Long-term care may not be the most exciting topic of discussion when sitting around the kitchen table, but if you want to make a smart financial decision and protect your nest egg, its prudent that you have a discussion. There are quite a few ways to pay for long-term care expenses when that time comes. Below are a few ways to help you pay the bill:
Long-Term Care Insurance
The name speaks for itself. Long-term care insurance covers most, if not, all long-term care services whether it be in-home healthcare, adult-day care, assisted living, or nursing home care. The policy pays a monthly benefit once you’re on claim to pay for these services among others. Partnership program policies allow for dollar-for-dollar protection from Medicaid’s income/asset requirements, if you end up having to file for assistance down the road.
Long-term care insurance is the most effective way to pay for long-term care expenses. There are many types of policies available from hybrid asset based life insurance policies to traditional long-term care insurance policies. Each policy allows you to customize the benefits to fit your budget and future health needs. A policy may not cover 100% of your costs, but it can reduce them significantly.
Social Security or Pension
This is the most common way that pay for long-term care services. It is a guaranteed stream of income each month and may cover all or most long-term care costs. Of course any amount paid to a long-term care facility means less in your pocket.
Veterans Aid and Attendance Program
The Veterans Administration provides monthly benefits for anyone who has served as little as 90 days in the military during a time of war as well as benefits for a surviving spouse. There are other requirements such as income and asset maximums, but this can significantly help pay for your stay. Keep in mind in most cases it does not pay for the full costs of care.
Health Savings Account & Savings Account
Funds you withdraw from your Health Savings Account (HSA) are tax-free when used to pay for qualified medical expenses including, but not limited too: long-term care & home healthcare services, prescription drug costs, medical procedures, lodging and meals, and much more.
These are a really great asset to have, if your employer sponsored health plan offers them. Talk with your HR person to find out, if this is an option on your group health plan. HSA’s grow tax deferred and can be used as an additional retirement account, if carefully planned.
Life Insurance Cash-Value or Riders
Whole life and universal life insurance policies that have been in-force for quite a few years should have some significant cash-value built up within the policy that is accessible and sometimes without any penalties. If, you happen to have a life insurance policy with a chronic illness rider you can use the benefit to pay for most, if not, all long-term care services. Cash value life insurance offers the flexibility and liquidity needed during times of financial stress.
As mentioned above you can customize a cash value life insurance policy to include coverage for long-term care expenses with different riders and or with hybrid-life insurance policies that offer a death benefit that can be withdrawn from early to pay for long-term care expenses.
Both fixed annuities and indexed annuities can come with contracts that pay extra if you need long-term care. These plans are available to people up to age 85 and any long-term care benefits you receive from the annuity will be tax free.
With an immediate long-term care annuity the insurance company will send you a specified monthly income in return for a single premium payment. This option is available regardless of your current health status. If you do not qualify for long-term care insurance because of age or poor health or if you are already receiving long-term care, you can still purchase an annuity.
For inpatient hospital care, Medicare patients may receive coverage for 90 days under Medicare Part A. The first 60 days are fully covered by Medicare after the Medicare copay (or deductible), while the following 61-90 days have a coinsurance payment per day. If the patient requires skilled nursing care instead of full inpatient hospital care, Medicare may also cover a temporary nursing home stay. After 100 days, Medicare will no longer cover a nursing home stay. If the patient is unable to return to the community after 100 days (or less) of skilled nursing care, they will have to pay out of pocket to extend their stay. That is unless they qualify for Medicaid.
Medicaid has both health and financial eligibility requirements that must be met. The rules for income eligibility vary by state, but are typically no more than $4,000 per individual. Once Medicaid eligibility is verified, individuals will receive long-term care in a Medicaid-approved facility and will have all care paid for by the program minus their co-share, if any.
Withdraw from Retirement Accounts
You can use your current withdrawals or increase them to cover the additional expenses of long-term care services. An increase in withdrawals will increase your income tax burden, but some of the withdrawals may qualify for a medical expense deduction essentially making them tax-free. Speak with your accountant with regards to any tax questions.
Reverse mortgages allow you to receive cash against the value of your home without selling it. You can choose to receive a lump-sum payment, a monthly payment, or a line of credit.
There are no restrictions on how you use the remainder of the money. So long as you continue to live in the home you retain the title and ownership of it and you do not have to repay the loan as long as you continue to live in the home. You must meet with an approved reverse mortgage counselor before you can start the loan process.
Friends and Family
It may hurt your pride to ask for help, but in some cases it may be a viable option and possibly your only option. Many religious communities will also, have funds specifically set aside for this type of burden and are willing to help out during financial distress.
Children are often left with taking care of mom or dad’s extended long-term needs up until the health needs of the parent are far too much for the son or daughter to handle. This not only puts a burden on the child, but, also the parent which is not good for either.
How We Can Help
When its time to address financial needs that have been or will be created by long-term care needs of a loved one, we know that the process feels overwhelming and the future seems uncertain. At Nebraska Asset Protection Group we’re insurance advisors that specialize in the long-term care process. With our unique planning tools we can help you protect your most precious assets while ensuring you leave a lasting legacy that you can be proud of.
Contact us today for a free long-term care review. If, you would like us to contact you click here and we will reach out to you directly!