Long Term Care and the Family Business

In a prior newsletter entitled “Long Term Care – What’s Your Plan,” I discussed the various ways one can plan for the potential cost of long term care.  Long term care is the need for assistance with the normal activities of daily living that extends for a period longer than 100 days.   While many think of long term care as nursing home care, in reality, long term care is provided over a continuum.  Long term care usually begins in the family home and may advance over time to an assisted living facility and finally to a nursing home.  There are four resources from which the costs of long term care are paid for:

  • Personal Assets

  • Family

  • Insurance (this may include traditional long term care insurance or life insurance with a long term care rider)

  • Medicaid

Many people are rightfully concerned about the impact of death taxes on their assets.  However, if you are a family business owner, such as a family farm, that wants to pass your business along to the next generation, the cost of long term care can be devastating.  For many, given the high exemption amounts, death taxes is only an imagined fear.  The potential of entering a nursing home is real for everyone.  Here is the trap you face.  If you attempt to give the family business to a child, you may be penalized and become ineligible for Medicaid, but if you keep the business, you may have too much in assets and likewise not qualify for Medicaid.There is a lot of discussion and debate about how likely any of us are to end up staying a significant time in a nursing home.  I like to point out to people that the debate is much like the six foot tall man who drowned in a river whose average depth was three feet.  It didn’t matter what the averages were.  All that mattered was the result for him.I believe that every business owner should have a plan to pay for long term care needs in a way that does not require the liquidation of the business or other fire sale type situation.  The good news is that the trap discussed above can be avoided with proper planning.  Whether it is through insurance, sound liquid investments or other planning options, the important part is not leaving it to chance.  If the business is going to pass successfully to the next generation, a strategy should be devised to pay the cost of such care.If you are concerned about the impact of long term care costs on your family business we would invite you to come meet with us and learn about the options available to you.