I have provided financial and estate planning services on the west coast of Florida since 1975. Until the past seven years, long-term care planning was not on my clients’ priority list.
This is the first generation to live into their 80s, 90s, even their 100s; therefore, it’s the first generation to risk needing long-term care in large numbers.
Long-term care needs can be caused by an accident, a chronic or disabling disease, cognitive impairment and just normal aging.
Long-term care is more than a nursing home.
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Long-term care is usually defined as the need for personal or medical assistance with the “activities of daily living,” which include bathing, dressing, continence, eating, toileting and transferring (e.g., moving from wheelchair to a bed) whether at home or in a facility.
There are several types of long-term care services, depending upon your level of independence.
n Assisted living. This provides help with bathing and dressing, medication reminders and light housekeeping. It’s designed to assist those with minimal needs to remain as independent as possible. Cost averages $2,714 a month, according to the U.S. Department of Health and Human Services.
n Adult day-care. For those who want to remain at home, but need help with activities of daily living while a caretaker is at work, adult day-care can be a good solution. Meals and some medical monitoring services are usually included, and transportation may also be available.
n Home care. This can include companions to assist with housekeeping, cooking and shopping. It can also include medical care provided by registered or licensed practical nurses. Home care can be part-time or full-time, depending upon your needs. Cost for a home health aide averages $25 per hour.
n Nursing home. These services are mostly for those who need more intensive medical care, such as wound care, rehabilitation, or help with respirators or ventilators. Nursing home care may be temporary (recovering from surgery or an injury), or permanent (end-of-life services). Cost for semi-private room: $181 per day, or $66,065 per year.
If you’re self-insured, you should set aside money to pay privately for future long-term care services. This plan may require a dedicated, aggressive and immediate savings plan. It’s impossible to know if or when these services will be needed, and that makes the target saving amount difficult to determine.
If you qualify for Medicaid, it provides coverage for long-term care after you have exhausted almost all of your own assets.
Medicare, for people age 65 or older, will provide long-term care expenses for a short period of time. After a minimum three-day hospital stay, if you still require medical care Medicare will only pay the first 20 days of your stay — and only in a Medicare-approved facility.
Insurance can provide coverage in many settings such as your own home, adult day care, assisted living facility or a nursing home.
A traditional policy requires an annual premium and is similar to auto or homeowners insurance. The cost of the policy is dependent on the benefits chosen by the insured. The premiums are typically not guaranteed and historically the rates have increased with inflation. If you do not use the coverage, the premiums paid will be lost.
An asset-based policy repositions your assets into a specially designed life insurance policy, and provides you several options.
n If you need long-term care coverage, you can access the death benefit on a tax-free basis to cover your expenses.
n You have 100 percent access to your initial investment from Day 1, and it will grow at a guaranteed interest rate.
n If you do not access the cash value, your heirs will receive the policy’s death benefit tax free.
For those looking to insure or self-insure, this is an alternative way to leverage your assets. Most of my clients like the idea of getting their money back or leaving a tax-free death benefit to their heirs.
Retirement income planning and estate planning should include a plan for the possibility of long-term medical expenses. Talk to your planner on these options and determine the best plan based on your personal situation.
Bob Wayland, founder of Wealth Advisory Group Inc. in Clearwater, has served clients throughout Tampa Bay since 1975. His toll-free number is (877) 633-3048.