No one really wants to think about needing long term care, but the fact is, most of us probably will. When you’re in good health and enjoying retirement and the freedom to pursue hobbies, travel, or just relax, assisted living or nursing home care seems far away. But realistically, the time to make plans is before you actually need to put the plan into action. If you wait until you need care to figure out how to pay for it, your options are much more limited.
Many people assume Medicare pays for nursing home care. To an extent, that’s true. If it’s medically necessary skilled nursing and rehabilitation following an inpatient hospitalization, Medicare will pay a portion. But skilled nursing is very different from assisted living or general nursing home care. Medicaid, the state- and federally-funded medical care program does pay for nursing home care, but has strict income limits. Some people “spend down” to qualify, but this can be a tricky proposition. If you own a home and/or have financial assets that you sign over to someone else, and then apply for Medicaid within two years, the value of those assets will still be used to determine your eligibility and level of benefits. In most cases, owning a home won’t disqualify you if your income (including Social Security benefits!) falls within the limits. But, Medicaid may place a lien against it, to recoup some of the costs of your care. If you think you may have to rely on Medicaid in the future, it’s best to consult an accountant or attorney who can advise you on what’s legal and what’s likely to land you in hot water. Keep in mind that not all facilities will accept Medicaid! Medicaid payments are notoriously low, and many facilities limit the number of residents under Medicaid, or just won’t accept it.
Another choice is downsizing. If you own your home outright, or have significant equity, selling and moving to a smaller home, town home or even apartment might net you a cash payment that you can then invest in a CD or another interest-bearing account. The interest will add up. When the time is right, you’ll have the resources to pay for the care you need. It also gives you the opportunity to go through your possessions, and make meaningful gifts to friends and loved ones. Even though you probably have a will, it can be wonderful to have that special moment with someone, and personally give them something that you know will be appreciated and remembered. Another good idea for you collectors is to start documenting your collection, or making notes about the value of certain items. That old car in the garage may look like a rusty relic, but if you know it’s highly sought-after, record that information somewhere.
A newer option is Long Term Care insurance. It hasn’t been around too long, and most people aren’t familiar with it. The premise is that you purchase a policy, make payments over the course of time, and it builds value or otherwise will pay for care when you need it. It’s best to do careful research and make sure you understand the fine print, what’s covered, how much the insurance will pay and how much you’ll still be responsible for. A starting point may be the insurance agent or broker you use for auto and homeowner’s insurance. Don’t be shy about asking lots of questions.
There’s also something called a reverse mortgage. It’s a bit scary, but basically, you get a lump sum in return for signing over your home when you’re no longer able to live in it, or upon your death. The reverse mortgage lender then sells the home to get their money back and hopefully some profit. Generally, the amount they’ll offer will be less than the home is worth, and it does mean that your children or heirs won’t have any claim to it, or any proceeds from the sale. The money you receive can be used in any way you like. Always consult an accountant and/or an attorney before entering into something like this, to be sure you understand exactly how it works, and what will happen in the future.
There are many decisions to make and different ways to prepare for a time when you are no longer able to live independently. You and your spouse and other family should have honest, ongoing discussions about your wishes and expectations, so plans can be made well in advance. It can be stressful and even depressing, but waiting until there’s a medical emergency to figure it out will be even more stressful for everyone. Having thoughtful arrangements in place will make it easier to get the care you need, in the best possible setting. Tax and estate attorneys and even your personal accountant can be a great place to start. Senior living referral services also have tons of information and links to helpful sites and services on their websites. Take the time to figure out the best options for you and your spouse and family, it will be well worth it down the road.