Presented by: Claude Thau Long-Term Care Insurance Before & After Divorce Slides Available Upon Request

50% as many divorces as marriages  Change of status is a major time to consider finances  More than 50% if you count separations & people who consider divorce but decide against it. People seeking divorce advice generally have assets to protect (generally more assets than when they married) Likely to seek new advisor Big market that we can help 2

Divorce Rates MarriageDivorce Rate First41% Second60% Third73%

Divorce Above Age 50 in USA 50 years ago, 2.8% older than 50 were divorced. By 2011, 15.4% were divorced, 2.1% separated and 13.5% widowed. In 1990, about 10% of persons who divorced were 50 or older. In 2011, more than 28% of persons who divorced were 50 or older.

Financial Considerations at Time of Divorce Things to consider before divorce: File tax returns first? Sell house first? File for bankruptcy first? Review beneficiaries Review retirement plans Update wills Now add: review LTC plans 5

Impact of Divorce 1. Reduced net income (cost of 2 homes) 2. May need to go back into the work force (or work longer hours or retire later) 3. Poorer health (stressed; depressed) 4. Possible relocation: for work, to be near family, and/or to start anew 5. Living alone: hence more likely eventual need for commercial LTC 6. May not take good care of self 6

What were the Couple's LTC Plans Prior to Divorce? Would she be his caregiver? Would his assets pay for her care? Would their children be caregivers? Were they determined not to burden their kids? Are they now as likely to want to stay in their home? Are their previous plans reliable? 7

LTC Considerations at Divorce: Housing Might LTC considerations affect where I choose to live or my type of housing? Geographically, or locally, closer to family? One-story home? Stairs? Etc. Urban? On mass transit lines? Near hospital and doctors? Congregate housing? 8

LTC Considerations at Divorce: Should I buy LTCi? 1. Am I more likely to need commercial LTC? 2. If so, should I/we buy LTCi before divorce? 3. Who will be covered? 4. Who will pay? 5. What is the best design or carrier? 9

Buying LTCi After Divorce 1. Lose at least one-spouse discount (+17%) 2. Couples both-buy discount might be lost (+ 43%, because 100/70 is 143% ) 3. Preferred health discount might be lost (+11%) 4. May need to delay ‘til finances stabilize (each year of delay adds ~7% cost) Help people who are divorcing. If they wait, their LTCi price will rise 17%-50% or more. 10

Who Will Pay for Her LTCi? Please excuse my simplifying presumption that the husband is the primary breadwinner. 80% of custodial moms get alimony; 30% of custodial dads. Husband may be required to fund LTCi for the wife --- at least for a period of time If so, husband would want LTCi in place before the divorce to:  Determine the cost in advance  Benefit from marital discount 11

Why He Might Need LTCi 1. His view: Can no longer rely upon her (and possibly not on their children) 2. Her view: Life insurance protects alimony stream against his death. But a need for LTC can not only cut off income, it also adds expenses. The result can be reduced or discontinued alimony. 3. Win-win if settlement requires that the husband buy LTCi for himself? 4. His LTCi is going to cost very little if LTCi is being bought for her. 12

Why Their Parents Might Need LTCi What were their parents' (implicit) LTC plans prior to the kids’ divorce? Would she have been her parents’ caregiver? Would she have been his parents’ caregiver? Is that likely to happen post-divorce? 13

Daughter's Availability to be Caregiver She might be less available because she has begun to work or is working more hours or retiring later. She may relocate to start a new life, perhaps with a new spouse. On the other hand, she might have freed up time spent with her husband or relocate to where her parents live and become more available to be their caregiver. 14

Ex-Daughter-in-Law's Availability to be Caregiver She may no longer be willing to do so She may be working now or longer hours or retiring later She may relocate She might re-marry and have other responsibilities LTCi may become more appropriate for elder relatives as well as those getting divorced. 15

Note: Ex-Daughter-in-Law May Still be the Caregiver May still be the “Designated Daughter” May still feel bond and responsibility Is she “responsible” for multiple people?  LTCi gets best care: her + commercial care  Small LTCi policy to supplement her services How might this affect her plans and likely need for LTC in the future?  If she is caring for her ex-in-laws, the stress is likely to be huge, resulting in her being more likely to need LTC herself in the future. Maybe they should buy LTCi for her, in appreciation of her services. 16

Disability Income Insurance Might Become More Needed While married may have been a two- income family. Now just a one-income person 17

Siblings' Possible Interest in LTCi May now become the designated caregivers for parents.  They may want parents to have LTCi  They may be more likely to need LTC as a result. May be more concerned re: their LTC plans  Because of becoming designated caregiver.  Because of disruption for other family members. What if they too get divorced? What if their kids get divorced? What if their in-laws get divorced? How would such divorces affect them as care recipients or care providers? 18

Divorce Advisors Need You Like to find savings (when to file taxes, sell home, file bankruptcy, etc.) to offset the cost of their services. May like adding LTCi to the list. May be a good source of referrals who are motivated to act now! Search for “divorce attorneys”, “divorce mediators” and “divorce advisors” 19

After-Divorce Issues: Impact of Remarriage 1. 57% have re-married; another 21% willing : 42 KK married >1 time in USA 3. 23% of married people had prior marriage 4. LTC needs of new spouse can impact inheritance of kids from your first marriage. 5. Pre-nuptial agreements don’t protect assets. 6. Nice to have LTCi for self & new spouse. 7. Will future spouse get both-buy discount from the same insurer your clients buy from now? Research even if both insured. 20

Some of the Same Issues Apply to Pre-Widow Market KK widows in 2001 (80% female) ,000 new widows in USA each year 3. Psychological, financial, LTC plan impact (not likely to focus on LTC now) 4. Buy while spouse is living to get discount 5. Siblings’/friends’ wake-up call 6. Remarriage 7. Take-me boxes in doctors’ offices? 21

What if LTCi Already Existed Pre-Divorce? Recommended actions depend on: Marital status at original issue  Now eligible for (greater) discount? Insurer & policy form: may not want to identify (see later slides) Policy Design (see later slides) Amicability of the divorce. 22

Shared Care After Divorce 3 main possibilities: 1. Well spouse canNOT block care recipient from accessing well-spouse benefits. 2. Well spouse can deny benefits to care recipient. 3. Third pool. #1 is most likely to lead to dropping Shared Care. #3 is least likely. If one drops Shared Care, they both lose it. 23

Other Features Survivorship: Why drop? Spite perhaps? Joint Waiver of Premium Return of Premium: name new beneficiaries If Home Care is now less attractive, might inquire about lowering Home Care % or lowering premium by dropping HC. 24

What if LTCi Already Exists? Determine whether to inform the insurer about the separation  Want split billing?  Want to drop Shared Care?  Would spousal discounts be lost?  Would desired Shared Care be forfeited?  Perhaps agree to have one spouse pay the insurer and not inform. Fund premiums with alimony or an annuity or escrowed assets?  Tax-preferred if done as §1035 exchange. 25

Summary LTC plans change critically when marital status changes Impacts relatives as well as principals Great opportunity to provide service Partner with other professionals servicing this market. Ask clients for referrals to people who are going through such changes. 26

Claude Thau