Have you ever thought about what would happen if you, or a member of your family, were no longer able to live independently? What if your elderly parents were no longer able to drive or perform basic activities of daily living, such as bathing or toileting? Would you or another family member be able to provide the care they might need? With longer life expectancies, it is likely that you or someone close to you may eventually need some type of long term care (LTC). While it may be difficult to contemplate, LTC planning is important. Start by considering common options for receiving and funding care.
Family: Sometimes parents assume their children will take care of them in their old age, and although children may have the desire to do as much as they can, certain factors need to be considered. Will your children have the strength, time, and financial freedom to give you the care you need? Do they possess medical training? As you plan, it is important to consider your family, your gender, your medical history, and personal health risks, and then to honestly assess whether your children will be able to take care of you.
Public Programs: Most people underestimate the cost of LTC and overestimate the funding that will be available through public programs and private health insurance. Currently, there is no government program specifically designed to cover LTC expenses. Medicare may cover some nursing home or assisted living costs, but only for “skilled care” that is deemed medically necessary for the duration of an illness, usually limited to 100 days following a three-day hospital stay. As a result, Medicaid has become the primary source of public funding for LTC. However, because Medicaid is a program designed to help those in financial need, families must “spend down” their personal assets before they qualify for public assistance.
Personal Assets: In order to meet LTC expenses that exceed Medicare and Medicaid, you may be able to use personal assets, such as retirement funds, trust funds, or education savings. Real estate can be sold, if necessary; however, real estate is a non-liquid asset, and forced sales can have negative consequences. Permanent life insurance offers cash values that may be borrowed against the policy; however, tapping into a policy’s equity may reduce the policy’s death benefit, increase the chance that the policy will lapse, and may result in a tax liability if the policy is terminated before the death of the insured.
Insurance: Insurance can offer protection in some cases. Disability income insurance may replace a portion of your income if you are unable to work due to an accident or illness, but this coverage is designed to be temporary, and it is not available once you retire. Health insurance may help pay for skilled care, but not chronic, custodial, or long term care. Long term care insurance (LTC i), on the other hand, can help with the expenses of home care, nursing home or assisted living facility, or adult day care. LTCi can help minimize the financial risk associated with extended care and help eliminate uncertainty for your family.
Of course, it’s difficult to prepare for the possibility that you or someone you love may one day need LTC. We simply don’t know what the future holds. But, planning today for an uncertain tomorrow may help preserve your family’s assets, increase options for care, and perhaps most importantly, bring you and your loved ones comfort.