It can be hard to imagine a time when you will be unable to take care of all your own day-to-day responsibilities. Of course, it is equally difficult to envision how you will feel when you are in your mid-to-late 70s and 80s if you have not yet arrived at that destination.
Indeed, most senior citizens will need help of their activities of daily living, and over 30 percent of elders will eventually reside in nursing homes. Medicare will pay for convalescent care after an injury or illness, but it does not cover the custodial care that you would receive in a nursing facility.
Long-Term Care Costs
We have recently shared information about the final results of the 2020 Genworth long-term care cost survey, and the numbers are quite sobering. The survey found that the median annual charge for a private room in a Cincinnati area nursing home was $114,245 last year.
If you are willing to sacrifice some privacy in return for a lower price tag, relatively speaking, the situation doesn’t improve much. You are looking at a median charge of almost $98,000 for a year in a semi-private room in our area.
The United States Department of Health and Human Services compiled some length of stay statistics a couple of years ago. They found that 48 percent of people that are receiving long-term care need it for less than one year, and 19 percent received paid care for between one and two years.
A solid 21 percent are in the two-year to five-year group, and 13 percent of seniors that are receiving custodial care require the care for more than five years. (These numbers exceed 100 percent because of the rounding method they used.)
These prices combined with the length of stay stats paint a grim picture, and married couples may contend with two sets of assisted living bills.
Long-Term Care Insurance
During the decade of the 1990s, there were over 100 different insurers selling long-term care insurance. Because of cost uncertainties and low interest rates, most of these companies have vacated the marketplace, but there are still a handful of holdovers.
The question of whether or not you should buy long-term care insurance has no definitive answer. You have to use all the information that is available to make a risk/reward assessment.
Long-term care is going to be looming larger as you get older, and as you might imagine, the premiums are based on your age.
To give you an idea, the average annual premium for a single female that is 55 years of age is $2675 according to the American Association for Long-Term Care Insurance. This would buy the insured $164,000 of coverage, and there would be inflation increases.
When you obtain long-term care insurance, the premiums that you are paying initially are not etched in stone. They are subject to change, and so you are flying blind in this regard.
Another drawback is the “elimination period.” You have to pay for your care out of your own pocket for 30, 60, or 90 days depending on the policy details.
There is an alternative approach that can be taken in the form of Medicaid planning. This jointly administered federal/state government program will pay for long-term care if you can gain eligibility.
Since it is a need-based benefit, there is a $2000 limit on countable assets, but your home is exempt. You could fund an irrevocable income-only Medicaid trust to develop a financial profile that will lead to eligibility, and this is the widely the embraced solution.
It takes careful planning to execute this strategy properly, because the trust must be funded at least five years before you apply for Medicaid coverage.
Schedule a Consultation Today!
If you are ready to devise a custom crafted nursing home asset protection plan, we are here to help. You can schedule a consultation appointment if you call us at 513-721-1513, and you can fill out our contact form if you would prefer to send us a message.
- Creating a Trust: What to Consider - March 23, 2023
- What You Need to Know about Planning for Elder Care - March 21, 2023
- Can a Trust Be Contested? - March 16, 2023