by Gregory Aler
Will you need long-term care? Most likely YES. Recent statistics have shown that over 70% of adults over the age of 65 will need some form of Long-Term Care (this includes in-home, assisted living or nursing home care). So you know you’ll likely need it. Now you’re thinking, how much is this Long-Term Care going to cost? The State of Ohio has the average monthly cost for a nursing home pegged at $6,023 per month, per individual ($72,276 annually). The average nursing home stay is approximately two and a half years. If you do the math, every individual should plan on spending approximately $180,690 (or $361,380 per couple) on Long-Term Care. What happens if you do not have a plan for paying for these expenses? If you wait and watch the sand fall through the hourglass, you could find yourself paying the penalty tenfold.
Long-Term Care insurance is an effective option to hedge against some of the risks of future nursing home costs and expenses. Traditional Long-Term Care insurance requires the policy holder to pay premiums and if the holder needs care, the insurance provider will pay for the nursing home expenses for a specified period of time. The public typically has mixed reviews when it comes to traditional Long-Term Care insurance because of the costly premiums and the risk that if you don’t use it, you lose it. Despite that risk, this route may be the best option available to ensure that your assets are adequately protected. More recently, a new type of hybrid Long-Term Care insurance has emerged which is commonly referred to as “life insurance with a healthcare rider.” This insurance includes characteristics from the traditional insurance discussed above while utilizing some benefits of traditional life insurance. This hybrid insurance allows you to still hedge your risks against nursing home costs but, unlike the traditional Long-Term Care policies, it also pays a death benefit so that you avoid the dreaded “use it or lose it” result.
Hourglass Effect – Delaying your consideration of putting off looking into Long-Term Care insurance often results in more difficultly qualifying and an increase in premiums costs based on age and medical history.
Many individuals can’t afford or even qualify for Long-Term Care insurance. Instead, they must look to other avenues for assistance in paying for their Long-Term Care. Available need-based government programs include Medicare, Veterans Benefits and Medicaid. Medicare is typically used for short-term care and will typically not pay for care and support in excess of 100 days. Veterans Benefits can be a great resource to qualifying veterans and their spouses to help provide financial assistance for certain types of in-home care. Finally, Medicaid is the most popular government program for financial assistance with Long-Term Care. In fact, Medicaid pays for over 70% of all nursing home care in the country.
To qualify for Medicaid you must meet minimum financial requirements set by the State of Ohio. For example, an individual can only possess $1,500 in assets before Medicaid will pay for nursing home care. This means that if YOU have a $100,000 house and $10,000 in a checking account, The Department of Job and Family Services would tell you that need to “spend down” $108,500 to the nursing home (or other permitted expenses) before Medicaid would kick in and start paying the bill. What The Department of Job and Family Services won’t tell you is that there are many Medicaid Planning strategies that can be used to help YOU save over half of the $108,500 from going to the nursing home. In addition to the required spend down discussed above, Medicaid will examine the previous five years from the date which the Medicaid application was filed (aka the “look back period”). You will be penalized for any transfer of assets (or cash) that occurred during such five-year look back period. This penalty will require you to pay privately for additional months of nursing home costs before Medicaid begins paying. As you can see, it is imperative to consult an elder law attorney prior to (i) applying for Medicaid and/or (ii) transferring any of your assets to try and avoid these nursing home costs (regardless of whether or not you are currently in a nursing home).
Hourglass Effect – As highlighted above, every day counts when it comes to protecting your assets from the nursing home spend down. In most instances, it will cost you up to $6,023 per month for every month your assets remains inside the Medicaid five year look-back window. This amount must come directly out of your POCKET. We strongly encourage any person thinking about transferring assets to a friend or family member to avoid nursing home costs to speak with an elder law attorney before taking any action due to the (i) complexity of Medicaid law, (ii) inherent risks of gifting and transferring assets to friends or family and (iii) possibility of incurring HUGE negative tax consequences when assets are improperly transferred.
The key is to be proactive TODAY versus TOMORROW. By taking a moment to plan how you will pay for your Long-Term Care costs, you can guarantee that your assets and legacy are protected and available to pass to your friends and family instead of passing to the nursing home. For more information about Long-Term Care and/or asset protection planning, please attend one of our many FREE events or contact us to schedule a FREE consultation at one of our office locations – Dublin, Ohio (Columbus area), Atlanta, Georgia and Chicago, Illinois.
“A Lifetime Accumulating Wealth, An Afternoon Preserving It”