Long-term care can be a difficult topic to address with clients. The subject can bring up uncomfortable emotions many clients would rather avoid, such as fear of mortality or losing their independence. Long-term care can also be very expensive, and clients may wonder how they’ll afford it — either for themselves or for family members.
All the same, it’s an important topic for CPA financial planners to bring up. Many people don’t seriously research long-term care and its related costs until they decide to downsize or experience a medical issue, said Kelley C. Long, CPA/PFS, a financial coach and owner of Financial Bliss with Kelley Long, based in Tucson, Ariz.
If clients wait too long to consider long-term care, they could lose the chance to purchase insurance at a reasonable price or be forced to act quickly — and potentially miss out on certain long-termcare options — if an emergency arises, she said.
One benefit of having this conversation is the ability to clear up misconceptions, said Thomas N. Tillery, vice president at Financial Planning Advocate LLC and vice president/chief compliance officer of Paraklete Financial Inc. in Kennesaw, Ga. “I think CPAs need to have candid conversations with clients. Long-term care is a risk, it’s an expense, but the numbers are not as dire as marketers make them out to be,” he said. In his home state of Georgia, the average age for entering long-term care is 79, and most nursing home stays — the most expensive type of long-term-care facility — are less than 100 days, according to Tillery. In other words, clients should know that long-term care isn’t always going to be a long-term expense.
Clients may not realize that more options for long-term care are available today. “Long-term care can mean everything from occasional in-home visits from a nurse to an extended hospital stay to assisted living to full-time residence in a nursing home,” explained Donna Wood, CPA/PFS, the CEO of Wood Smith Advisors in Franklin, Tenn.
People may not realize how many options they have when it comes to financing long-term care.
Though clients might find all the options bewildering at first, discussing them can also help clients see that they have more choices than they might have realized. “People used to react emotionally about the idea of sitting in a nursing home and staring at the wall,” said Colleen Weber, CPA, a fee-only financial adviser from Chanhassen, Minn. But the options have made discussions on the topic a bit more palatable for clients, she said.
Discussing long-term care with clients begins with honest conversations. Here are some ideas on how to start the conversation and what to discuss as part of a solid financial plan.
Introduce the subject
It’s not necessary to wait for clients to bring up the topic of long-term-care planning on their own. Though broaching the subject presents a challenge, it can be beneficial for financial advisers. “I think people are always worried about uncomfortable conversations, but think about how much worse it gets if people don’t have plans in place,” said Brian I. Gordon, president of senior housing advisers Senior Living Experts and president of Gordon Associates Long Term Care Planning, an insurance firm specializing in long-term-care planning, in Bannockburn, Ill. “I know people who have transferred substantial wealth away from financial advisers because of the experiences their parents had later in life.”
As an example, he cited a family who fired a financial adviser who was managing almost $50 million of their assets after the adviser failed to prepare for the parents’ long-term-care needs, which ultimately cost about $3 million. “The family was angry the adviser didn’t have the conversation and just assumed with the type of wealth they had that they would self-fund,” he explained.
Some clients will bring up long-term care as a concern on their own, said Weber, but it’s a topic every client and financial planner should discuss. “We bring it up as part of our ongoing services when we review financial plans with clients,” she said.
Acknowledge the difficulty
Planning for long-term care can lead to difficult conversations, Long said. Build empathy by acknowledging that long-term-care planning can be frustrating due to the unknowns, she said. “Resist the urge to share a horror story of a client or family member who didn’t prepare, and instead start by asking motivational questions to help them start to take action on their own.”
Long-term care may feel like a more difficult conversation than planning for college funds and retirement, but it’s not all that different. “It’s like any financial planning we do. We take our best assumptions and the information we have, and we do our best, Weber said. Plus, with more people entering long-term care, “there’s better data than ever for financial planners,” she said. “We have actual claims data identifying cost of stay, length of stay, age and condition when accessing long-term care, and data on how people are paying for long-term care.”
Introduce options for financing
When discussing long-term-care plans with clients, the conversation should cover health concerns, the importance of maintaining assets for an inheritance, and the lifestyle the client expects to experience in long-term care.
People may not realize how many options they have when it comes to financing long-term care, which is another reason it’s an important conversation to have with clients.
Some clients may choose to invest in long-termcare insurance, for instance, which can be used in combination with money from other sources. Others may prefer options such as continuing care retirement communities and assisted living. These options may come with a hefty down payment, but they typically replace the cost of rent or home ownership, Wood said. Clients can even consider a reverse mortgage to cover home updates that could allow them to age in place, she noted. Medicare also contributes to shorter stays in skilled nursing facilities — up to 100% for 20 days or less — which may occur after a surgery or health scare, Tillery noted.
Health savings accounts are a great option for covering long-term care for clients with that asset, Long said. They can even be used to pay for longterm- care insurance premiums up to a certain limit (see the sidebar, “Considering Long-Term-Care Insurance”). Long-term-care riders are becoming more common on life insurance policies, too, she noted. “With this type of policy, at least some type of benefit is guaranteed, alleviating one of the key drawbacks to long-term-care insurance alone,” she said. “The downside is that the cost of care may exceed the benefit, which would require use of retirement funds or other assets.”
For clients who expect to live beyond 85, a qualified longevity annuity contract is also an option, Long said. “Learning about the options that are out there from a trusted broker can be a real help to clients, as the thought of planning for living longer rather than planning for when you’re at the end of life is simply an easier pill to swallow, even when you’re solving for the same problem,” she said.
Address individual concerns
There’s no universal long-term-care plan that’s right for all clients. Therefore, ask the right questions to uncover your clients’ concerns about long-term care, and tailor your advice accordingly. One common fear for many people is the potential need for memory care, so make sure you discuss specific concerns based on your clients’ family history and existing health conditions. Clients may also be more concerned about longterm- care issues if they’re single and don’t have friends or relatives in a position to help with care, Wood said.
“Sleep factor” — clients’ risk tolerance and how it affects their well-being — is also something to consider, Tillery said. “Some people are just more comfortable transferring risk [to an insurer] because they can’t sleep at night,” he said. It’s a reasonable concern and another example of how each client is likely to feel differently when it comes to planning for long-term care.
Encourage clients to put their intentions in writing
Long-term-care planning will be most effective if your clients’ relatives understand their wishes. For example, sometimes planners encounter children who didn’t want to put their parents in assisted living, even though that’s what the parents wanted, Gordon said. Simply holding a longterm- care insurance plan may help indicate that clients are prepared to enter a long-term-care facility, if necessary, but it’s a good idea to have your clients put something in writing, Gordon said. During long-term-care conversations, be sure to ask clients if their estate planning documents and medical directives are in place.
SORTING THROUGH THE OPTIONS
While planning for long-term care can still be a stressful experience, Weber said she has seen changes during her career. “Boomers are moving through [this process], and when they do, they make changes,” she said, noting their volume, wealth, and voting power. “It’s like they are paving the path clear for the next generations to follow.” There’s greater demand than ever for in-home and residential long-term care, which is leading to more options, especially with Boomers living longer than their parents’ generation. With the right planning, these shifts could mean more options and better quality of life for your clients.
Considering long-term-care insurance
Long-term-care insurance is one option for financing long-term care. Plans will typically cover a set number of years, and they can be used at any age, Brian I. Gordon, president of Senior Living Advisors and Murray A. Gordon & Associates in Bannockburn, Ill., said. For example, Gordon had a client who began drawing insurance at 48 after having a stroke.
As premiums for long-term-care insurance go up as age goes up, it can be better to buy it earlier in life, said Donna Wood, CPA/PFS, the CEO of Wood Smith Advisors in Franklin, Tenn. Some employers offer long-term-care insurance as a benefit, she noted.
Colleen Weber, CPA, a fee-only wealth manager and owner of Colleen Weber CPA, LLC in Chanhassen, Minn., said there are two circumstances where clients are likely to consider longterm- care insurance. First, if they think they’ll need assistance earlier in life due to hereditary conditions, they might purchase insurance to avoid bankrupting a partner who could outlive them, she said. “The other is a client who can afford the premiums and is looking to protect assets to ensure their legacy goes to their kids,” she said.
Overall, she has been surprised to see how many clients hold their policies even as premiums increase, she said. “They really see the value,” she said.
However, long-term-care insurance doesn’t make sense for every client — or even most clients, according to Thomas N. Tillery, vice president at Financial Planning Advocate LLC and vice president/chief compliance officer of Paraklete Financial Inc. in Kennesaw, Ga.
Clients with assets under a certain amount can have their long-term care covered by Medicaid, he explained. “It might not be in the facility you would have chosen, but from an actuary’s perspective, long-term-care insurance wouldn’t be a good use of your resources.” Similarly, his practice has found that it often benefits more affluent clients with over $2 million in assets to self-insure, though they’ll need to be diligent about investing funds that would have gone to long-term-care insurance premiums, he said.
There are drawbacks to long-term-care insurance. Insurance carriers can go out of business, income tax laws could shift so that long-term-care premiums are no longer deductible, and the government could institute new programs to make longterm care more affordable in the future, Tillery explained. Some clients may not qualify for long-term-care insurance due to their age or health conditions, or those factors can make premiums prohibitively expensive.
About the author
Megan Hart is a freelance writer based in Florida. For more information or to make a purchase, go to aicpa.org/cpe-learning or call the Institute at 888-777-7077.
“The Long-Term-Care Quandary: Helping Clients Prepare,” JofA, Oct. 14, 2021
“Preparing for Future Health Needs,” JofA, June 15, 2020
Guide to Retirement & Elder Planning: Healthcare Coverage Planning, 6th Ed. (open to PFP Section members)
Financial Decisions Guide — Elder Planning (open to PFP Section members)
“Guiding Clients With Diminished Mental Capacity: Residential Choices,” AICPA PFP Section Podcast, Sept. 10, 2021
“The Importance of Addressing Long Term Care Planning,” AICPA PFP Section Podcast, Sept. 4, 2020
“Part Two of the Importance of Addressing Long Term Care Planning,” AICPA PFP Section Podcast, Sept. 11, 2020