November was Long Term Care (LTC
LTC
) Awareness Month and a great time to increase our understanding and knowledge of this important topic. November is also the month we celebrate Thanksgiving and reflect on the importance of family ties. I see a strong connection between these two events. Planning for LTC is a way to show love for family and help relatives avoid the stress and discord that often accompanies entering a nursing facility or hiring a home health care aide. For couples, an LTC plan can be a true act of love. It preserves the assets so that the healthier spouse can maintain their standard of living and choose how much hands-on caregiving to do.
Let’s take a deeper look at long-term care – what it means, how likely we are to need it, how much it costs, and options for planning ahead.
The definition of long-term care
LTC includes custodial care and assistance with basic activities of daily living, such as eating, bathing, dressing, getting in and out of a chair, and more. As longevity increases and we live into our late eighties, nineties, and beyond, many of us will need this kind of help and enter a nursing facility, hire a home health care service, or pay a relative, neighbor, or friend to provide informal care.
Long-term care statistics
According to A Place for Mom, 70% of people over 65 will need care at some point in their lives. This is a discouraging statistic and may increase as medicine advances further and longevity continues to increase.
Good care doesn’t come cheap. A 2021 survey by CareScout found that the national average cost of a private room in a nursing home was $108,405 per year. Getting care at home was also expensive. The same survey had homemaker services averaging $61,776 per year.
Costs like this can have a big impact on a retired couple’s finances and mental state. I have seen what happens to couples with a comfortable $1,000,000 portfolio and no LTC plan. It doesn’t take long for the healthier of the two spouses to worry about their finances, lifestyle and inheritance. And rightfully so.
Options for LTC planning
There are several different ways to approach advance planning:
Self insurance
We can self-insure if we have enough money or want to bet on not needing care.
Create a trust
We can create an irrevocable trust with the help of an elder law or estate planning attorney. The trust owns whatever asset we put into it, such as a house or a retirement portfolio. Surrendering our property allows us to protect our assets by qualifying for Title 19 or Medicaid sooner. Certain rules must be followed to protect assets.
Give assets
A third option is to give away our assets and property. When we have little or no resources, Medicaid or Title 19 covers our LTC costs.
Many of us do not choose this option because it generally means giving control of assets to our grown children. Can you imagine asking their permission to have vacation money? And what if they spend irresponsibly, experience a bitter divorce, or are found liable in a lawsuit? Well, we’re out of luck. We could lose it all.
Buy traditional LTC insurance
By purchasing LTC insurance, we transfer the risk of having to pay for the LTC to an insurance company. Buying this coverage can be a good choice when we are healthy, middle-aged or younger. When we are older, premiums can be $10,000 or $12,000 a year IF we can even qualify for coverage due to a pre-existing condition.
The downside to having this type of insurance is the loss of premiums if we never make a claim. In other words, if we don’t need LTC, we won’t get our money back.
Buy a hybrid policy
This is basically LTC insurance wrapped in a life insurance policy. If the LTC is not used, the policy pays death benefit to the named beneficiaries. This addresses the “use it or lose it” issue associated with traditional LTC insurance.
Plan now
Now is the time to decide on an LTC plan. Resist the temptation to procrastinate until the “perfect” solution presents itself. Programming options will be significantly reduced as time goes on.
Remember: LTC planning is about protecting the people we love, not protecting ourselves. Let’s do it for them.
