Too few older people know their rights and what they can do about long-term care (LTC). Many people don't want to deal with this problem or think they won't need this care when they get older.
In 2000, more than 10 million people in the U.S. needed long-term care help, according to the U.S. Department of Health and Human Services. There were 3.6 million people younger than 65 and 6 million older than 65.
Because of this, everyone, from Gen Xers to Baby Boomers and everyone in between, should plan for long-term care.
Long-term care (LTC) is a group of services and resources you may need to meet your personal elder care needs for a short or long time. When people can't do everyday things independently, these services help them stay as independent and safe as possible. About 60% of us will need help with things like getting dressed, meeting, or making meals at some point. Planning is essential, but many people don't know what their insurance covers and often have the wrong idea about what Medicare covers.
Depending on a person's needs, people give long-term care elsewhere. Most long-term care is provided at home by family and friends who don't get paid. It can also be given in a place like a nursing home or out in the community, like at an adult day care center.
Most long-term care is personal care, which helps with day-to-day tasks. This type of care is also called "activities of daily living." Some things are cleaning, getting dressed, grooming, going to the bathroom, eating, and moving around, like sitting on a chair or getting out of bed.
Long-term care also includes services for the community, like meals, daycare for adults, and transportation services. These services may be free, or they may cost money.
Long-term care is usually needed when someone has a major illness or disability. Long-term care needs can arise quickly, like after a heart attack or stroke. Most of the time, though, it happens slowly as people get older and weaker or as a disease or condition worsens.
Who needs long-term care?
Knowing how much or what kind of long-term care someone might need is hard. Several things make it more likely that someone will need long-term care.
Due to the high cost of long-term care, most middle-class adults and their family members have to plan very carefully. Most seniors may need some kind of Long-Term Care. Sadly, many aren't ready for how much money it will cost them and how it will affect their family's savings. Financial uncertainty can add to the worry of a family paying $10,000 or more monthly for long-term care.
It's essential to initiate long-term care planning because if you live past age 65, you'll likely need some kind of long-term care. About 70% of people over 65 need some sort of help, and the chance of needing help goes up as you get older.
Planning ahead lets you know what kinds of long-term care services are available in your area and if there are any special requirements for getting services. It may include the age or other eligibility requirements such as medical records, existing health insurance, long-term care services costs, and available public and private payment options. When you need long-term care, having this knowledge gives you more options and makes it more likely that you will have more choice and control over where and how you get those services.
The cost of long-term care services often becomes unaffordable to the average person. The cost reaches so high that a common individual can't bear it with their regular income and other available financial resources. If you plan, you may be able to save your assets and income for things other than long-term care, like making sure your partner or other loved ones have a good quality of life. With long-term care planning, you are less likely to use all of your money to pay for long-term care. This means that you are more likely to be able to leave a fortune to your loved ones.
When you plan for long-term care, you and your family will also feel less mental and financial stress. It can give you a way to get your whole family involved in making choices without putting the entire load on them when the time comes.
Lastly, one of the best things about planning ahead is that it gives you more freedom if you need long-term care. If you plan, you have more options for getting care outside of a long-term care center and can stay at home or get services in the community for as long as possible.
Choosing any kind of elderly care or long-term care facility is one of the most challenging choices people will ever have to make. Even though there aren't many things you can do to make this easier on yourself emotionally, there are steps that can make the change easier for your loved one.
Senior communities offer a variety of housing choices and different levels of elderly care, so every senior can find something that fits their needs and way of life. As per urmc.rochester.edu, these are some of the facilities available:
Independent living apartments are great for seniors who don't need personal or medical care but would like to stay with other seniors who share similar interests. Most places for adults to live on their own offer community events, field trips, shopping trips, and projects that can be done right on the property. There are no licenses or rules for these apartments.
Adult homes are licensed and regulated places where people who can't live independently can stay temporarily or for a long time. Most of the time, Family-type homes provide:
The Social Services Department is in charge of how they work.
Enriched living is like an adult home, except that older people live in their own apartments. They serve at least one meal daily, and the State Department of Health has given them a license.
A great option to nursing homes for older people who need help with daily tasks but don't always need care. An outside group handles room and board, case management, and skilled nursing care. People who get Medicaid, Supplemental Security Income (SSI), or home relief can participate in this service.
Continuing care communities have everything from assisted living to nursing homes on the same property. They make sure that the person can "age in place," which means that as their needs change, they can move from one level of care to the next. The move to a care home is easier for the people who live there because they can stay in the same place. They may require a buy-in fee or an upfront purchase of a pension, followed by monthly payments that cover services, perks, and medical care.
People who can no longer live independently can get long-term care 24 hours a day, seven days a week, at a nursing home. In nursing homes, adults with serious illnesses or injuries get special care from doctors and nurses trained to do so. Special training staff helps people bathe, eat, do laundry, and clean the house. They may focus on acute, short-term, middle, or long-term skilled care.
The Department of Soldiers Affairs (VA) is in charge of its Medical Foster Homes Program, which helps soldiers with long-term health problems that need care at the nursing home level. These places are similar to adult family homes in that they are private homes where a trained nurse helps a small group of people.
The VA says that veterans must pay for their care in a medical foster home out of their own pockets or with long-term care insurance, VA Aid and Attendance Pension benefits, or another benefit program that applies. The cost is between $1,500 and $3,000 per month, depending on how much money you make and how much care you need. The residents and the helper agree on the fee upfront.
Memory care is extra care and supervision for people with Alzheimer's disease, other types of dementia, or significant memory problems. People with dementia can benefit from being in a safe, structured setting with more gentle sensory stimulation.
You may find similarities in Memory care communities with Assisted living. But they are locked facilities or safe for people with dementia who might walk off. Moving to a secured memory care unit can help someone who has gotten lost or is likely to walk out of a facility and get lost.
There are secure memory care rooms in many nursing homes and facilities for people who need help living independently. Staff members get special training to care for and help this group 24 hours a day, seven days a week. Most of the time, memory care costs more than other kinds of care.
People use the terms "nursing home" and "skilled nursing facility" equally since the types of care they provide are often similar. They aren't the same, though.
Skilled nursing facilities, or SNFs, are more likely to have nurses or doctors around all the time and to offer recovery services like speech, physical, and occupational therapy. Both SNFs and nursing homes have to follow different rules.
A person who needs care from an SNF "needs a lot of help." Moving them usually takes two people; they can't get out of bed and need other kinds of skilled care. An SNF patient might have a disability or need long-term care like dialysis or a tracheostomy tube, for example.
Long-Term Care expenses can be paid for in several different ways. Long-Term Care can put a lot of strain on a person's finances, but there are several ways to help pay for it. Let's talk about the three most common ways to pay for long-term Care:
First, you can plan to pay for your own Long-Term Care out of your own pocket. The person pays for the costs with the money from their financial account. This can include retirement accounts, bank accounts, savings, and, worst cases, selling personal property like collectibles or real estate. This choice is best for people who will have enough money each month when they retire to cover the cost on their own or very close to it. If not, the cost of care will force the person to spend all their money until they have a tiny left.
Long-Term Care Insurance is one way to help pay for your care bills that come out of your pocket. Long-Term Care Insurance is an investment you can make through an insurance company. It will pay for certain types of care if you meet a set of conditions. Long-Term Care Insurance lets a person stay in a facility on a private-pay basis and can help the person's other assets last longer. But this kind of insurance can be expensive, and not everyone has the chance to get it.
The Department of Veteran's Affairs Improved Pension Program, also known as Aid and Attendance, is an option for paying out of pocket. Veterans and the spouses of Veterans who fought during a specific time of war can receive benefits to help pay for their long-term Care. To get help from the program, you must meet certain requirements related to military service, income, assets, and the need for care. The pension is income and not taxed. It is paid straight to the veteran or his or her spouse. This keeps them in the private pay status.
Medicaid is another joint federal and state public assistance program that helps anyone who needs care and can pass Medicaid eligibility. This service helps pay for Long-Term Care for people who can't afford to pay for it on their own. When a person qualifies, almost all their monthly income goes to the facility, and Medicaid makes up the difference.
But there are stringent rules, and most people don't qualify for Medicaid until they have spent much of their money. There are choices, so one doesn't have to spend money on everything. Planning around Medicaid gives people funds available to themselves, their partners, and all the costs that Medicaid doesn't pay for.
Medicare is a government health insurance program for people 65 and older. It will pay for the skilled nursing facility stay for the first twenty (20) days but not after that. If the stay lasts longer than 20 days, the insured person must pay a coinsurance fee of $176 per day for up to 80 days. If the covered person getting skilled care stays longer than 100 days, he or she will have to pay $14,080 for days 21 through 100. If the person with Medicare stays in a skilled nursing home for over 100 days, she must pay for all the costs. Medicare will stop paying.
Protecting your assets in case you need long-term care is vital for several reasons:
You may protect assets, your old memories, and the money you want to leave to your family. Without protecting your assets, you might lose a lot of the life estate you have owned throughout your life. As a result, you may leave less for your children or beneficiaries.
If you don't have asset protection, you might have to spend down your assets before you can get help from Medicaid or other government programs. This can make you less flexible and hurt your financial security.
When you save money for long-term care, you have more say over the kind and level of care you get. You don't have to get care only in places and ways the government pays for. Instead, you can choose to bring your own preferred long-term care services.
By protecting your assets, you can ensure you can keep living the way you're used to. Without security, you might have to sell your home or other valuable assets to pay for long-term care. This could cause your standard of living to drop by a lot.
If you spend all your money on long-term care and have nothing left, you might need government or family help. Protecting your assets can help you keep your freedom and keep your family from having to take care of you.
Long-term care can cost a lot, especially if you need to stay in a nursing home for a long time or need specialized medical services. Without the proper security, you could lose all of your savings and assets quickly, putting you and your family in a challenging financial situation.
Knowing your belongings are safe can give you peace of mind and less stress during a hard time. You won't have to worry as much about your finances while dealing with a long-term care emergency's mental and physical stress.
You could also qualify for tax breaks based on where you currently reside and how you protect your assets, making you considerably more financially safe. The IRS lets certain taxpayers deduct a part of their long-term care insurance premiums from tax returns based on their age.
Long-term care insurance plans tax-qualified in 2022 gave tax-free benefits of up to $400 per day or $146,000 annually. Also, if your long-term care costs are higher than this cap, you may be able to write off the difference as a medical expense on your tax return.
One perk of some Long-Term Care Insurance that not many know about is that you can deduct some or all of the cost when you are retired. For people ages 50 to 60, the premium that can be deducted goes from $1690 in 2022 to $1790 in 2023.
When a family member has a health issue and needs to go to a nursing home or needs full-time care at home, it can financially be tough on you, your kids, grandkids, or caretaker. A nursing home costs between $10,000 and $15,000 per month, and if a family doesn't plan ahead, they may have to spend almost all of their money before they can apply for Medicaid.
As people live longer, they get weaker in their 80s and 90s. This makes it more likely that they will need long-term care. Many of the people we meet have already had to help their parents or grandparents with long-term care, and they have seen first-hand how painful it is to watch them spend all of their money. For married people, having to use pensions, social security, and marital assets to pay for care for the other person can put the other spouse in a difficult financial situation.
A financial advisor may suggest how to handle long-term care expenses instead of having the high nursing home care costs threaten your financial security. Consider these options provided by some popular financial advisors:
Buying a Medicaid-compliant annuity is one of the best ways to turn your assets into income and protect them from nursing home costs. By doing this, you may be able to lower the value of your assets and become eligible for Medicaid without giving up any of your hard-earned money.
Most of the time, Medicaid is for low-income people, and a person's assets can't be worth more than a certain amount. People who want to get Medicaid may spend down their assets, giving up their cash in exchange for help. But if they use their assets to buy an annuity that Medicaid accepts, they may convert their assets into income and be eligible for Medicaid.
When you buy an annuity that qualifies, you agree to give the company a significant sum of cash. The money is invested, and you get it back in regular payments. You may be able to lower the value of your assets sufficiently to qualify for Medicaid because of the initial fee. But the money will be given back as pay.
Long-term care insurance is an excellent method to keep your assets safe from the costs of a nursing home. Even if you don't use it for anything else, a long-term insurance plan provided by a reputed insurance company can help pay for the care that the nursing home gives. Long-term care insurance, like most other types of insurance, such as disability insurance, may cover nursing home costs and the cost of medical appointments up to a certain amount. In exchange, they will have to pay a weekly premium.
According to figures from 2020 from the Administration for Community Living of the U.S. Department of Health and Human Services), approximately 70% of seniors 65 or older will need long-term care services or help at some point, creating personal finance problems. On average, women need care for 3.7 years, while men need care for 2.2 years.
With long-term care insurance, people don't have to depend as much on their belongings to pay for nursing home care costs. If you don't have to pay for things out of your own pocket, you can keep your savings for more important things, like paying medical bills or giving money to loved ones. In other words, you can spend the money you save on more important things. Premiums will, of course, use up some of the savings, but less than straight nursing home costs.
If you qualify for long-term care insurance, you also have more financial freedom than if you are eligible for Medicaid. Medicaid gives health insurance to millions of Americans, but it is made to help people with low incomes. So, to get Medicaid, some people may have to spend down their assets. People with long-term care insurance can keep their assets and still get help with the high costs of being nursing home residents.
If you list your deductions, long-term care insurance can help you save money on taxes. Some federal and state tax laws let you deduct all or part of your long-term care insurance premiums as medical costs if they meet a certain threshold. You may deduct the fees, considering how old you are.
A "Trust" is an agreement in which a "settlor" (also called a "grantor") gives money or other assets to a "trustee." The trustee handles the assets and spends the money according to written trust laws to benefit a "beneficiary" or "beneficiaries." Trusts come in many different forms and are used for many other things. Most of the time, these goals are one or more of the following:
If you want to keep your assets safe from home care or nursing home costs, you might want to set up an irrevocable Trust. When a Trust is set up, the money will belong to the Trust account, which a manager runs. Because of this, the money is no longer part of your estate. Instead, it is now the property of the Trust.
A Medicaid Asset Protection Trust or MAPT is a trust set up to keep assets from being counted when determining if someone is eligible for Medicaid.
A MAPT lets people get Medicaid payments for long-term care while keeping their assets safe if they need long-term care. To get Medicaid, a family's assets must be less than a certain amount. There are strict rules about the amount of assets you can have, and you have to look back five years to see if you qualify.
Medicaid may look at your cash dealings from the past five years. If you want the money to be taken out of the value of your estate in time for you to qualify for Medicaid, you need to be bold and act as soon as possible.
For the Medicaid Trust plan to work, the assets must be placed in the Trust 5 years before the Medicaid application is sent in. Once the assets have been in the Trust for more than five years, they are no longer counted as assets, no matter how much money is in the Trust. This means the person instantly qualifies for Medicaid.
Your estate's value decreases when you set up an irrevocable trust and include assets. Let's say that enough money is put into the Trust. In that case, the new value of your estate might make it possible for you to get Medicaid while still leaving a gift for your loved ones.
A family caregiver agreement is a powerful method to protect your assets from a long-term care emergency.
By formalizing an arrangement with a trusted family member or loved one, you can compensate them for providing care services. Jason Cheung, Operations Manager, Credit KO, noted that the agreement safeguards your assets and ensures personalized care from someone you trust. It is essential to consult with legal professionals to create a legally binding agreement clearly outlining the responsibilities, compensation, and duration of care.
By considering factors like the caregiver's qualifications, experience, and potential impact on Medicaid eligibility, you can tailor the agreement to your specific needs. For example, Bob enters into a family caregiver agreement with his daughter, Sarah, to compensate her for providing long-term care. In this way, Bob's assets are protected, and he can receive excellent care from his daughter.
Creating a life estate is similar to the other things on this list in that it lets you lower the value of your estate so that you may apply for Medicaid. On the other hand, creating a life estate enables you to give your property to someone else while keeping the right to live there for the rest of your life. This is better than just spending down your assets.
By making a "life estate," you can give someone else ownership of your land. A life estate usually gives ownership to family members, close friends, or others you can trust. The person who gets the property is then called a "remainderman." You will always have the right to use and live on the land. When you die, the land goes to the person whose name is on the deed.
When you apply for Medicaid, the property you own in a life estate will not be added to the total amount of your estate. So, the property will go to the people picked to get it. You may be able to get Medicaid without spending down because the value of your land has gone down.
Giving money to people you care about can protect your belongings from the costs of a nursing home. In particular, allocating assets to the people you care about most can lower the value of your estate and make you eligible for Medicaid. The value of the gifts might not count toward Medicaid's standards for income and assets.
Before applying for Medicaid, it's essential to know about the "look-back" time, which looks at all financial transactions made in the last five years. Giving gifts during this time could affect your status for Medicaid, and you might have to wait a certain amount before you can get Medicaid again.
Many seniors still have balances on their home mortgage or a home equity line of credit. Because the home is generally an exempt asset when it comes to applying for Medicaid, a quick way to save money from having to be paid to the nursing home is to pay off any debt against the home.
Michael Guerrero, Certified Medicaid Planner, Eldercare Resource Planning, also explained that an unmarried Medicaid applicant must keep their total home equity under their state home equity cap (between $688,000 and $1,033,000).
By using at-risk assets to pay bills before asking for Medicaid help (but after the "snapshot date" of institutionalization), the spouse living in the community can reduce the number of demands on the assets he or she can keep under Medicaid rules for spousal impoverishment. For example, a couple might pay off any debts through the best debt relief options, pay their real estate taxes, insurance, or other big bills, or pay their funeral costs beforehand.
Establishing a Family Limited Partnership (FLP) can effectively shield assets from long-term care emergencies.
Roy Lau, Co-Founder of 28 Mortgage, said - “By transferring ownership of assets to a partnership, with family members as limited partners, the assets are protected while allowing family involvement. FLPs offer asset protection benefits as they can be less vulnerable to potential long-term care costs”.
For example, if an individual requires long-term care and Medicaid eligibility is a concern, the assets held within the FLP may not be counted as personal assets. It's essential to consult with legal and financial professionals to set up an FLP properly, ensuring compliance and maximizing its benefits.
Some things, like a home, a car, and personal items, do not count toward Medicaid eligibility. So, in the right situations, a community spouse could use money from their savings to buy a more expensive home, fix or improve their current home, or buy a new car, new furniture, or personal items. Medicaid rules do not stop people from spending assets that are counted on assets that are not counted but have the same value. Money spent on non-countable assets needed by the spouse living in the community can speed up getting on Medicaid.
Navigating the different choices can be scary, and it's just one of many steps that need to be taken to help better secure your financial future. Because of this, people who want to protect their assets from long-term care emergencies should talk to an asset protection attorney with knowledge in this area. The attorney will examine your case and devise a better plan to meet your needs.
In New York, the average cost of nursing home care is $364 per day, $11,076 per month, and $132,907 per year. Depending on your state, the average cost could be higher or cheaper than it is now.
No, Medicare does not pay for long-term care costs like those for adult day care, home health care, nursing home costs, or cost towards assisted living facilities. Medicare can only pay for skilled nursing care for a certain amount of time. Medicare will pay for all the costs for the first twenty days. After that, it will pay 80% of the costs for eight days. But Medicare and Medicare Supplemental Insurance won't pay for any nursing home costs after 100 days.
Medicaid is a federal and state program in the United States that pays for most nursing home care. Applicants must meet specific cash requirements to be eligible for this program. The candidate can't have more than $2,000 in assets if they are single and $ 3,000 if they are married. Also, the applicant's monthly income cannot be more than $2,205.
No, hiding your assets so you can get Medicaid is not legal. This is called theft. Medicaid does allow some transfers of assets before asking for a nursing home. However, Medicaid also requires that you list any gifts or transfers of assets you have made in the last five years and sign the application under penalty of perjury.
The downside is that if you don't set up a MAPT right away, it might not cover your assets as well as it could, and you might not be able to get Medicaid for a while.
People who buy a Partnership-qualified LTC insurance policy can protect their assets up to an amount roughly equal to the coverage given by the policy and still are eligible for Medicaid if/when their long-term care policy expires.
Most of us will need to make sure that our money and other belongings don't run out at some point. A living trust is often the best way to protect assets for you or a loved one who is getting older. Living trusts let older people choose the right person to care for their money and property.