Without question, the most pressing elder law situation is the matter of long-term care and the costs that go along with it. We are going to look at the pros and cons of long-term care insurance here, but before we get to that point, we will share some necessary background information.
Don’t Be Overconfident
A lot of people do not give long-term care a second thought because they assume they will always be able to handle their own activities of daily living. This is understandable in a way because it’s hard to wrap your head around something that you have never experienced.
At the same time, there are probably things that you go through right now that you could have never dreamed of 20 years ago.
The statistics paint a stark picture when it comes to aging and long-term care. Seven out of every 10 seniors will need some form of living assistance, and more than one-third of elders will reside in nursing homes.
These stats are coming from LongTermCare.gov, which is a website that is maintained by the U.S. Department of Health and Human Services, so they are accurate.
You may think that your ace in the hole is Medicare eligibility. In fact, this program does not pay for the custodial care that nursing homes provide, and it doesn’t pay for in-home care.
Simply put, you are taking a gamble if you keep your head stuck in the sand, and the odds are against you.
Nursing Home Costs
If you have to pay for a stay in a nursing home out-of-pocket, you may experience a bit of sticker shock. You can expect to pay about $200,000 for a year in a private room in a nursing home in the Westport, CT area.
Overall, the average length of stay is one year, but 21 percent of people who receive care need it for between two and five years, and 13 percent require care for over five years.
When you do the math, you can see that the numbers can get pretty large, and a married couple should prepare for two potential sets of nursing home bills.
Long-Term Care Insurance
Now that you know why you may want to consider the subject, we can take a look at long-term care insurance. During the 1990s, over 100 companies offered this type of coverage, but that number has dwindled to a relative handful, so there are very limited options out there.
The premium that you would pay depends on your age, your gender, your health, and the amount of coverage you want to carry. For example, a sixty-five-year-old woman that is looking for $165,000 worth of coverage would pay about $3,000 a year.
One of the disconcerting things about long-term care insurance is the so-called “elimination period.”
You can pay for your policy for years, and when you file a claim, the coverage does not immediately kick in because of the elimination period. Depending on the policy you have, you are required to pay out-of-pocket for 30, 60, or 90 days.
Another negative is the fact that the premiums can change at any time, so they can become unaffordable at some point. Plus, we have emphasized the fact that many people need long-term care, but some do not, and some require assistance for short periods.
In the final analysis, long-term care insurance is an iffy proposition, and many would say the drawbacks outweigh the positives.
Medicaid Planning
There is another way that you can prepare for possible long-term care costs. Medicaid will pay for the custodial care that nursing homes provide, but you can’t qualify if you have significant assets in your own name.
With this in mind, you could convey resources into a Medicaid trust. You would have no access to the principal, but you could accept distributions of the trust’s earnings while you are living independently.
If and when you apply for Medicaid, the principal would not count if you fund the trust at least five years before you seek Medicaid eligibility.
Take Action Today!
We are here to help if you would like to create a nursing home asset protection plan. You can schedule a consultation appointment at our Glastonbury or Westport, CT estate planning offices if you call us at 860-548-1000, and you can use our contact form to send us a message.
Mr. McCann is licensed to practice before the courts of the State of Connecticut. He is a member of the American Academy of Estate Planning Attorneys.
Mr. McCann provides to his clients, trust and estate planning, and trust and estate administration services. Formerly, Mr. McCann was an adjunct professor of economics in the State of Connecticut Community College system, and a Commissioner of the Town of Simsbury Zoning Board of Appeals.