As the adult child of an aging parent, you no doubt do your very best to respect your parent’s life choices and not to intrude with unwanted advice. But, there’s one area where you should weigh in (albeit gently and respectfully) – your loved one’s long-term care financial planning.
One of the consequences of our increased longevity is the fact that more of us will likely need some type of care over the long term. This can be devastatingly expensive to families who aren’t prepared financially. Too often, the financial burdens of mom or dad’s long-term care end up being shouldered by their children and even grandchildren if they are old enough. This can cause untold family stress.
Many people mistakenly assume that they can turn to government programs for help with long-term care expenses, when in fact Medicare pays only for skilled or rehabilitative care, not assisted living or independent living. Medicaid is a federal/state health insurance program designed for low-income individuals. To qualify, your loved one must meet strict income and asset limits, which often entails ‘spending down’ to reach the low-income threshold, and then moving into a nursing home. Remember: Medicaid and Medicare will NOT cover the cost of assisted living or independent living communities.
One option worthy of investigation is private long-term care insurance (LTCI). These policies cover costs of care not covered by private health insurance or government programs. Yearly policy premiums are significantly higher than other types of insurance. Most LTCI policies have variables that determine premium costs and benefits, including:
· Daily benefit amount - the maximum dollar amount the policy must pay for your care on any given day. This can vary widely, but today, most policies typically pay $150 per day.
· Benefit period – the maximum amount of time the policy holder receives benefits. This can range from a few years to unlimited lifetime coverage.
· Elimination period – how long the policy holder must pay out-of-pocket for long-term care before the long-term care insurance policy kicks in.
· Home care benefits – a feature of some policies allowing the holder to receive in-home care.
· Inflation protection – a common option of long-term care insurance designed to protect against the rising healthcare costs.
· Policy types – comprehensive, facility-only and home care-only are the three types of policies currently offered.
· Benefit payment – how the policy pays benefits to the policy holder; most reimburse for expenses, up to a pre-determined amount.
Those who choose a long-term care insurance policy typically do so because they want to be prepared so their families don’t bear the financial burden of care. Yet not everyone is a good fit for these policies. Most experts recommend against it for those with very low incomes or assets (who can access Medicaid funding sources) and for those with higher incomes and assets (who can self-insure or draw on finances to pay for assisted or independent living communities). Further, there is vigorous debate about whether these policies are too costly and largely unnecessary.
Before purchasing any long-term care insurance policy, take the time to educate yourself; ask careful questions of anyone offering to sell you a policy; don’t buy based on scare tactics or base emotional appeals; and get impartial advice from a trusted financial advisor. While LTCI may or may not be right for your loved one, we can’t stress enough the need to have that conversation about long-term care finances so no one is caught unprepared. What type of financial planning has your family done?
Do you think a long-term care insurance policy would work for your loved one?
If you think a long-term care insurance policy might be an option for you or your families, make sure you learn the details yourself. Ask for a qualified provider.
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Sometimes, an unforeseen event can force you to rapidly move your loved one into an assisted living community. When a situation like this arises, it can cause financial strain if funding sources are not immediately available – for example, if most of your loved one’s assets are tied up in their home and life insurance policies. A good solution for many seniors and their families is the senior line of credit. This option allows you and other family members some breathing room and time so you can liquidate assets at the best possible return to pay for your loved one’s housing and care and so you can evaluate longer-term financial plans to fund your loved one’s needs.
There are six key steps to establishing how big your senior line of credit needs to be:
1. Determine the monthly cost of care at your chosen assisted living community.
2. Clarify any additional monthly costs related to eldercare.
3. Ascertain any personal monthly costs not related to eldercare.
4. Find out how much financing your family has been approved for.
5. Establish how much your loved one can afford to pay out-of-pocket each month.
6. Discuss and decide how much you and other family members can contribute to your loved one’s care needs each month.
The above six-step process is critical and many families considering a senior line of credit turn to financial counseling with firms that have expertise in eldercare issues to help them navigate these unfamiliar waters.
Take note, though, that not every senior is a good candidate. This financial vehicle is only for seniors who are moving into an assisted living, senior living or retirement community. Payments are sent directly to the housing community; these payments come from the lender, not come from family members, thereby ensuring the integrity of the whole process. Families turn to a senior line of credit when they need time and flexibility while they wait for access to other financial resources, such as the proceeds from a home sale or veteran’s benefits. Many families find they don’t need a month-to-month solution, but rather some money to cover large upfront costs like first months’ rent or move-in-fees.
However, if the senior does not have a support system such as family, trusted financial planners or an eldercare attorney, the senior line of credit is not a good solution. Additionally, a single senior without a reliable support system will likely have trouble getting approved because it’s likely that his or her income will be insufficient to make the required payments. Seniors without family should enlist the help of a professional advisor to go over the process and the paperwork.
If you’re considering this option, be sure to look at all the implications and make sure all family members involved in the decision understand what’s required too. Tell us about your experiences obtaining a senior line of credit for your loved one.
Do you think a senior line of credit is for you?
If you think a senior line of credit might be an option for you or your families, make sure you learn the details yourself. A Senior Solutions executive director can refer you to a qualified provider.
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Medicare and Medicaid are sometimes confused; it’s important to understand that these programs are not the same. While Medicare serves all retirees over the age of 65 who paid into the Social Security system for a specified time period, Medicaid is the health program for individuals and families with low incomes and negligible resources. It is means-tested and jointly funded and administered by the states and federal government. Medicaid is the largest U.S. funding source for medical and health-related services for those with limited income.
If you qualify for Medicaid coverage, your benefits include some types of long-term care, home health care services for qualified individuals, and both inpatient and outpatient hospital services. That “if you qualify for Medicaid coverage” phrase is critically important. Medicaid planning is a strategy used to satisfy financial eligibility requirements. It is basically a legal way to restructure assets and income so that an individual or family can qualify for Medicaid long-term care assistance.
How It Works
Every individual or family’s circumstances are assessed on a case-by-case basis. Though each state varies somewhat in case treatment, there are several common factors taken into consideration:
- Marital status
- Home ownership
- Pension benefits or social security income
- Assets such as real estate, stocks and bonds, mineral interests, annuities and IRAs
- Appropriately drafted legal documents such as a will, power of attorney, living wills, trusts or other similar estate and disability planning
- Mental competency, i.e. the ability to change documents and handle asset
- Family support
- Urgency of required care
Based on the above factors, here are some of the legal methods to restructure your existing assets so you qualify for Medicaid assistance. However, do not attempt to do anything without the input and guidance of an experienced attorney who understands Medicaid rules and regulations:
- Convert assets that Medicaid considers countable to those it considers exempt or
- Convert an asset into an income
- Transfer assets to other persons in or outside of the
- Exercise provisions which allow a client to expand the amount of protected assets beyond statutory limits. This is called resource expansion.
New Eligibility Rules
Determining eligibility can be complicated and again, points to the importance of using an experienced Medicaid attorney. The federal government’s Affordable Care Act of 2010
filled in gaps in coverage for the poorest Americans by creating a minimum Medicaid income eligibility level across the country. Beginning in January 2014, individuals under 65 years of age with income below 133 percent of the federal poverty level (currently determined at $14,500 for an individual and $29,700 for a family of four) will be Medicaid-eligible.
Getting Qualified = Getting Advice
Most people initially think that giving away their assets will quickly qualify them, but this in fact can delay benefits. Also, you must keep impeccable records documenting any transfers made and why they were made. If you think you’re eligible, here’s the first step to take: talk to a qualified expert in the field. Help is available so you do not have to spend everything to become Medicaid-eligible.
Tell us about your Medicaid planning experiences: what advice would you offer?
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A reverse mortgage is a loan for seniors that allows them to convert their home equity into cash. The homeowner is not obligated to repay the loan for as long as the home is their principal residence.
Unfortunately, there is a lot of bad information about who actually qualifies for a reverse mortgage. They can be great options for unlocking money for care—even while one spouse stays in the home.
Who’s a Good Fit for Reverse Mortgages
A reverse mortgage is a good fit for you if:
- You want to stay in your home for a long period of time
- You’re house rich but cash poor
- You’re over 80, and need money for medical expenses or home care
- You’re between the ages of 62 and 72, find your assets diminishing, need help to get by or just need to pay off your existing mortgage
- Your spouse requires senior care at home
As with any loan, borrowers must satisfy certain eligibility requirements. Borrowers must be at least 62 years of age. All homeowners must sign the loan papers. And most importantly, owners must occupy the home as a principal residence.
What Properties are the Best Fit for Reverse Mortgages
The following property types are eligible for reverse mortgage loans, and must meet all FHA property standards and flood requirements:
- Single family home or 1-4 unit home (with one unit occupied by the borrower)
- HUD-approved condominium or manufactured home
- Mobile homes and co-op units are not eligible
Who Reverse Mortgages Are Not For
The follow individuals should avoid reverse mortgages:
- Seniors without long term care insurance who need to relocate to a senior care community
- Families that have owned the home for generations and want to continue to pass it on
- Married couples who do not have both names on the property title
- Married couples where one spouse is under the age of 62 and the younger lives in the home
- Seniors whose homes have very low property values
Do you think a reverse mortgage is for you?
If you think a reverse mortgage might be an option for you or your families, make sure you learn the details yourself. Any Senior Solutions executive director can refer you to a VA-licensed profession.
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There is a little known and little used program available for veterans an/or spouses that will allow for financial support for assisted living, nursing home, or housebound individuals. The program is for Veterans and the Veteran’s Spouse. In some cases if the Veteran and the spouse are divorced, the benefits may still be available.
The important thing to remember is that the Veteran must have served at least 90 days of active duty with at least one day served during a time of war. There are very specific days of required service. Another important aspect of this program is that your savings and assets are less than $80,000 excluding your home and vehicle. There is no “look back” period. The only assets counted are the ones at the time of your application. Generally one must have been in a facility or situation for 90 days before the program goes into effect.
If a veteran or spouse finds themselves in need of assisted living, nursing home or home health, you should start the process of applying for this benefit. Our veterans and their spouses have given to our country. Now is the time for our country to give to them. Call the Department of Veteran Affairs at 1-800-827-1000. If you can find a Department of Veterans Service in your area, it may make for a better and more time efficient source.