As Americans grow older, more and more of us need help with our daily activities. It could be a little help or a lot of help, depending on the situation. Of course, the level of assistance we need can change over time.
According to a recent study by Bankers Life Center for a Secure Retirement, 68% of middle-income boomers are providing care for a parent and 17% are providing care for a spouse or partner. According to the survey, about two-thirds of those boomers prefer to be cared for in their own home.
Seven out of ten people will require long-term care (LTC) during their lifetime, at least for a while. But, many people haven’t planned for that possibility in their retirement plan. LTC care costs over $89,000 per year nationally, according to a Genworth study. But the costs vary dramatically from the least expensive state (Texas, about $58,000) to the most expensive state (Connecticut, about $151,000). See what it costs in your area according to Genworth’s calculator.
Do you know how you will obtain the help you need? Will your spouse, partner, or a family member provide the help? This may be a great option if you need limited assistance and they are willing and able to provide the help you need. However, you may need more care than they are willing or able to provide.
Standard health insurance doesn’t cover LTC expenses. You’d need to have a special LTC policy. Such policies have become more limited and more expensive over recent years.
Do you have the financial resources to pay for the care you need from others? While you might rely on Medicare for other health needs, Medicare only covers a portion of the first 100 days in a skilled nursing facility. Beyond that, you’d need to pay out-of-pocket. Here’s a link to an explanation from AARP regarding the Medicare benefits for a skilled nursing facility.
So, if you need skilled nursing care for more than 100 days, you’d be required to pay for it yourself. The other possibility is to qualify for Medicaid, a joint federal and state program providing health coverage to millions of Americans. However, Medicaid has limits on the amount of assets and income you can have and still qualify.
You may think you could give away excess resources in the future if and when you need it. However, there is a 60-month lookback or you’d incur a penalty period. The penalty period is the amount you’ve given away in the prior 60 months divided by the average private pay rate in your area. In other words, if you have excess resources, you’d need to plan more than 5 years in advance if you are going to have an asset transfer as part of your qualification.
Consider how you would cover the help you’d need. Will you rely on your loved ones? Will you get LTC insurance? Would you pay out-of-pocket? Would you qualify for Medicaid? If you’re intending on relying on Medicaid, remember you must plan more than 5 years in advance to transfer assets.
Most of us will need care at some point in our lives. How will you get the care you need?
Stephen C. Hartnett, J.D., LL.M.
Director of Education
American Academy of Estate Planning Attorneys, Inc.
9444 Balboa Avenue, Suite 300
San Diego, California 92123
Phone: (858) 453-2128