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Long-Term Care Planning: Your Options Thumbnail

Long-Term Care Planning: Your Options

Estate Planning Financial Planning Investment Retirement Funding

Grant Reeves | March 1st, 2023

Long-Term Care Planning: Your Options

Within your financial plan is your retirement plan, and inside that, your long-term care plan. There are various ways to approach long-term care planning, we'll go over your options.

The Cost of Long-Term Care

Each year Genworth releases a report on the cost of long-term care services. It's comprehensive and eye-opening. You can search by specific locations, hourly, daily, monthly, and annual costs, and estimated future costs. For Indiana in 2021, these are some of the monthly median costs:

  • Homemaker services: $4,767
  • In-home health aid: $4,767
  • Adult day health care: $1,733
  • Assisted living facility: $4,283
  • Semi-private nursing home room: $7,270
  • Private nursing home room: $8,700

    • If you estimate for these costs in 2041, just 18 years from now, they are nearly double.

    Many people believe that Medicare covers all healthcare expenses. This is not true. These are some of the things Medicare Parts A and B don’t cover:

  • Outpatient prescription drugs
  • Long-term care
  • Deductibles and copays
  • Dental care
  • Vision care
  • Hearing aids

    • Notice that long-term care is on the list. As you can see, long-term care is expensive and getting more expensive each year which is why having a long-term care plan is so important.

    Self-Funding

    Because long-term care is so costly, self-funding will not be an option for everyone and it only works if you've planned well ahead and set aside a big chunk of money specifically for these costs.

    If you're considering self-funding, let your financial advisor know so they can either help you create a plan or give you alternatives if it's not realistic.

    Long-Term Care Insurance

    There are three types of long-term care insurance:

  • Traditional: This type of long-term care insurance is expensive and gets more expensive the older you are. If you're going to purchase it, you should do so while you're still relatively young and still working. Also called standalone long-term care insurance, it covers the cost of care at home or in a facility.
  • Hybrid: Sometimes called linked benefits or combo policies, it pairs long-term care with life insurance or an annuity. Hybrid covers extended home care or facility care and a death benefit.
  • Life insurance with a long-term care rider: This allows the policy holder to use some of the life insurance policy's death benefit for long-term care costs during their lifetime.

    • Asset Protection

    While Medicare doesn't cover the cost of long-term care, Medicaid does for those who meet the state's eligibility requirements. These are the income and asset limits for Indiana. The limits for one spouse receiving Medicaid nursing home coverage in 2023 are:

  • Income limit: $2,742 per month for applicant
  • Asset limit: $2,000 for applicant, $148,620 for non-applicant

    • Asset protection involves protecting assets for your spouse and heirs in order to qualify for Medicaid through a life estate or irrevocable trust and must be handled by at attorney.

    Either of these options will require a five-year look back. You must wait five years after the transfers to qualify for Medicaid without penalty. So this option would need to be carried out five years before you intend to apply for Medicaid.

    Spend Down

    Spending down is another option to qualify for Medicaid. There are expenditures that reduce an applicant's estate to the point the can qualify.

    Non-Countable Assets

    The following assets do not have to be spent or sold to qualify:

  • Home
  • Personal effects
  • Household items
  • Some pre-paid funeral and burial arrangements

    • Permissible Expenses

  • Legitimate Debt: Credit cards, mortgage or rent payments, medical bills, taxes, auto payments, utilities, household and auto maintenance costs
  • Full or Partial Payments: Credit cards, mortgage, auto and personal loans
  • Pre-payment: Mortgage, auto, personal loans

    • Purchasing Non-Countable Assets

    Applicants can purchase a home, household goods, and furnishings if they meet exemption requirements and a new vehicle if their spouse will drive it.

    Payments for Non-Countable Assets

    Applicants can spend money to maintain or improve a non-countable asset like a home or vehicle.

    Annuities

    Buying an annuity with a lump sum for a spouse is is permitted but must meet specific requirements; be nontransferable and the state's Medicaid agency has to be listed as the primary beneficiary after your spouse's death.

    Caregiver Agreements

    Applicants can pay for caregiving services even if the caregiver is a family member.

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    Grant Reeves is an attorney with Barada Law Offices and a financial advisor with coreVISION Financial Group.  The concepts discussed are for informational purposes only.  Consult with your own counsel for legal advice specific to your own situation.