How Much Will Long-Term Care Cost?
Good Long-Term Care Planning is a Gift to Family

How Much Will Long-Term Care Cost?

The recent article from MarketWatch, “This is how much long-term care could cost you, and don’t expect Medicare to help,” reports that most people over 65 will eventually need help with daily living tasks, like bathing, eating, or dressing. Men will need long-term care assistance for an average of 2.2 years, and women will need it for 3.7 years, according to the U.S. Department of Health and Human Services’ Administration on Aging.

Many will rely on unpaid care from spouses or children, but over a third will spend time in a nursing home, where the median annual cost of a private room is now more than $100,000, according to insurer Genworth’s 2018 Cost of Care Survey. Four out of ten will choose paid care at home; the median annual cost of a home health aide is more than $50,000. Finally, more than 50% of people over 65 will incur long-term care costs, and 15% will incur more than $250,000 in costs, according to a study by Vanguard Research and Mercer Health and Benefits.

Note that Medicare and private health insurance typically don’t cover these “custodial” expenses. This means that such costs can quickly deplete the $126,000 median retirement savings for people age 65 to 74. People who exhaust their savings could wind up on Medicaid, the government health program for the indigent that pays for about half of all nursing home and custodial care.

People who live alone, are in poor health, or who have a family history of chronic conditions are more likely to require long-term care. Women face special risks, since they typically outlive their husbands and, as a result, may not have anyone to provide them with unpaid care. If husbands require paid care that erases all of the couple’s savings, women could have years or even decades of living on nothing but Social Security.

The earlier you start planning, the more choice and control you’ll have. Let’s look at some of the options:

Long-term care insurance. The average annual premium for a 55-year-old couple was $3,050 in 2019, according to the American Association for Long-Term Care Insurance. Premiums are higher for older people, and those with chronic conditions might not be eligible. Policies typically cover part of long-term care costs for a defined period, like three years.

Hybrid long-term care insurance. With life insurance or annuities with long-term care benefits, money that isn’t used for long-term care can be left to your heirs. These products typically require you to commit large sums or are paid in installments over 5 to 10 years, although some now have “lifetime pay” options.

Home equity. People who move permanently into a nursing home may be able to sell their houses to help fund the care. Reverse mortgages may be an option, if one member of a couple remains in the home. This type of loan lets them use their home equity. However, it must be repaid if the owners die, sold, or they must move out.

Contingency reserve. People with a great deal of investments could plan on using some of those assets for long-term care. Their investments can produce income, until there’s a need for long-term care, and then can be sold to pay for a nursing home or home health aide.

Medicaid spend-down. Those who don’t have much saved or who face a catastrophic long-term care cost that cleans out their entire savings, could wind up applying for Medicaid. Ask an elder law attorney about ways to protect, at least some assets for your spouse.

Learn how good planning can avoid the devastating costs of long-term care.

Reference: MarketWatch (July 19, 2019) “This is how much long-term care could cost you, and don’t expect Medicare to help”

How Much Money Should I Put into a Special Needs Trust for my Child?
Special Needs Trust Planning

How Much Money Should I Put into a Special Needs Trust for my Child?

One of the toughest things about planning for a child with special needs is trying to calculate the amount of money it’s going to take to provide both while the parents are alive and after the parents pass away. A special needs trust is a great way to set aside money for a special needs loved one to provide for them while at the same time preserving their ability to receive government benefits.

Kiplinger’s recent article asks “How Much Should Go into Your Special Needs Trust?” The article explains that it’s not uncommon for folks to have done some estate planning but not necessarily special needs estate planning. And they haven’t thought about how much money they should earmark to fund that trust someday and which assets would be the best to use.

Special needs estate planning involves creating a special needs trust that allows a person with a disability continue to receive certain public benefits. Typically, ownership of assets more than $2,000 would make the individual ineligible for certain public benefits. Assets held in a special needs trust don’t count toward this amount.

A child with special needs can generate multiple expenses. The precise amount will be based on the needs and lifestyle of the family and the child’s capabilities.

When the parents die, this budget must be increased because the things the parents did must be monetized.

A special needs trust usually isn’t funded until the parents’ death. Then, the trust would need to file a tax return each year and pay taxes.

There are also legal and trust administration expenses to think about. Public program benefits can in many cases offset many of the above-mentioned costs.

It’s vital to conduct a complete analysis of the future costs to provide for a child with special needs so that parents can start saving and making adjustments in their planning.

Speak with an elder law or estate planning attorney about special needs trusts.

Learn more about special needs trusts.

Reference: Kiplinger (June 10, 2019) “How Much Should Go into Your Special Needs Trust?”

Planning for the Impact of Medicaid
Medicaid Planning Can Protect the Family Treasure.

Planning for the Impact of Medicaid

One of the most complicated and fear-inducing aspects of Medicaid is the financial eligibility. The rules for the cost of Medicaid long-term care are complicated and can be difficult to understand. This is especially true when the Medicaid applicant is married, reports Delco Times in the article “Medicaid–Protecting Assets for a Spouse.”

Generally speaking, to be eligible for Medicaid long-term care, the applicant may not have more than $2,400 in countable assets in their name, if their gross monthly income is $2,313 or more. That’s the 2019 income limit.

There are Federal laws that mandate certain protections for a spouse, so they do not become impoverished when their spouse enters a nursing home and applies for Medicaid. This is where advance planning with an experienced elder law attorney is needed. The spouse of a Medicaid recipient living in a nursing home, who is referred to as the Community Spouse, is permitted to keep as much as $126,420 and a minimum of $25,284, known as the “Community Spouse Resource Allowance,” without putting the Medicaid eligibility of the spouse who needs long-term care at risk.

Determining the Community Spouse Resource Allowance requires totaling the countable assets of both the community spouse and the spouse in the long-term care facility, as of the date of admission to the nursing home. The date of admission is referred to as the “snapshot” date. The community spouse is also permitted to keep one-half of the couple’s total countable assets up to a maximum of $126,420 in 2019 and no less than the minimum of $25,284. The rest of the assets must be spent down.

Countable assets for Medicaid include all belongings. However, there are a few exceptions. These are personal possessions, including jewelry, clothing and furniture, one car, the applicant’s principal residence (if the equity in the home does not exceed $585,500 in 2019) and assets that are considered inaccessible, such as a spouse’s retirement accounts.

Unless an asset is specifically excluded, it is countable.

There are also Federal rules regarding how much the spouse is permitted to earn. This varies by state. In Pennsylvania, the spouse is permitted to keep all of their own income, regardless of the amount.

The rules regarding requests for additional income are also very complicated, so an elder law attorney’s help will be needed to ensure that the spouse’s income aligns with their state’s requirements.

These are complicated matters, and not easily navigated. Talk with an experienced elder law estate planning attorney to help plan in advance, if possible. There are many different strategies for Medicaid applications, and they are best handled with experienced professional help.

Read about some of the specifics of good Medicaid planning.

Reference: Delco Times (June 26, 2019) “Medicaid–Protecting Assets for a Spouse”