Planning for Long-Term Care

Your choices about the disposition of your assets and plans for long term care or end of life care are among the most personal and important decisions you will make during your lifetime. The decisions you make today can ensure that your long term needs are met while laying the foundation for the smooth (and cost effective) administration of your estate. There are many considerations in estate planning matters including, but by no means limited to: wealth preservation, meeting charitable goals, providing for blended families, ensuring long term medical care needs are met, and Medicaid planning. The purpose of our newsletter is to provide clients with practical information on issues that you or a loved one may face and to assist you in planning for the future. We hope that the topics are helpful and welcome feedback.

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Planning For Long-Term Care

As you draw up your estate plan, you should consider setting aside funds to pay for long-term care, should you need it in the future. Many people rely on federal and state assistance programs, like Medicaid, to pay for these costs and quickly find out they are insufficient. This then leaves people attempting to pay for the care themselves or with the help of family. If you did not set aside adequate personal resources for your care, you may find yourself in the position of having to cash out life insurance policies or sell your house and other possessions.

While many think of nursing homes as the main option for long-term care, there are other choices available, including:

  • Assisted living facilities
  • Home health care
  • Adult care facilities
  • Adult day cares
  • Continuing care retirement communities

Paying for these types of services can be a huge burden on both the individual and the family. Some of the sources of funding for these types of facilities and services include:

Federal and state programs

Medicaid will pay for some long-term care, but the type of care it will pay for, how much it will pay and the eligibility requirements for the benefits vary state by state. Generally, a person has to have spent all of their personal assets in order to receive Medicaid funding for nursing home care. Most Medicaid programs will not pay for assisted living or other types of care other than nursing homes. Medicare, on the other hand, generally only pays for short-term nursing home care following a hospital stay to treat an injury or illness. Medicare also may cover some of the costs associated with therapy (physical, occupational) and in some instances, home care, following a hospital stay.

Private insurance

Individuals can purchase long-term care insurance policies, which are designed specifically to help cover the costs of nursing homes and other assisted care. The type of care and how much it will cover varies by policy. It is important to purchase long-term care insurance before retirement because the costs of the insurance increase with age and it may be more difficult to qualify for the insurance the older you are.

Medigap policies - supplemental insurance policies for Medicare - may help pay for some of the costs of nursing homes, but it is important to remember that Medigap usually will only help pay for costs that are covered and approved by Medicare. Some policies will cover additional costs, but you will want to verify this with your insurance carrier.

Personal Savings

Individuals can open up savings accounts or other investment accounts to set aside funding for long-term care. An estate planning attorney or financial advisor can help you choose the best type of account to achieve this purpose.

For those who find themselves in a position of paying for long-term care for themselves or a loved one and do not have adequate resources to do so, other options include:

  • Reverse mortgage – lender pays the borrower payments based on the value of the home. The loan is due at the time the borrower no longer occupies the home as his or her principle residence. The borrower, or the borrower's heirs, can keep the home so long as the loan is paid off.
  • Life insurance policies – you can borrow against the cash value in the policy or cancel it and cash it out, depending on the type of policy and its restrictions.
  • State resources – there may be financial resources available in your state or city to help defray the costs of long-term care.

Long-term care is expensive. No one enjoys thinking about what will happen to them when their health decreases or if they suffer a serious injury, illness or disease. But it is better to be prepared for the worst-case scenario than to worry about it when you and your family are feeling most vulnerable.

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