Planning for the future and considering financial matters can be a challenging and emotional experience. However,…
In our previous blog, we met Jim and Sandy. Now they are age 65 and reviewed their need for age-appropriate health care and decision-making documents. We left off with the question, “How can Jim and Sandy take steps to prevent losing everything in the event their health fails?”
The costs of long-term care can be staggering. Home health aides can cost, on average, $45,760 per year, based on care provided 44 hours per week. Nursing home care, on average, is nearly double that – $80,300 per year for a semi-private room.
What are our chances of needing long-term care? According to the Department of Health and Human Services, someone turning 65 today has a 70% chance of needing some type of long-term care services in their remaining years. This means Jim and Sandy should be considering how they will pay for that care in the event one or both of them are part of that 70%.
Jim and Sandy’s choices include: 1) paying out of their own pocket for care, 2) purchasing long-term care insurance, 3) qualifying for government assistance programs, or 4) any combination of the first 3.
By planning early, before there’s a health care crisis, Jim and Sandy can take advantage of all three options yet protect their home and any other cash or assets they wish. This type of asset protection is done using a specially designed irrevocable trust. Only a portion of Jim and Sandy’s assets would be transferred to the irrevocable trust, with the remainder either remaining in Jim and Sandy’s name or held in a revocable trust with special provisions for the surviving spouse.
By transferring assets to an irrevocable trust, those assets would not be counted in the future (in most cases, after 5 years) if Jim or Sandy needed to qualify for government assistance to help pay for their long-term care. If Jim or Sandy is a wartime Veteran, there are additional cash assistance programs available through the Veterans Administration that should be explored as another means to help pay for their care.
To round out the asset protection package, Jim and Sandy would also complete financial powers of attorney and health care advance directives along with living wills. They would also explore purchasing an appropriate long-term care policy in the event one of them needed care sooner than expected.
By planning early, Jim and Sandy have tools in place to protect their home and other assets should one or both of them need care in the future – and there is a 70% chance they will. Jim and Sandy have also lessened the emotional and financial stress placed on a family when a health care crisis does happen. They’ve taken care of the heavy lifting with regard to their assets, so their family can just focus on what really matters – making sure they have the best care possible.