You should be aware of the potential impact of assisted living costs when you are planning ahead for the future. About 70 percent of elders will need help with their activities of daily living, but some folks will be able to get the helping hands that they need from unpaid family members and friends.
This being stated, just over half of people that require living assistance will incur custodial care expenses. Medicare does not pay for long-term care, and nursing homes and in-home caregivers are quite expensive to say the least.
Long-Term Care (LTC) Insurance
When you hear about the Medicare gap and you consider the implications, you would naturally wonder if long-term care insurance is a thing. The answer is yes, but whether or not it is a good thing is a question that is open to debate.
The premiums are more expensive as you get older, but few people that are in their 30s or 40s are going to start thinking about potential long-term care costs. Even if you did act this far in advance, you may be paying for 40 or 50 years before you see any return on your investment.
According to the American Association for Long-Term Care Insurance, the average annual premium for $165,000 worth of coverage for a 65-year-old male is $1700. For women, the figure is $2700 because of the longer lifespans.
That may sound relatively affordable, but the premiums will rise by 4 percent to 6 percent each year on average. This is the rate of increase when you are in your 60s, and it will go up as you get older.
The average age of admittance is 79 for nursing home residents. When you put all the stats together, you can see that the steadily rising premiums can be stifling. In fact, about half of LTC insurance policies lapse before any benefits are paid.
Plus, there is the elimination period. You can pay your premiums for many years until you actually file a claim. When that time comes, they will not pay for your care immediately. You have to pay out-of-pocket during a waiting or elimination period that will typically be between 30 and 90 days.
Medicaid Planning
You can decide if long-term care insurance sounds like a good deal, but before you make your decision, you should consider a widely embraced alternative. Medicaid will cover long-term care, but you can’t qualify if you have more than $2000 in countable assets.
That sounds like a dealbreaker, but this is not necessarily the case. You can transfer assets into an irrevocable Medicaid trust with future eligibility in mind. The income will still be distributed to you as usual, and that is one major base covered.
The principal would be out of your reach after you fund the trust. However, if your retirement plan revolves around the income that you get from your savings, you would not want to touch it anyway. Those assets would not count if you were to apply for Medicaid.
Advance planning is key because of the five-year look back period. You are ineligible for five years after you divest yourself of direct personal possession of assets. For many people, this will not be a problem because the income will keep not be interrupted.
Home ownership is another consideration. You can qualify if you own a home, but Medicaid will try to put a lien on the property after your death. They would be unable to touch it if you convey the home into your irrevocable Medicaid trust, but your living arrangement would not be interrupted.
Schedule a Consultation Right Now!
Today is the day for action if you do not have a nursing home asset protection plan in place. You can schedule a consultation at our Bluffton, SC elder care planning office if you call us at 843-815-8580, and you can use our contact form to send us a message.
Hunter is a member of the South Carolina Bar Association, the Beaufort County Bar Association, and has served on charitable and advisory boards in the Bluffton/Hilton Head area.
Hunter graduated from Hilton Head High School. He then earned his Bachelor of Science Degree in Economics from Clemson University, in Clemson, South Carolina.
Hunter graduated Cum Laude from Regent University School of Law in Virginia Beach, Virginia, having earned a Juris Doctor Degree. He also wrote his doctorial thesis on Estate Planning Dynasty Trusts.
Hunter has called Beaufort County home for since 1984, where he lives with his wife and two children.In his spare time he dabbles in automobiles, reading history, hunting and fishing.
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