PREPARING FOR LONG-TERM CARE
WHAT IS LONG-TERM CARE?
Many people equate the term ‘long-term care’ with being in a nursing home. However, there are many different forms of long-term care including assisted living, at-home care, and care in the community such as an adult day care center. Long-term care services are designed to meet a person’s health and/or personal care needs during a period of time. This could include assistance with driving to appointments, making meals, bathing, getting dressed, cleaning, and other daily activities. These services help people live as independently and safely as possible when they cannot perform everyday activities on their own.
WHO NEEDS LONG-TERM CARE?
70% of people over the age of 65 will need long-term care during their lifetime, so it’s important for everyone to prepare for it. If you have a family history of dementia or Alzheimer’s, planning for long-term care should be a priority for you. Also, long-term care isn’t exclusive to the elderly. In fact, 43% of individuals requiring long-term care are working-age adults under the age of 65. Anyone can need long-term care services anytime due to severe and unexpected chronic illnesses and diseases, injuries, accidents, and after surgical procedures.
WHO PROVIDES LONG-TERM CARE?
Long-term care can be provided by professional medical personnel, but most commonly it is provided at home by unpaid family members and friends. However, it is not wise to assume that a family member will be able to care for you. The type of care you need may go beyond a family member’s abilities, and although your loved one is unpaid, providing the equipment needed for care can still be a significant financial burden in itself.
Ultimately, most people feel guilty about burdening family members with the responsibilities of providing care. At the same time, their family members often feel guilty about their inability to slow their loved one’s decline. The result can be a devastating situation for everyone.
WILL MY INSURANCE COVER LONG-TERM CARE?
Don’t plan on your health or disability insurance covering long-term care. Many health insurance plans, including Medicare, will only pay for acute care such as doctor’s visits, medications, and short-term hospital stays relating to illness or injury. Typically, even the most comprehensive health insurance plan will not pay for assistance with daily activities and will have very limited options. Long-term care insurance policies are available to cover such services.
HOW TO PAY FOR LONG-TERM CARE
The thought of someday becoming dependent on others is a scary thought. However, learning about how you can prepare for long-term care situations can ease some of your own fears and worries, as well as your family’s.
The potential cost of long-term care is astronomical and can quickly eat away at your retirement savings, so don’t depend on them for a long-term care solution. The ultimate cost of long-term care greatly varies depending on the length of time care is required, the care setting and geographic location, and level of care required.
A financial advocate can help you look at the various options for funding long-term care and help you select what’s right for you and your circumstances. Options include the following:
LONG-TERM CARE INSURANCE
Long-term care insurance is one of the most effective and reliable options for paying for daily personal and custodial care. The most important things to consider when choosing a long-term care plan are ratings, assets, discounts, and taxes.
Ratings: Our recommendation is the choose a company with an AM BEST rating of A+ or better
Assets: The assets of the insurance company should be in the billions of dollars
Discounts: Some long-term care insurers will allow for group discounts through employers or “affinity” group discounts through a local organization.
Tax considerations: Talk to a tax professional about tax-qualified long-term care insurance plans that could have potential benefits for you.
A financial advisor can help you choose the best long-term care insurance to fit your specific needs. Here at DuPont Wealth Solutions, we’ve done our homework on long-term care insurance companies and know which ones are reliable. Should this be your option of choice, it’s best to buy it when you’re in good health and relatively young when premiums are lower.
Some people may find it best to opt for long-term care insurance that is used in conjunction with their life insurance policies. A so-called “hybrid” long-term care insurance, this option can provide health coverage over and above your death benefit. Any money used for long-term care will reduce your death benefit first. You also can purchase life insurance with a long-term care rider.
You can use your IRA to supplement your retirement income and pay for long-term care. Some people chose to take a portion of their IRA and fund an IRA-based annuity, which then systematically funds a life insurance plan with long-term care features. This type of IRA-based long-term care policy is unique in the sense that it starts out as an IRA annuity policy (also known as a tax-qualified annuity), and then over a 20-year period makes equal distribution internally to the life insurance carrier.
HEALTH SAVINGS ACCOUNT (HSA)
If you enjoy saving on taxes, this option could be just the thing for you. HSAs offer three tax advantages. First, contributions are tax-deductible. Second, those contributions can be invested and grow tax-free. Third, withdrawals are not taxed if you use them for qualified medical expenses, such as doctors’ visits, prescription drugs, dental care, and long-term care costs.
Reverse mortgages (also known as Home Equity Conversion Mortgages) can keep seniors in their homes for longer. They have become one of the most popular and accepted ways to pay for many different high-ticket expenses, including the cost of long-term care. A reverse mortgage is a loan available to homeowners 62 or older that have considerable home equity. The homeowner can borrow against the value of their home, and the loan balance becomes due and payable when the borrower dies, moves away permanently, or sells the home. This money can be used for any need a senior may have, including in-home care and home modification.
Veteran’s benefits can help pay for long-term care. The Veteran’s Administration offers a special pension with the Aid and Attendance Benefit. This benefit is not dependent upon service-related injuries for compensation.
These and other options are extremely personal, and there is no right answer that fits everyone. A financial advisor can not only help you determine what’s right for you but can also work the option into an overall financial plan designed to help you achieve the retirement you envision.
YOU’LL NEED AN ESTATE PLAN
One of the most important things to set in motion before a long-term care type situation comes upon you is an estate plan. A durable power of attorney for healthcare and financial power of attorney are essential, along with an advance directive or living will. These documents ensure that your wishes will be carried out should you become incapacitated and unable to communicate or handle your own affairs.
Preparing for long-term care could make the difference between your independence in selecting who your caregivers are and having someone else decide for you. When you properly plan for long-term care, you take a burden off yourself and your family members. The financial advocates at DuPont Wealth Solutions can help you meet your retirement goals and help you stay financially independent for as long as possible. Call to set up a consultation at 614-389-9711.
Interested in learning about Medicaid and Long-Term Planning? Download our guide, Aging with Confidence.
GREGORY S. DUPONT, ELDER LAW ATTORNEY
Greg DuPont, JD, CFP®, is a well-respected estate attorney, financial advisor, public speaker, and published author. He has been serving clients as an estate and tax planning attorney since graduating from Capital University Law School in 1992 and added a wealth component to his practice over 15 years ago. He designed his firm to be the place where finance and law meet. He has been named one of Ohio’s Top 100 lawyers and was also recently named an Ohio Super Lawyer. Greg has been featured on WTVN radio and WCMH television. He is a life-long resident of Central Ohio and resides in Hilliard with his wife, Julia, and his daughter, Sophie.