How to plan for long term care…
We’re living longer—that’s the good news. Life expectancy continues to increase, which means more time with loved ones and doing the things you love. So, what’s the bad news? Chances are—at least, the odds are an even 50/50—that you’ll need some form of long-term care (LTC) sometime in your life. If you’re not planning for those expenses now, you might just find that your golden years are worth their weight in actual gold.
Nursing home costs for a private room vary state to state, with Oklahoma being the cheapest at $65,415 and Connecticut the most expensive at $166,922 per year. The average cost comes in at about $100,379 per year. Utah comes in slightly lower at $86,088. According to the National Care Planning Council the average stay in a nursing home is just under 2.3 years (835 days). With an average price tag of $100,379 per year, at today’s current price, that comes out to nearly $230,871 for the average stay in a nursing home with a private room. That doesn’t take into consideration inflation. And what if you’re part of the 20 percent who need LTC for five years or longer?
Setting up an estate plan that includes a strategy for LTC is a wise move. What’s not a wise move? Thinking that Medicare will take care of your LTC needs. While Medicare may meet your needs with standard care, with the addition of deductibles and coinsurance, it won’t kick in on LTC unless you meet some very specific and stringent criteria. Even then, Medicare won’t pay for non-skilled assistance with Activities of Daily Living such as bathing, dressing, eating, and using the bathroom—the kinds of activities that make up the vast majority of long-term care services. You’ll have to pick up those costs.
And what about Medicaid? Depending on how you’ve set up your retirement, your assets might just disqualify you from receiving LTC through Medicaid. That means you need to arrange your financial affairs to meet asset limits. The question you’ll need to ask is just how good are your prognostic skills? If you make transfers less than five years in advance of needing Medicaid for LTC, those transfers will count against you and you could be penalized. Do you know exactly when you’ll need LTC? If so, then you won’t have to worry about transfers of assets; you’ll be able to time them perfectly. But if you’re like the rest of the world, then you have no idea when you’ll need LTC.
A better approach might be to consider insurance outside of Medicare. LifePlans, an insurance industry research firm, The average cost of an LTC policy is $2,700—if you can find a firm that offers it. The number of providers is falling, making it more difficult to get such insurance. You’ll stand a better chance of finding these providers if you partner with someone who already has those connections.
If you do have an expert in your corner, you might want to consider putting your assets into an irrevocable trust. Such a trust puts your assets “out of reach,” meaning that they won’t necessarily factor into your ability to qualify for Medicaid. Additionally, trusts will protect your assets for your children and grandchildren. You may even be able to keep the ability to earn income from the trust.
Planning for your future is incredibly important. Not only do you need to worry about who will take care of you should you need LTC, you’ve also got to consider what you’ll be leaving behind for your family and loved ones. Plan now, and you’ll avoid being buried under a mountain of gold bricks in your golden years.