Some of our most grateful clients will tell you that we do a great job helping families deal with a long-term care crisis. Those same clients would ask us to pass this piece of advice on to you: Do not wait for a crisis to make plans to pay for long-term care.
No one wants a crisis, especially where an aging parent is concerned. The sudden need for long-term care is particularly troublesome, especially when you’re not prepared for the massive expense.
Long term care insurance is a complicated subject. For many of us, the technical explanations start to sound like Charlie Brown’s teacher. In truth, when it comes to the options related to funding long-term care, the landscape is indeed complex.
We turned to Craig Alper, Vice President of Wealth Protection Advisors to help us talk about some of the basics.
Almost everyone will need long term care
Plan in advance. This is some of the best, most fundamental advice Craig has to offer. When an individual can’t perform two of the six Activities of Daily Living, some form of care is needed. In many cases, the need arises very quickly.
Alper passes on the following statistics[1] related to those 65 and older, as provided by the U.S. Department of Health and Human Services. The numbers clearly show that most of us will require some form of care, and the means to pay for it.
• 69% will require some form of care for three years.
• 59% will use some form of unpaid care at home for one year.
• 42% will requires some form of paid care at home for less than one year.
• 65% will require care at home, either paid or unpaid, for two years.
The costs of long-term care are significant
Long-term care comes in several forms. Expenses vary greatly between different kinds of care, as does the average duration. An infinite number of scenarios could unfold.
Mom could be very healthy at home for many years, and then quickly experience a series of health conditions prior to a peaceful passing. She might only require a couple years of care.
Dad, on the other hand, might require two years of home health care, followed by several years of assisted living, several more years of memory care, and then eight months of skilled nursing.
Expenses vary between regions, but the national averages tell an important story.
• Adult day care: Annual expenses average nearly $18,000
• Assisted living: Annual expenses average $43,500
• Home health care: Annual expenses average $46,000
• Memory care: Annual expenses run approximately $78,000
• Skilled nursing: Annual expenses range between $96,000 – $108,000
Paying for long-term care has many options
Advance planning certainly makes sense. There’s no crystal ball telling us who will need care, what kind of care they’ll need, and for how long they’ll need it. But you can prepare for the probabilities.
When asked about the right way to buy long-term care insurance, Alper suggests that the better question to ask is, “How will I plan for an additional $6,000-$8,000 of monthly income?” He further suggests that there are many ways to prepare for the expense.
In rare cases, families are able to sensibly pay from their own savings. Few people have those kinds of resources. Although it’s now less popular, traditional long-term care insurance is another possibility.
Asset-based strategies is a concept that’s gaining in popularity. It’s about helping you leverage your assets to make the necessary resources available when you need them for long-term care. Some of those possibilities are in this short list of the many options.
• Life insurance accelerated for chronic illness
• Life insurance and annuities in relationship to the Pension Protection Act
• Hybrid life/annuity solutions utilizing IRA dollars
Effective long-term care planning is a holistic endeavor
According to Alper, the most effective solutions require a team approach, taking several elements into consideration. Long-term care insurance is only one dimension. A comprehensive plan takes these factors into account.
• The Medical aspect
• The Financial aspect
• The Legal aspect
• The Family aspect
Get the whole family involved
Alper suggests that the whole family should be involved as much as possible. Consider the proximity and capabilities of different family members. Who lives close to mom or dad, and what kind of care are they able to provide?
There are particular implications related to estate planning. Family members and close friends are candidates as guardians, especially when children with special needs are in the picture. Choices also have to be made when it comes to assigning financial and medical powers of attorney.
How will you or your parents plan to pay for long term care?
Achieving your estate goals while maximizing your resources to pay for the high cost of long-term care is a complex endeavor. But the result is more resources for better care, a higher quality of life, and perhaps even a better inheritance for your children, if that is your goal.
At Quinn Estate & Elder Law we work with a team of associates to help our clients achieve the best possible outcome. If your family is experiencing a long-term care crisis, or if you want to plan ahead, call us now to learn more. 636-428-3344
1. Source: https://longtermcare.acl.gov/the-basics/how-much-care-will-you-need.html – as accessed on 11/21/2018
