The Talk You Need to Have Now: Creating a Plan for Long-Term Care Costs

Nobody likes to discuss the worst-case scenario; and thankfully, in many cases “the worst” doesn’t happen all that often. However, there is one worst-case scenario that affects the majority of people over the age of 65; and yet despite the prevalence, it’s not discussed openly. We’re talking about long-term care.

The U.S. Department of Health & Human Service’s Administration for Community Living found today’s 65-year-old has a nearly 70% chance of needing long-term care. Many retirees aren’t financially prepared for the cost, which at the time of this writing averages nearly $8,000 per month for a private room in a nursing home. That’s well over $90,000 per year. Considering 20% of today’s 65-year-olds will need long-term care for more than 5 years, it’s easy to see why the cost can quickly devastate your financial finances.

Given the risks, why don’t we talk about this more? Simply put, no one likes to talk about getting old. And many financial advisors aren’t equipped for these difficult conversations or are not well-versed in the options that exist to help you mitigate the risk. Worse, it’s a common misconception that Medicare will pay for your long-term care needs. Medicare will only pay for a short stay in a skilled nursing facility under very specific circumstances.

So, What Are the Options

Private pay is one option, though many people don’t have the assets necessary for this to be a viable option. You could sell the family home, or draw down your accounts, but that would leave a surviving spouse or other family members without a place to live, or the financial resources for their own care.

Another option is long-term care insurance, but the premiums can be prohibitively expensive. The most affordable rates are offered when you’re younger, precisely when long-term care isn’t on your radar.

Finally, military veterans may have access to care through their VA benefits. This can be a valuable feature. But, what if you’re not a veteran? Are there any other options?

Meet the Asset Protection Trust

One of the best solutions is a legal tool called an asset protection trust. When an asset protection trust is set up for your benefit, your assets become owned by the trust, thus shielding your savings and any property contained within the trust from creditors.

In layman’s terms, that means an asset protection trust could protect you against losing everything to the nursing home. It may also help you qualify for Medicaid, which pays a considerable portion of the nation’s nursing home bills.

What’s the catch? You can’t just move your money into a trust once you need care. Nor can you gift your money to family and friends in hopes of reducing your assets enough to meet eligibility requirements. Medicaid has a 5-year lookback period, meaning your money will need to have been held in the trust for more than 5 years. That’s why the time to plan is now.

At the Heart of the Solution

At AlerStallings, we’ve helped many families navigate the process of protecting against long-term care costs. We know the conversations aren’t easy, but we hope to change that. Through our partnership with retirement planning firm Golden Reserve, we’re making it as painless as possible for Ohioans to shield themselves against the risk. We’re proud to have helped many families explore their individual options and hope to do the same for you. Should a trust be your best course of action, you can rest easy knowing it will be set up with efficiency and accuracy, by a team that truly takes the process to heart.