Are You Making a Long-Term Care Plan?
Planning for long-term care costs

Are You Making a Long-Term Care Plan?

More than 10,000 people turn 65 in the U.S. every day. Almost 70% of people retiring today will need some type of long-term care during their lifetimes, according to the Department of Health and Human Services (DHHS). The cost of long-term care can be substantial—but even the most financially secure people are totally discounting the looming threat of long-term care in their retirement planning.

The Motley Fool’s recent article, “Baby Boomers Are More Prepared for Death Than Life,” says most baby boomers are either unprepared or haven’t planned for a long-term care expense, according to a Bankers Life survey of 1,500 middle-income Americans aged 54 to 72. The results show that baby boomers were more likely to plan for their own death, than to have a long-term care plan. About 81% made some kind of funeral arrangements for when they pass away, but just 32% have a plan for how they’ll get care in retirement. The lack of long-term care planning is a significant issue, when you compound this with the harm that such a huge unexpected expense has on a person’s retirement savings, especially in cases where a nest egg is small to begin with.

DHHS believes that the average total cost of care for a retiree is $138,000. However, 79% of the respondents said they have set no money aside for their retirement care needs. For those who do have long-term care savings, the median amount saved is a mere $40,000. Nonetheless, 67% of those surveyed said they know someone who required care in retirement and 36% said they can’t rely as much on friends or family for around-the-clock care. Given all these negative numbers, why aren’t more boomers better prepared? The article gives us three surprising reasons that contribute to this lack of awareness and lack in savings for long-term care:

  1. Overconfidence. Boomers may overestimate their ability to manage future long-term care costs. Three-fourths of those surveyed by Bankers Life said they were confident in their ability to handle future healthcare costs. A misplaced confidence could be why boomers used more effort and money to plan for their deaths. About half of the respondents had fewer than $5,000 saved in an emergency fund, and 33% had fewer than $1,000 set aside for emergencies. With the high cost of long-term care, and the collective weakness in emergency funds, boomers’ confidence in being able to manage long-term care costs appears unrealistic. These people may be relying on Social Security benefits and Medicare too much.
  2. Lack of basic Medicare understanding. Medicare covers only some long-term care expenses like skilled nursing care after a hospital stay, but there are limits. It also doesn’t pay for custodial or home healthcare. Most of those surveyed believe that Medicare will pay for a future healthcare event, and 56% mistakenly identified Medicare as a source to pay for future long-term care.
  3. Not knowing where to get advice. The greatest obstacle to planning for care in retirement, is a lack of trust. About a third of boomers surveyed said they need and want advice, but don’t know whom to trust. Most seek the help of a family member (36%), and just only 7% ask a health professional. A lack of trust or willingness to seek professional help may lead boomers to either put off a decision or perhaps not fully understanding their planning options.

The best use of a long-term care insurance policy may be folding it into a more comprehensive plan. Talk to an elder law attorney about what makes sense for your situation.

Learn more about the costs of growing old and long-term care.

Reference: The Motley Fool (March 27, 2019) “Baby Boomers Are More Prepared for Death Than Life”

How Your Caregiver Can Get Paid and Treated Fairly

Many older Americans can live at home instead of in a nursing home, if they receive adequate caregiving services. “Consumer-directed care” programs in some states provide funds to pay for family caregivers. These programs can cost the state and federal government less money than long-term care facilities. Seniors get to continue living in the home they love. On the surface, this arrangement sounds perfect, yet the caregivers often experience surprising problems with other family members and the parents they are trying to help.

The adult child who serves as the primary caregiver frequently does so at great financial sacrifice, having to quit her job or work fewer hours to take the parent to doctor appointments and dress, groom, and feed the parent. Siblings of the caregiver sometimes resent the fact that the person providing the care gets paid by the government, even though it is a modest wage. Here are some tips on how your caregiver can get paid and treated fairly, while avoiding family conflict.

Communicate. The caregiver, care recipient and other family members should have a candid conversation about the arrangement before taking the leap. Once siblings realize the government red tape required and the small amount of compensation the caregiver will receive, they will be less likely to cause problems.

In some families, however, the existing dynamic is not a good fit for a paid caregiver arrangement. In these situations, the parent might treat the caregiver like a servant, damaging the parent-child relationship. Siblings might refuse to pitch in at all with helping the parents, even though the nominal salary is grossly inadequate to cover round-the-clock care. Some caregivers also might treat the parents or siblings unfairly, once they start collecting an income for providing care.

Decide if the caregiver salary is worth it. In some situations, the caregiver might find that the little bit of income is not worth the family squabbles and being treated like a second-class citizen. Some caregivers reach their breaking point and go back to their previous jobs that often paid more money and provided benefits. In these instances, the parent will likely have to move into a nursing home. Many families do not appreciate the caregiver’s work, until the situation gets to this level. By then it is too late to undo the harm.

This advice is a cautionary tale for older parents, whose children serve as their caregivers. Once the adult child starts getting paid for his work, the parent might start to mistreat him, barking orders and making unreasonable demands. Seniors should understand that the consequences of such actions can include being moved into a nursing home.

If your state has programs that pay family members to provide caregiving services, your parent might be able to delay the nursing home and the caregiver can get some respect and pay for doing these valuable activities. To make sure that everyone gets treated fairly, the family needs to have a family meeting, discuss the details openly and set clear boundaries and expectations.

You should talk with a nearby elder law attorney about whether your state’s regulations vary from the general law of this article.

References:

AARP. “Getting Compensated for Caregiving Can Change Family Dynamics.” (accessed February 14, 2019) https://www.aarp.org/caregiving/home-care/info-2019/compensation-family-dynamics.html

Protect A Life of Working and Saving from Long Term Care Costs

Every month, Lawrence Cappiello writes a check to a nursing home for $12,000 to pay for the cost of his wife’s nursing home care. Two years ago, his net worth was $500,000. In less than two years, the Cappiello’s savings will be gone. This unsettling story is explained in the article “How to Keep LTC Costs From Devouring Your Client’s Life Savings” from Insurance News Net. He is suffering from nursing home sticker shock and says he should have known better.

Cappiello was a professor at the University of Buffalo for 25 years. During that time, he taught an introductory course on health care and human services that touched on the costs to consumers. He said it was clear even then, that the cost of health care was going to escalate out of control.

To qualify for Medicaid payments of nursing home care in New York State, residents are permitted to own no more than $15,450 in nonexempt assets. However, elder lawyers, whose practices focus on these exact issues, say that the way to protect the family’s assets, is to take steps years before nursing home care is needed. Some general recommendations:

  • Signing over the deed of the home to children or any others who would otherwise inherit it from you in a will. The transaction would need to stipulate that you have life use of the home.
  • Establishing an irrevocable trust, that upon death, transfers the house to the beneficiaries. There must be language that ensures that you have life use of the house.
  • Giving away savings and other financial assets.

Transfers of any assets must take place more than five years before applying for Medicaid nursing home coverage. If they have been given away or transferred within the five year “look-back” period, then there is a chance that they may still qualify, or they may have to wait five years.

That is why planning with an experienced elder law attorney is so critical for families, especially when one of the spouses is facing a known illness that will get worse with time. There are steps that can be taken, but they must be done in a timely manner.

Many older people are not exactly jumping with joy at the idea of handing over their assets, even when relationships with adult children are good. The idea of giving up assets and the family home is a marker of the passage of time and the inevitability of death. These are not things that we enjoy considering. However, taking these steps in advance, can make a huge difference in the quality of the well spouse’s life.

It should be noted that a sick spouse can move assets to a healthy spouse, to make the sick spouse lawfully poor and eligible for Medicaid. There is no look back period or penalty for interspousal transfers. This sounds like a very simple solution. However, these are complex matters that need the help of an experienced attorney. If it were so easy, countless spouses would not be facing their own impoverishment because of an ill spouse.

Reference: Insurance News Net (Feb. 4, 2019) “How to Keep LTC Costs From Devouring Your Client’s Life Savings”