Long-term care will be needed for many aging loved ones. While nursing homes, assisted living centers and other care options are available, they are an expense and could drain your assets unless good planning is undertaken. In fact, the U.S. Department of Labor views long-term care expenses as the greatest uninsured risk Americans face today. There are viable alternatives that help ensure assets are preserved for a loved one in need of such care. Here are some examples:
Long Term Care Insurance: Did you know that your private health insurance or Medicare will not help pay for nursing home care? You may want to consider buying a long-term care insurance (LTCI) policy. A LTCI policy can significantly reduce the burden on paying for long-term care, as it pays a daily amount to you to help defray the out-of-pocket cost.
A new type of plan is a LTCI Partnership between insurance and Medicaid. For example, let’s say you are single and you go to a nursing home. You can’t get Medicaid normally until you’ve “spent down” assets to $1,500. With a LTCI Partnership policy, if your long-term care policy provides $300,000 in benefits, this amount is protected from Medicaid spend down — meaning you can keep that amount. That’s a great relief, especially in the case of couples who have a spouse still at home.
Reverse Mortgages: A reverse mortgage is a government insured home loan for ages 62 or older that lets you tap the equity in your home in order to pay for long-term care costs you may incur, especially if you want to remain in your home.
You still own your home; you are only drawing out your equity. You can take a lump sum — a line of credit that you can draw upon as needed — or monthly income payments. You are charged interest, but the interest accumulates. You don’t have to pay the loan or interest until one year after you permanently leave the home. HUD insures reverse mortgages, which means that if the home sale proceeds do not cover the amount owed to the lender, HUD will pay the difference.
VA Benefits: VA Aid and attendance monthly check payment is a wonderful program for veterans and their spouses to help pay for long-term care at home or in assisted living. You do not have to have a service-related disability in order to qualify.
You or your spouse must have served in the military for 90 days, at least one day during wartime, and must not have been dishonorably discharged. You must be 65 or older with a need for help with daily activities like dressing or undressing, cooking meals, or using the toilet.
Your annual income, after subtracting all medical expenses, assisted living fees and caregiver costs, must be less than $21,466 for a single vet, $25,448 for a married vet, and $13,744 for the surviving spouse of a vet. Assets apart from your home and car must be less than $50,000 if you’re single or $80,000 if married.
Medicaid Eligibility: One final option to pay for long-term care, especially in a nursing home, is Medicaid. This is a federal/state-funded program that can pay most health care costs, including monthly room and board in a facility.
You must reduce your assets to a very low amount, such as $1,500 if you are single, and between $23,844 and $119,220 plus a house and car if you are married. The rules are complex, especially the gifting rules (including the five-year look back), but if your loved one must remain in a nursing home for life, the program is essential. You need not spend down all your assets to qualify for Medicaid. Many planning options exist to protect assets, even after someone enters the nursing home.
Taking advantage of one or more of these options does require planning —the sooner the better. However, you need to consult a qualified, certified elder law attorney for help, as a mistake can be very costly.