Long Term Care
One of the biggest drains on an estate can be long term care costs. These costs arise from the need for assistance with activities of daily living, such as:
- Getting in and out of bed
- Getting to the bathroom
- Using the toilet
- Bathing and showering
- Dressing
- Preparing food
In order to qualify for government Medicaid, most of your assets must be spent down. Your home and primary vehicle may be kept, but much of your investments and bank accounts will be spent on in-home assistance or nursing home care.
A revocable living trust does not prevent Medicaid spend down of an estate. Types of irrevocable trusts are sometimes used which can prevent Medicaid spend down, but access to and liquidity of assets can be greatly reduced, often off-setting the benefit of such a trust. Consult an estate planning attorney for planning options in your state.
And Statistics
Costs vary widely depending on needs. Home-health care is much less expensive than moving into an assisted living facility or nursing home. The latter can cost between $40,000-$80,000/year depending on the location and quality of the facilities.
Home health care typically lasts anywhere between two to ten years before a person moves in to a nursing home for a period often less than five years according to a variety of studies.
If a person averages $40,000 in long term care costs over a 5 year period, the result is $200,000 taken from the estate. Those costs do not include medical costs.
Should a spouse need equivalent care, the drain on the estate can double.
Various studies indicate a range of 25% to 75% that a person will have long term care needs at some point in their life.
Many studies also point to a statistical decrease in life expectancy of family member caregivers due to the stress of caring for a loved one and balancing his or her family and job.
Like health insurance which provides money when you are sick, long term care insurance provides money when you require assistance with daily living activities, reducing or eliminating the need to spend down your estate.
The cost for long term care insurance usually remains the same based on the age you took out your policy, hence the importance of investigating a plan when younger.
Long term care insurance often becomes cost-prohibitive once a person reaches his or her seventies. Insurers typically do not offer coverage to someone who has major medical issues so it is important to examine coverage while you are healthy.
When you no longer can perform a combination of the above activities of daily living, the insurance company begins sending money directly to you or your long term care provider.
The monthly amount paid to your or your provider depends on the type of plan you select. Some plans offer unlimited coverage while others offer coverage for only the first few years of care.
Some plans allow a return of your monthly insurance payments after you have passed regardless if you have used any benefits.
A good insurance advisor can help you create a plan that meets your current budget and provides financial assistance in the future.
