According to the AARP, only 36 percent of those who have financially planned for old age included long-term care in their planning. However, if you are over 65, your chances of needing some kind of long-term care during your lifetime are at 70%. While it’s not enjoyable to think about a future including caregivers, it is not wise to ignore a likely scenario. Let’s look at what types of long-term care facilities exist and how to plan for the day you could need one.
Aging in Place
If you reach your senior years in life, you may wonder what kind of condition would induce your loved ones to place you in a nursing home. However, there are several kinds of situations in which continuing life at home would require a full-time caregiver.
Family members, friends, and community resources are often not enough for someone wishing to age in place. In addition, certain conditions such as Alzheimer’s or dementia could make it almost impossible for even around-the-clock caregivers to keep you safe at home.
Other conditions may require skilled nursing care 24 hours a day. The costs and logistics of having this kind of care at home are insupportable for most income levels. The National Institutes of Health agree that “for some illnesses and for some people, professional health care in a long-term care facility is the only reasonable choice.”
Planning For Your Future
If you are in the one-third of baby boomers who may never need long-term care, count yourself lucky. Of those 65 and over now, 20 percent will need it longer than five years. Women are likely to need long-term care for almost four years. Men generally only need long-term care for a bit over two years. (2) Because you are likely to need long-term care in the future, it is crucial to start planning before time runs out.
Check out these average yearly costs for care:
- $43,472 Home health aide services
- $15,860 Adult daycare while living at home or with friends or relatives
- $39,600 Assisted living facility
- $73,000 Semi-private room in a skilled nursing facility
- $81,030 Private room in a skilled nursing facility (3)
The fact is that there are ways to plan to pay for your stay in a skilled nursing facility without spending your entire retirement savings.
What Does Medicaid Cover?
In North Carolina, 64% of our 65 and older population living in a skilled nursing facility receive Medicaid. Medicaid covers the cost of long-term care, but only after you spend down most of your assets. In some cases, you may keep your home. Medicaid coverage also allows a small amount of income each month. For one person in 2021, the maximum allowable income is $17,131.
When you spend down your assets to qualify for Medicaid coverage of long-term care costs, you have little money to care for your other needs. For example, if you want to buy face cream or a new pair of pants, you may not have the funds to cover a purchase.
In addition, if you spend down your retirement assets and sell your home, you have no inheritance to give family members when you do pass on. Long-term care insurance is one option to cover needed expenses, but planning ahead with a trust can also be a good option.
What Is Long-Term Care Insurance?
Long-term care insurance can cover the costs for any long-term care needs in a nursing home, your own home, assisted living, or even for adult daycare. However, different policies have varying coverages, so it is essential to look for the type of care you desire when you consider a policy.
This type of coverage is a bet by the insurance company that you may not need care, so you must purchase before your care needs become apparent. Usually, a good time to start looking is in your early 50s. The cost for this type of insurance may be prohibitive. Some policies can run as high as $3,685 for a single male or $6,400 for a single female. A combined couples policy could run up to $8,575 per year for comprehensive coverage. (4)
Irrevocable Trust
If the cost of long-term care insurance scares you away, you may want Medicaid to cover your expenses for long-term care. In this case, you may keep your assets from being counted by Medicaid by opening a trust fund. An irrevocable trust shields your assets from the Medicaid spend-down by owning your assets. A trust is a legal framework drawn up with your attorney to hold assets for you. Whoever acts as trustee of the trust follows the rules you create in the original trust legal framework.
You can set up an irrevocable trust that will give you income each month but not disqualify you from Medicaid. This extra income allows you to live comfortably in a skilled nursing facility while having enough money to buy what you need. As the designated beneficiary, you receive distributions from the trust each month. You can also set up a trust to give distributions to a different beneficiary once you pass away.
We Can Help
If you are considering your options for long-term care, talk with our experienced estate planning attorneys at Hopler, Wilms, and Hanna. We focus on issues affecting the senior population in North Carolina and want to help you make a wise plan for your future and your heirs. Contact us today to find out how to get started.