Risk Management – Health Savings Plans, Life Insurance, and Long Term Care

Dear Valued Clients and Friends,

As part of our holistic financial planning process, we help clients evaluate and resolve risks that may take their plans off course. Risks come in all shapes and sizes and may include property damage, liability, identity theft, health, disability, death and long-term care. In this issue, we focus on healthcare and offer some perspectives and strategies to help clients manage risk.   

  1. Eight Benefits of Health Savings Accounts
  2. Seven Ideas For Life Insurance
  3. Six Considerations About Long Term Care Insurance

Appendix – The Financierge Topical Index (by Publish Date)

Eight Benefits of Health Savings Accounts

According to the Internal Revenue Code, a Health Savings Account (HSA) is a medical savings account used for the payment of qualified medical expenses not covered by insurance or other benefit plans. While HSAs are only available to individuals covered by high deductible health plans (HDHP), they offer many benefits. Here are eight benefits of HSAs:

  • Triple Tax AdvantageContributions are tax-deductible, contributions grow tax-free, and withdrawals for qualified medical expenses are tax-free. For 2018, the maximum HSA contribution for individual coverage is $3,450, and $6,900 for family coverage.  (Note: For 2018, your high deductible health plan (HDHP) plan must have a deductible of at least $1,350 for individual and $2,700 for family coverage, and the HDHP’s maximum out-of-pocket amounts cannot exceed $6,650 and $13,300, respectively.) For 2019, the maximum HSA contribution for individual coverage is $3,500, and $7,000 for family coverage. (Note: For 2019, your (high deductible health plan) HDHP plan must have a deductible of at least $1,350 for individual and $2,700 for family coverage, and the HDHP’s maximum out-of-pocket amounts cannot exceed $6,750 and $13,500, respectively.) There is also a catch-up limit of $1,000 for participants who are 55 or older on December 31. Furthermore, there is no income phase-out, so HSAs are available to everyone and you don’t have to itemize to deduct it.
  • Multiple Contribution SourcesYou, your employer or anyone can contribute to your HSA.
  • Age 65 Withdrawal BenefitAt age 65 and over, non-medical withdrawals avoid a 20% penalty and are taxed at your current tax rate. Medical expense withdrawals remain tax-free.
  • Can Pay for Retiree Health InsuranceHSAs can be used to pay for your Medicare, COBRA, and long-term care premiums.
  • Lifetime CarryforwardHSAs can be carried forward for your lifetime and upon death, transferred to your spouse tax-free. Unused assets named to a non-spouse beneficiary are taxed as ordinary income.
  • Some HSAs Allow InvestingSome HSAs have simple savings plans with minimal interest while others allow self-directed investing for greater potential growth. This is an area where we can help you decide how to allocate and diversify your investment fund choices.  
  • HSAs are PortableOnce you have an HSA, it stays with you even if you retire, become unemployed or change jobs.
  • No Required Minimum DistributionsYou are not required to take Required Minimum Distributions at age 70 1/2 on HSA accounts unlike your 401(k) and IRA accounts. This makes HSAs a more tax-efficient way for you to pay for medical expenses in retirement, especially if the alternative is taking a taxable 401(k) or IRA distribution.

Seven Ideas For Life Insurance

Life insurance can be a valuable risk management strategy within your financial plan to ensure income replacement, business continuity, and liquidity in estate planning. Here are seven ideas to consider about life insurance.

  • Insurance Portfolio AssessmentInsurance portfolios should constantly be monitored to ensure your insurance is cost-effective, performing as planned, and in alignment with your current needs and risk management goals. Often, there are less expensive solutions, gaps in insurance, needs that no longer exist, or policies that are underperforming and headed toward lapsing or requiring higher premiums. Also, as part of our insurance portfolio review, we assess other insurance areas such as property and casualty, liability, identity theft, health, disability, long-term care, errors and omissions (E&O) and directors and officers (D&O).
  • Income Replacement – If someone depends on your income to live, you should consider life insurance. The least expensive life insurance is called term life – you pay premiums for a stated term – typically 10, 20 or 30 years. The amount of coverage depends on your circumstances, but one rule of thumb is multiplying your annual income by 15 and making sure you have coverage through retirement. For example, if you are 45 and make $100,000 annually, you would consider a $1.5 million policy for 20 years.   
  • Business ContinuityIf you have a business, you can use life insurance as part of a buy-sell agreement to buyout partners upon death and keep the business moving forward. There are two major strategies for buy-sell agreements – a cross-purchase agreement whereby you and your co-owners buy insurance on each other and agree to buy each other’s business interests upon death, or an entity purchase agreement whereby the business entity buys insurance and buys the interest upon death. Depending on a number of different circumstances, one or a combination of both strategies may be appropriate for you and your business.
  • Estate LiquidityGenerally, assets you own at death are subject to federal estate tax, and some states impose an additional estate and/or inheritance tax. From 2018-2025, estates in excess of $11,200,000 per person may have to pay federal estate tax at rates as high as 40 percent. One method to create liquidity for estate taxes, debt, and other expenses is an irrevocable life insurance trust (ILIT). An ILIT is a trust that is funded, at least in part, by life insurance policies or proceeds. If properly implemented, an ILIT can help minimize estate taxes and provide a source of liquid funds to your estate. While an ILIT can hold almost any type of life insurance, a properly designed policy such as a second-to-die (survivorship) policy can be less expensive and easier to underwrite.
  • Selling Unneeded InsuranceIf you are insured but don’t need life insurance anymore, instead of terminating it, it may be worth selling it to a third party. Sellers in life settlements are generally over 65, but younger people may qualify if they have certain medical conditions, according to the Life Insurance Settlement Association.
  • Using Cash Values to Increase BenefitsIf you have a whole life policy with a cash value that you will never touch, it may be worthwhile to leverage that cash value into a new policy with a higher death benefit.
  • Buying Long-Term Care If you want long-term care insurance, you may be able to exchange your existing life insurance policy for a new policy with a long-term care rider. This can be done through a tax-free exchange, provided you qualify for the new insurance policy. Long-term care payments are available until the total death benefit amount is exhausted, and whatever isn’t used for long-term care will go to your beneficiaries as a tax-free death benefit.

Six Considerations About Long Term Care Insurance

As a nation, we are living longer, but with that comes more demand on our retirement savings. According to the Center for Disease Control, life expectancy in the U.S. continues to improve. During 1975–2015, life expectancy in the U.S. increased from 68.8 to 76.3 years for males, and from 76.6 to 81.2 years for females. At the same time, the cost of long-term care also increased dramatically as people are living longer with more care.  Also, according to the Department of Health and Human Services, about 70 percent of people currently aged 65 can expect to need some sort of long-term care services. One solution to help mitigate the cost of long-term care (LTC) services are buying insurance. Here are six considerations for buying LTC insurance:

  • Long-Term Care Defined – LTC is not necessarily medical care, but rather “custodial care.” Custodial care involves assisting with activities of daily living or the supervision of someone who is cognitively impaired. One way to think of activities of daily living is to think of activities you do on a daily basis – you get out of bed, walk to the bathroom, use the toilet, take a shower, get dressed, and make breakfast. Most people need long-term care in their later years, but you may also need long-term care because of an accident or illness. Remember, Medicare doesn’t cover most long-term care, but it does cover care in a long-term care hospital, skilled nursing care in a skilled nursing facility, certain eligible home health services, and hospice & respite care.
  • LTC Timeframe – While everyone’s circumstances are different, in looking at information from the National Center for Assisted Living, National Care Planning Council, and the American Association for LTC Insurance, a person can receive care at home, at adult day care, in an assisted living facility, and then go to a nursing home for one to two years. All combined, this is a total of approximately 4-5 years of long-term care.
  • LTC Cost – According to the 2017 Genworth Cost of Care Survey, the U.S. median annual cost for home aid services was about $48,000 (range $18,000-$114,000), adult day care was about $18,000 (Range $1,300-$127,000), assisted living facility private room was about $45,000 (range $7,000-255,000), and a semi-private room at a nursing home was about $86,000 (range $19,000-$550,000). In this scenario, the average total cost of care could easily exceed $350,000.
  • Self-Funding – While each family and situation is different, the decision to self-fund for LTC should consider premium cost, cash flow, net worth and legacy planning. From a pure net worth basis, we think a client should have at least $5 million before they consider self-insuring.
  • Tax benefits – Qualified LTC insurance premiums can be tax deductible if you have enough medical related deductions, you are self-employed, or own an LLC, S-Corporation or C-Corporation. C-Corporations can deduct 100% of the premium. You can also use your Health Savings Accounts (HSA) to pay for premiums. Plus, some states offer additional tax deductions or credits. LTC reimbursements are tax-free in most situations, even if you deduct the premium from your taxes.
  • Traditional vs. Hybrid LTC – As an alternative to traditional LTC insurance, it may be worth considering a “hybrid” life insurance product that combines death benefits with long-term care benefits. The advantage of a hybrid policy is that if you don’t use your long-term care benefits, you will still have a death benefit and cash value.  Hybrid policies are also easier to qualify for, premiums are fixed, and your death benefit, cash value and amount of long-term care coverage is guaranteed. Traditional LTC policies do not have these guarantees. A disadvantage of a hybrid LTC policy is that premiums are paid upfront or over a shorter time period which can make premiums expensive. Another disadvantage is that hybrid LTC premiums are not usually tax-deductible because they are not considered tax-qualified policies.


We hope you enjoyed some of our healthcare planning insights and encourage you to reach out with any questions or if there is anything we can do for you.  We consider it a privilege to serve you and always look for ways to improve our trust, value, and communications.

Cheers to your health, wealth and wisdom!

Sincerely yours,

Don B. Saulic, CFP® CPA

Partner, Private Wealth Management


Appendix – The Financierge Topical Index (by Publish Date)

Business Planning

Business Entity Structures and New Tax Law Considerations (Aug 20, 2018)
Five Charitable Planning Perspectives to Know Before You Sell Your Business (Aug 20, 2018)
Two Estate Planning Tips for Your Businesses (Aug 20, 2018)
Four Strategies to Preserve Your Business’ Future (Aug 20, 2018)

College Planning
Five Ideas about 529 College Savings Plans (Nov 2, 2017)

Charitable Planning
Twelve Charitable Planning Ideas to Reduce Income Taxes in 2018 (Feb 14, 2018)
Five Charitable Planning Ideas (Nov 20, 2018)

Estate Planning
Five Annual Estate Planning Tasks (Nov 2, 2017)
Four Components of a Wealth Legacy Plan (Nov 20, 2018)


Investment Planning
Dividend Stock Investing (Feb 14, 2018)

Lifestyle Planning
Six Items to Keep in Your Vault (Nov 16, 2017)
Twelve Proactive Tips to Fight Identity Theft (Nov 16, 2017)
Twelve Ideas to Guard Your Family in a Digital World (Nov 16, 2017)
Is Your Lifestyle Balanced and in SHAPE? (Nov 20, 2018)

Real Estate Planning
Four Points to Ponder Before Buying or Leasing a Home (Jun 22, 2018)
Six Considerations About Mortgages, Refinancing and Taxes (Jun 22, 2018)
Five Elements of Reverse Mortgages (Jun 22, 2018)
Four Perspectives to Consider in Deciding to Move to a State with Lower Taxes (Jun 22, 2018)

Risk Management and Insurance Planning

Starting Social Security Benefits – Ready, Set, Hold!? (Nov 2, 2017)
Nine Considerations to Maximize Social Security Benefits (Nov 2, 2017)
Lifestyles of the Affluent and Exposed (Nov 16, 2017)
Eight Benefits of Health Savings Accounts (Mar 16, 2018)
Seven Ideas for Life Insurance (Mar 16, 2018)
Six Considerations About Long-Term Care Insurance (Mar 16, 2018)

Retirement Planning

Starting Social Security Benefits – Ready, Set, Hold!? (Nov 2, 2017)
Ten Things to Know About IRAs and Saving for Retirement (Feb 14, 2018)

Tax Planning
Twenty New Tax Reform Bill Changes (Feb 14, 2018)



The Bahnsen Group is registered with HighTower Securities, LLC, member FINRA and SIPC, and with HighTower Advisors, LLC, a registered investment advisor with the SEC. Securities are offered through HighTower Securities, LLC; advisory services are offered through HighTower Advisors, LLC.

This is not an offer to buy or sell securities. No investment process is free of risk, and there is no guarantee that the investment process or the investment opportunities referenced herein will be profitable. Past performance is not indicative of current or future performance and is not a guarantee. The investment opportunities referenced herein may not be suitable for all investors.

All data and information reference herein are from sources believed to be reliable. Any opinions, news, research, analyses, prices, or other information contained in this research is provided as general market commentary, it does not constitute investment advice. The team and HighTower shall not in any way be liable for claims, and make no expressed or implied representations or warranties as to the accuracy or completeness of the data and other information, or for statements or errors contained in or omissions from the obtained data and information referenced herein. The data and information are provided as of the date referenced. Such data and information are subject to change without notice.

Third-party links and references are provided solely to share social, cultural and educational information. Any reference in this post to any person, or organization, or activities, products, or services related to such person or organization, or any linkages from this post to the web site of another party, do not constitute or imply the endorsement, recommendation, or favoring of The Bahnsen Group or Hightower Advisors, LLC, or any of its affiliates, employees or contractors acting on their behalf. Hightower Advisors, LLC, do not guarantee the accuracy or safety of any linked site.

This document was created for informational purposes only; the opinions expressed are solely those of the team and do not represent those of HighTower Advisors, LLC, or any of its affiliates.

About the Author

Don B. Saulic

Managing Director, Partner

Don is a Partner in the team’s Private Wealth Management practice specializing in helping affluent families develop comprehensive strategies for all phases of wealth accumulation, preservation, and transfer.

He also leads our Financial Concierge Services platform of professional alliances and serves as the editor of The Financierge.

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