How Assisted Living and Nursing Home Expenses Can Wipe Out Your Savings (Part 2)
In last month’s article we provided an overview of the different types of long term care facilities that are available: home care, assisted living, group home, nursing home/memory care. All of these facilities are expensive. If you don’t plan correctly you can outlive your money if you end up in an expensive care facility for an extended period of time.
This month we discuss Long Term Care Insurance and Government Programs that can assist with long term care costs.
What about Medicaid and Medicare?
Well Medicare does not pay for long term care. Medicaid is the government program designed to pay for long term care. However, the bottom line is that you have to be essentially destitute to receive this government assistance. It’s basically welfare for those who need long term care. If you qualify for Medicaid you lose many of your options because Medicaid has low monthly limits on what it will pay for care so your choices of facilities go way down. The better facilities have few if any Medicaid beds. So if you have been considering paying for a “Medicaid plan” you might want to rethink that decision. It is much better if you can structure you finances so you never have to go on Medicaid. However, if you need the benefit it is obviously very important to have this backstop.
Long Term Care Insurance
Long Term Care Insurance (LTCI) is an obvious solution to protecting yourself from long term care costs. However, LTCI is typically very expensive. Often those who can afford it don’t really need it – meaning that they could pay for their own long term care from income or assets without much trouble. Like any insurance you hope you never need it – if you don’t need it you may have spent $50,000 to $100,000 in premiums over your lifetime that your heirs will never see. Or if you need long term care you may only need it for a couple of years so again you may have been able to afford the care out of your own assets and saved the premiums. Of course if you need extensive long term care such as Alzheimers or memory care for many years a LTCI policy would have been a very wise choice. But again many people simply don’t want to spend the equivalent of a nice vacation every year for a LTCI policy so they take the chance that they won’t be the one who needs the coverage.
Long Term Care Insurance – Without the Premium
But instead of gambling that you won’t be one that needs extensive long term care there is an alternative to paying big LTCI premiums. Asset Based Long Term Care is a hybrid product that allows you to take money you have set aside or are not planning on using to do double duty: 1) it provides long term care benefits if you need it or 2) if you don’t need long term care then it acts as an investment. Here’s how it works:
If you qualify, (some asset based long term care polices have easier medical underwriting) you can deposit funds into a special interest bearing account. When you deposit funds into this account, you have four immediate benefits:
1) You receive some interest on your deposit and have Liquidity: a money back guarantee
2) You have an asset that earns compound interest
3)You receive a much larger amount than the deposit to use for nursing care if you need it. For example, a male in his late 70’s could deposit $100,000 (based on age and health at the time the deposit is made) could immediately have $3,300 monthly benefit for nursing home care. This benefit could be used for long term nursing care expenses, home health care expenses, adult day care expenses, assisted living facility expenses, or even homemaker services. Also this benefit can increase over time depending on your interest earnings.
4)You have a life insurance policy that pays tax free on death. In the above example the 70+ year old would immediately have a $133,000 insurance policy.
In other words, he got an “insurance benefit” of $33,000 for depositing $100,000 in an interest bearing account, with no additional premiums required!! Keep in mind he could also get his $100,000 back anytime he wanted.
Of course there are a number of different types of asset based long term care polices and the younger you are the better the numbers look.
Veterans and Widows of Veterans can often qualify for tax free long term care benefits of between $12,000 to $24,000, per year, for life. This benefit is available for most middle class veterans with some planning. We have a specialized practice that helps middle class veterans and widows who need long term care qualify for this very valuable benefit. If you know a Veteran or Widow of a Vet who needs assisted living, home care or memory care have them contact us and we can quickly evaluate if they qualify for this government pension.