Long Term Care Options and Solutions
Here is a Long-term Care Insurance Option for Beginning Retirees
As we age our chance of needing long-term care increases. You need long term
care when you require help doing your activities of daily living (ADLs). Examples
of ADLs are dressing, toileting, eating, transferring from bed to chair and
continence.
When the amount of help you need increases so that it is burdensome to your
family, a nursing home may be the only reasonable alternative. But annual
nursing home bills can range from $70,000 to more than $90,000 depending on
where you live.
If you are approaching or beginning your retirement in good health, you will
need to take stock of how to handle your long term care costs when or if they
occur.
There are several options you can use to pay them. You can pay with your
own money, but that might undermine your estate or completely wipe you out.
Medicare is not geared to cover long term care costs but Medicaid is. However
you will need to spend down your assets and have a low income to qualify. And
this has to be done five years before seeking Medicaid assistance because
of its 60 months ‘look back’ provision on your assets. Lastly you
can buy Long
Term Care insurance.
Long term care insurance policies come in Comprehensive or Facilities-Only
versions. Comprehensive coverage may pick up long term care costs administered
at home, an assisted living facility, an adult day care center, a hospice facility,
or a nursing home. The Facilities-Only option is restricted to long
term care care in a facility such as a nursing home.
long term care insurance policies offer a range of benefit options. Generally,
premium costs increase with more care location options, so Facilities-Only
options may be the less expensive choice.
Additionally, premium costs will decrease the earlier you purchase the insurance.
And they depend on how long your long term care care duration will be–for
as long as you live or for a shorter duration choice. The daily benefit–how
much the policy will pay for each day–also affects your premium as will
any built-in inflation adjustment of this.
A possible option to consider is a three-year duration policy since–statistically--most
people are not in a nursing home for more than three years. To determine what
daily benefit you need, consider where your nursing home will be, since some
states are more expensive than others. Be sure to include an inflation adjustment.
This is crucial to 65-year olds or younger, since daily costs may rise significantly
over 10 or 20 years--and you may not need your long term care for many years.
Perhaps a short, fat policy–a three-year provision, and an adequate
but inflation-adjusted daily benefit–rather than a lifetime duration
with a lower daily benefit may be suitable for you.
Save Your Home for Your Heirs if You Seek Medicaid Help for long term care
T heir home is often the main asset of many seniors. And they want to see
it passed on to their children when they die. However, if they cannot afford
to pay long-term care insurance (long term care) premiums or are not prepared
to privately pay for their long-term care when needed, their house will be
in jeopardy.
Medicaid is your only alternative. Medicaid’s long term care benefits
are quite comprehensive, but only for some states. You will have to check the
benefits offered by your own state.
But you won’t qualify for Medicaid unless you are close to being indigent. If
you are not, then Medicaid will seek payment for its services out of your assets.
And that includes your home.
So can you give away your assets before applying for Medicaid long term care? Yes
and no…
In carrying out their Medicaid program, states can "look
back" to find transfers of your assets for 36 months prior to the date
the individual is institutionalized. Or, if later, the date he or she applies
for Medicaid. For certain trusts, this look-back period extends to 60 months.
If a transfer of assets for less than fair market value is found, the state
must withhold payment for nursing facility care (and certain other long-term
care services) for a period of time referred to as the penalty period. The
length of the penalty period is determined by dividing the value of the ‘gift
portion’ of the transferred asset by the average monthly private-pay
rate for nursing facility care in the state.
As an example, a transferred asset worth $90,000, divided by a $3,000 average
monthly private-pay rate, results in a 30-month penalty period. And there is
no limit to the length of the penalty period.
Thus if it is your intention to transfer your house or anything else as a
gift or for less than fair market value to your children, you must do so at
least five years–to be safe–before incurring any long term
care that you will want Medicaid to pay for. The transfer cannot be
conditional or revocable.
Giving your home directly to your children can still leave you vulnerable.
You may trust your child to maintain you in ‘what was your home’.
But if he (or she) is sued, his assets–including what used to be your
house–could be lost.
To protect against this possibility, you can transfer it irrevocably to a
trust. This can guarantee your use of the house while you occupy it with your
child as the beneficiary.
Should You Buy a Cash-Benefit or a Reimbursement Policy?
Long-term care insurance companies use one of two methods to pay a policyholder’s
expenses: cash-benefit (indemnity) or reimbursement. The cash-benefit plan
will pay the full daily amount after you meet the criteria for coverage; whereas
a reimbursement plan will only pay for qualifying expenses, up to the daily
limit, once you submit the bills. Which one is best for you?
A cash-benefit plan can offer greater flexibility because you can spend
the money anyway you wish. For instance, if the plan has a $150 per day benefit
and your expenses are $125, you will receive $150. You can use the remaining
$25 for whatever you want; and up to $230 per day is income tax-free, even
if you just put it in the bank. Any amounts above that would be taxable unless
spent on qualified long-term care expenses and documented on your tax return.
All benefits from reimbursement policies are tax-free. But you will only receive
money to pay covered expenses. Therefore, if your plan’s benefit is $150
per day but your actual costs are only $125, you will get the $125.
Medicare information derives from www.medicare.gov website.
(Section 1917(c) of the Social
Security Act; U.S. Code Reference 42 U.S.C. 1396p(c)).
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