November is Long-Term Care Awareness Month, serving as a reminder of the importance of financial, insurance, tax, and legal advisors to help clients who are couples and/or have families with planning for long-term care needs. To help start this critical conversation and future planning, be sure to keep these five points in mind:
- Long-term care is the custodial aid that any person may need to resume their activities of daily life. Whether part of the natural aging process, the impact of medical conditions such as Alzheimer’s or dementia, or injuries from a physical accident, a person may no longer be able to care for himself/herself as they age. In fact, according to the Department of Health and Human Services, there is a 53 percent probability that an individual age 65 years and older will need long-term care in their lifetime. Long-term care covers a spectrum of personal custodial aid services, provided by a home health-aid visiting the patient or a nursing home facility that specializes in advanced care needs – both of which come at a substantial cost.
- Health insurance or Medicare does not cover long-term custodial care. Unless you hire a professional custodial care nurse to help with daily basic care such as bathing and eating, a spouse, family member or friend becomes responsible to provide this assistance. Such care can be an emotionally and physically stressful activity that is difficult to sustain for the caretaker and potentially dangerous to the recipient. If a professional is hired, there is a 27 percent chance that the care will cost over $100,000 per person in their lifetime. Unless your family can plan and reliably subsidize the cost of care, you risk draining family assets to pay for any necessary professional care in the future.
- Consider buying a long-term care (LTC) insurance policy to help finance the cost. If your family decides to buy insurance, it is important to be able to afford and pay the premiums. Make sure you plan for the premiums to increase by an average of 5 percent a year, through periodic increases of 25%. As a CERTIFIED FINANCIAL PLANNER™ professional, I recommend, as part of the financial planning process, completing a detailed analysis of the potential cost of care, your family’s resources and any other alternatives to finance care.
- There are ways to position assets to reduce the risk of losing them to help cover the LTC cost. Although many practitioners try to complete “Medicaid Planning” to hide assets and qualify for state aided care, that care is not the best quality and often these strategies do not end up saving you as much money as expected. A popular strategy to protect a big asset, such as the family/vacation home, is for family members to buy the house from their parents at a reasonable price, rent it back to parents for a reasonable cost, and then potentially use the proceeds to help finance the future LTC needs. In other words, legitimately remove the assets from your parents’ names for them to be eligible for late-in-life Medicaid services. Typically, such strategies need to be completed well in advance of the LTC need to be effective.
- To reduce the probability of needing long-term care, lead a healthy and safe lifestyle. Too many elderly people are injured trying to maintain a home, have medical complications due to incorrect medicine consumption, do not eat properly or maintain a healthy weight and level of activity. As a couple and as a family, encourage your spouse and parents to properly care for themselves, use medical advocates to help with understanding and communicating health issues, and hire individuals to help maintain the property if necessary.
For more guidance on planning for long-term care, visit the Department of Health and Human Services and consult a CERTIFIED FINANCIAL PLANNER™ professional in your area to help factor potential costs into your financial plan.