One of the most uncomfortable things you might have to do in your lifetime is plan for when you’re not around. To that end, you may want to use legal documents like a will or trust to pass assets on to your loved ones.
But another sobering thing you can’t overlook is the need for long-term care. In short, most people need it. According to the Office of the Assistant Secretary for Planning and Evaluation, 70% of adults who survive to the age of 65 will have “severe” needs for long-term service and support prior to their death, and 48% are going to require some kind of paid care over the remainder of their lives. Further, 15% of adults are going to spend more than two years in a nursing home. These are scary numbers given the cost of long-term care today, especially for nursing homes!
Genworth puts the average cost of a shared nursing home room at $111,325 per year. For a private room, you may be looking at $127,750. An extended nursing home stay could be catastrophic to your finances, so it’s important to plan for that possibility. That means understanding how Medicaid works, and how long-term care insurance works.
How Medicaid works for nursing home care:
It’s a big misconception that Medicare will cover the cost of a nursing home. Typically, that won’t be the case. Nursing home care is custodial care, which Medicare will not pay for. It will only pay for medical care, such as a temporary stay at a skilled nursing facility to help you recover from an accident or surgery. In other words, Medicare and Medicaid are different programs.
Medicaid, on the other hand, generally will pay for a nursing home if you need one. But that assumes you’ll qualify for Medicaid. If you have substantial assets, that may not be the case. Generally, having more than $2,000 in assets disqualifies you from Medicaid. However, there are strategies to help you qualify.
A common strategy is to spend down your assets so you’re not over the $2,000.00 threshold. However, that could leave you without adequate funds to pay for other needs you might have. Additionally, if you’re married, spending down assets is not a wise choice. It is possible that the spouse that does not reside in the nursing home may not be able to pay for their expenses after the spend down.
The good news is that an estate planning lawyer can work with you on strategies that may enable you to qualify for Medicaid without having to deplete almost all of your assets, which could spare you from having an extended stay in a nursing home bankrupt you and your family.
How long-term care insurance works for nursing home care:
Even with the right legal strategy, it’s not a given that you’ll be able to qualify for Medicaid to pay for nursing home care. There may only be so many assets you can legally exclude or shield, and you may not want to spend down your assets. That’s why it’s important to consider putting long-term care insurance in place.
Long-term care insurance, on a basic level, works like this: You apply for coverage and an insurer determines whether you qualify. (You’re more likely to get approved if you are younger and healthier.) If approved, you pay your premiums for coverage just like you would for life insurance. If you end up needing nursing home care, your insurance should then pick up the cost to whatever degree your policy allows for. It may not cover the entire cost of a nursing home stay, but it may cover a large portion of the cost.
Some people would rather not get long-term care insurance and instead save and invest money for nursing home care they pay for on their own. While this strategy sometimes works, it’s not always easy to stay on track and earmark money specifically for nursing home care. If you end up with a shortfall but can’t qualify for Medicaid, it could put a serious financial burden on your family. If you are inclined to say no to long-term care insurance due to the cost involved, talk to an attorney as well as a financial planner to see what they recommend.
Final Thoughts:
It’s not easy to picture a time when you might need to move into a nursing home, but unfortunately, it can happen to anyone. Don’t let the need for a nursing home stay upend your family’s finances. Prepare now! At The Mendel Law Firm, L.P., an estate planning attorney can help you understand your options for planning for nursing home care. They can also help you understand how to qualify for Medicaid and explain why long-term care insurance may be a smart thing to buy. Give us a call at (281) 759-3213 or contact us online to discuss your estate planning needs.
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