If your spouse needs nursing home care, we hope that you’ve prepared by taking out a long-term care insurance policy or ensuring Medicaid eligibility well in advance of needing it. The question of how to pay for long-term care is generally the first issue that arises when placing a loved one in a nursing home. Many people don’t realize it, but there are only three viable ways to pay for long-term care:
1. Long-Term Care Insurance
Planning ahead by securing long-term care insurance is the best way to pay for nursing home care, but it only works if your spouse already has an insurance policy long before care is needed. If you try to get long-term care insurance after you need it, it’s too late to qualify. This is because most policies require medical underwriting, and if you already receive long-term care services, you are unlikely to qualify. Getting a long-term care insurance policy well before you need the benefits will save you much stress and hardship down the road.
2. Out of Pocket
Exactly as it sounds, out of pocket means that you will have to pay 100% of the nursing home care costs yourselves. Most couples don’t have the finances on-hand to cover care this expensive, especially considering how long you may need the care. In Alabama, for example, the average cost of long-term nursing care is $78,000 per year. Your life savings can be eaten up in a matter of months with nursing home fees that high!
3. Qualify for Medicaid
Medicaid—not Medicare—is the government program that covers the cost of long-term nursing home care. The application process is slow and difficult, and the requirements to qualify are very financially restrictive. Applying for Medicaid when you already need nursing home care—also known as Medicaid Crisis Planning—will likely mean paying out of pocket at first. That’s because, in order to qualify for Medicaid when you’re married, you’ll only be able to keep about 50% of your combined assets—up to a maximum of about $130,000. This means that if you have $300,000 total in assets, you won’t meet Medicaid eligibility requirements until you spend down about $170,000. Then, once you do qualify for Medicaid, all of your spouse’s income will go directly to paying for the nursing home, and you’ll have to rely on your income alone—plus whatever is left of your assets—to get by on. Learn more about the rules of Medicaid eligibility in Alabama.
However, through Long-Term Care Planning, you can employ several strategies to protect your assets from the cost of nursing home care and ensure Medicaid eligibility when you need it. A qualified elder law attorney will help you determine the best way to organize assets now, so you don’t lose everything to the nursing home later.
Take the Next Step
Sign up for our free webinar about how to get qualified for Medicaid by using the brief form below, or contact attorney Bill Miller today at (256) 251-2137.
It might be hard to think about this now, but chances are—somewhere down the road—you may need help taking care of yourself. One question that arises from this situation is: how will you pay for it? One way to prepare for the potential cost of long-term nursing care is to purchase long-term care insurance. Unlike traditional health insurance, long-term care insurance is designed to cover the cost of long-term care services and support in a variety of settings, such as your home, a nursing home, or another facility.
Long-term care insurance policies cover such costs as assistance with routine daily activities, like bathing, dressing, or getting in and out of bed. They also help cover the cost of care if you have a chronic medical condition, disability, or disorder.
Taking into consideration long-term care costs is an important part of any long range financial plan. If you wait until you need care to buy coverage, it will be too late. Most policies require medical underwriting, and if you already receive long-term care services, you may not qualify. As a result, most people purchase long term care insurance plans in their mid 50’s to mid 60’s.
As we mention in the above video, there are two different types of long-term care insurance policies: traditional long-term care insurance, and asset based (hybrid) long-term care insurance. Both of these options have their pros and cons, but—as we mention—asset based insurance is usually the preferred option.
Traditional long term care insurance is a “use it or lose it” type policy, similar to homeowner’s insurance. If you do not need it or use it during your lifetime, you do not benefit from paying the monthly premium. The monthly premium that you do pay is based on your age, and how much coverage you want. This premium payment will increase over time, and can also continue to increase…even after you take out the policy.
On the other hand, a hybrid policy creates a pool of money for long-term care that is equal to several times your premium payments. The pool of money created for long-term care can either be used for a specified minimum period of time, or for a lifetime (depending on the insurance company). If you do not need these benefits, the policy pays a death benefit to your heirs upon your passing.
Long term care insurance is something everyone should consider, and it is important to understand the differences in the types of policies that are available. If you are apprehensive about navigating the long-term care maze, please join estate planning attorney Bill Miller for an upcoming free workshop using the form below. We’ll answer
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With the US population aging, life expectancy increasing, and events like the Covid-19 pandemic showing us that no one’s health is secure, new awareness has arrived concerning the need for a long-term care plan. This is great news and yet with increased awareness comes an increase in the circulation of misinformation. In a bid to clear the air, we address four of the most common misconceptions concerning long-term care planning below.
1. If you or your spouse enters a nursing home, the state will seize your assets.
Medicaid, the state and federal government-sponsored program that millions of US adults rely on to pay for long-term care needs, seizes nothing when you enter a nursing home. Instead, the program simply will not chip in a dime until you, yourself, have spent down your “countable” assets to a level that qualifies you for assistance. This does not mean only very low-income individuals are eligible to receive Medicaid, however; it simply means that you need to work with an experienced estate planning attorney well ahead of time to put a plan in place to protect assets so that you are able to qualify for Medicaid more quickly when the time comes.
2. If you use Medicaid to pay for care, you risk losing your home.
This misconception is similar to the above but deserves a separate address because of how often it is repeated.
As long as the person using Medicaid (the beneficiary) or their spouse continues to live in their home, it can neither be taken nor forcibly sold. This is the case even if you are single as long as you communicate your “intent to return home” in writing when you enter a nursing home.
It is true that upon your death, the state can file a claim against your estate (which includes your home) in order to repay nursing home expenses covered by Medicaid but even this can be avoided with help from an experienced attorney.
3. Making a financial gift disqualifies you from Medicaid for five years.
Medicaid employs a look-back period wherein any financial transfers or gifts made in the five years prior to applying for the program may be counted against your eligibility. This does not mean you will be barred from receiving benefits if you make a gift during this period. However, it does mean that you may have to endure a penalty period before Medicaid picks up the cost of your care.
This penalty is based on the value of the gifted assets made and how many days of long-term care they could have been used to pay for. Once more, an experienced estate planning attorney can help you work out specifics and determine the most affordable way for you to gain the coverage you need.
4. It is too late to start long-term care planning.
All too often, folks who are already receiving nursing home care or those with imminent need assume it is too late to engage in planning that preserves their assets. This is simply never true. You can always, for instance, use cash to pay down your mortgage and thereby convert a non-exempt asset into an exempt asset and thus save thousands. While it is always better to begin planning early, such last-minute strategies help you retain a large percentage of all that you have worked so hard to gain.
To learn more about long-term care planning or emergency strategies to ensure you have the coverage you need, do not hesitate to call Miller Estate and Elder Law at (256)251-2137 or reach out via the contact form on our website.
In determing how to pay for long term nursing home care, the first way, and by far the best way, is with long-term care insurance. There are different kinds of long-term care insurance policies out there. Unfortunately, most people do not have long-term care insurance, and they wait too long to get it. By the time they apply for it, they are either too sick, or it is no longer affordable. If you can get a long-term care policy, I would encourage you to do so because it is the best way to pay for care.
Medicaid
The second way to pay for long-term care is through the Medicaid program. The Medicaid program is a federal program that is administered by the states, but it has very strict requirements in order to qualify. An individual cannot have more than $2,000 in non-exempt assets in order to qualify. Most people have way more than $2,000 in assets. If you are married, the rules are a little different, but Medicaid can still be difficult to qualify for.
Out of Pocket
The third way to pay, and what most people are doing, is out of pocket. Right now, nursing home costs in this area are around $7,000 a month. Within 10 years, they will probably be $10,000 a month. Every month, these long-term care costs are due and are eating away at your nest egg at the rate of about $10,000. If you don’t have long-term care insurance and you don’t qualify for Medicaid, then you are going to have to pay out of pocket.
I hope this answers the question about how to pay for long-term care. Our clients are encouraged when told how to minimize out-of-pocket expenses and get qualified for Medicaid more quickly if they don’t have long-term care insurance.
According to LongTermCare.gov, almost 70% of people who are 65 years of age at this time will need long-term care at some point in their lives. Such care is expensive and could deplete a lifetime of savings in just a few years. People may be able to both pay for their long-term care and leave money for their heirs by establishing trusts for long-term care planning.
Medicaid Requirements
Many people hope that Medicaid will pay for their long-term care. However, Medicaid only pays for people with limited income and few resources. Applying can be difficult as applicants are required to submit numerous supporting documents.
Another important thing to remember is the Medicaid 60-month look back period. Medicaid reviews an applicant’s financial records for the 60 months before the date of application. Financial transactions made during that time, including transfers to a trust, may cause a delay or reduction in benefits. That’s one reason it’s important to start planning now. A trust may be in your future.
Irrevocable Trusts for Long-Term Care Planning
Please note that there are two general types of trusts: revocable and irrevocable. Revocable living trusts are common. However, they typically do not provide any kind of asset protection and are not helpful for long-term care planning.
Instead, consider establishing an irrevocable trust. This type of trust transfers control of the grantor’s assets to a trustee. In effect, the grantor no longer owns the trust assets. Medicaid generally does not count the funds in an applicant’s irrevocable trust toward the applicant’s resource or income requirements.
Plan Ahead to Pay for Long-Term Care
We don’t know what the future holds or how long it will be until we need long-term care. To prepare for your future, talk to an attorney about trusts for long-term care planning today.
The attorneys at Miller Estate and Elder Law assist their clients with Medicaid and long-term care planning, as well as general estate planning. Contact Bill Miller at 256-251-2137 to schedule an appointment. Though our office is now located at 818 Leighton Avenue in Anniston, we serve clients in Gadsden, Hoover, Talladega, Vestavia Hills, and surrounding areas.
Also, download a copy of our free e-book, Don’t Go Broke Paying for Long-Term Care, by clicking here.
Long-term care, should you require it as you age, is a significant expense. Depending on where you live, the cost of a skilled nursing home can be well over $100,000 a year or more, and this is for a semi-private room. Medicare only pays under certain circumstances and in limited amounts, which surprises most Older Americans and their loved ones to learn. Further, if you have savings and investments, you might not qualify for the public benefits programs that can help you pay for the care you need such as the Alabama Medicaid program.
If you have not thought too much about long-term care, you are certainly not alone. Even if you are well-off enough to think you do not really need to put money aside for such costs, you do not know what is going to happen in the future, and most families cannot accurately predict how much it is going to cost.
A study published by theDepartment of Health and Human Services shares that 48 percent of all Americans over the age of 65 will need long-term care outside the home for up to one year. Nineteen percent will need it for up to 24 months, and more than 21 percent between two and five years.
For most of us, we want to create an estate plan that is focused on two main aspects:
Lifetime protection, which safeguards you and your assets should you be in a crisis and need a decision maker with legal authority to act.
Creating a legacy that will live on with your family members after you pass.
There are many ways you can start to address long-term care needs in your estate plan when you work with an elder law attorney. Your elder law attorney can provide a comprehensive strategy that addresses all of your health and legal needs, assuring you of the best possible care and protection should you need it. Long-term care planning can be incorporated into your overall estate plan so that it includes lifetime protections that contemplate a potential need for custodial care when you discuss your concerns with your attorney.
When we are healthy and in our prime, we do not often think about the big “what ifs.” Long-term care, as well as the threat of critical illness, is generally the last thing on our minds, even if we already have an estate plan in place. Most people think of estate planning as something that settles your affairs after you are gone, but know that it can also help you live better in life. Estate plans that consider long-term care will protect your assets and can ensure your legacy is intact should you need to be in a nursing home for any length of time.
We know this blog may raise more questions than it answers. Do not wait to contact our law practice to schedule a meeting to discuss your concerns today, or any time in the future.
