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How Will My Parents Afford Long-Term Care?

Cynthia Perthuis Images July 2022

Elder Care Thought Leader: Cynthia Perthuis

Let’s just rip the bandaid off the wound – Long-Term Care can seem expensive. 

The prices range from $3,500 per month to $25,000 per month and higher. Some would call Assisted Living a “cruise ship on land” but the newer developments are more like “private yachts on land”. You can see an interesting take on pricing trends in this New York Post article:

“Once income is identified, you should make sure you have an understanding of the savings and investment accounts.”

Whether it is low or high, there is definitely a cost involved in being helped along our path in old age. Where does this money come from? There are three ways to pay for Long Term Care:

  1. Out-of-pocket,
  2. Insurance and
  3. Government programs

– or a combination of the three.  

Out-of-pocket Or Private Pay:

First, a discussion on out-of-pocket or private pay. A family can use the basic income from Social Security and a pension. Sometimes, these two methods are exactly enough to pay for the care.

The next place to look is at other sources of income – such as rentals or a business venture. Once income is identified, you should make sure you have an understanding of the savings and investment accounts.

Retirement accounts have grown substantially during the past bull markets and, even with our 2022 market, there are still some really big gains. Another investment with substantial gains might be the home.

The home can be sold or, if the older person is going to get care at home, a Home Equity Conversion Mortgage (also know as a Reverse Mortgage) might be another source of funds.

Long-Term Care Insurance:

If the assets on hand will not pay the bill, the next place to look (or first place in the case of Long-Term Care Insurance) is at insurance policies. Many life insurance policies have sophisticated programs that allow owners to borrow against the policy.

“Many life insurance policies have sophisticated programs that allow owners to borrow against the policy..”

These policies may also have life settlement or accelerated death benefits that can be used to pay for long term care. A similar product to a life settlement is known as a viatical settlement. A life settlement allows someone without a terminal illness to sell the policy for more than the surrender price while a viatical settlement is used by an owner with a terminal illness.

A Long-Term Care Insurance policy is just what it sounds like – it is a policy to pay for long term care. However, there are some very detailed nuances and one must get the policy to an expert to fully understand all the details of coverage.

Government Assistance:

Finally, if you have exhausted all of the options in out-of-pocket and insurance, there are government programs that help. Keep in mind that, to qualify, one must meet certain requirements around income or lack thereof.

Medicaid is probably the best known of the government assistance for long term care. Medicaid is a federal program that is administered by the individual state and that means that each state is different. The one thing that is the same in all states is that to qualify to use this method of payment, you must do a great deal of planning. It will take weeks to months to qualify for this program so start planning now.

Aid and Attendance:

Another government program is a little-known benefit through the Veterans’ Administration and is known as Aid and Attendance. This program is for those that served in the military during a time of war and their spouses or widows.  

“A good Advisor will have the super-rolodex of helpers and specialists to help make this journey a little more manageable.”

If your head is swimming with the opportunities as well as the challenges, there are people that can help with all of this. An Elder Law attorney can help with not only preparing a will and Power Of Attorney but can also help plan for some government programs. All critical for long-term care decision-making. 

Veterans’ Administration:

There are consultants that will work with you on other government programs such as Veterans’ Administration. A financial planner is always good to have nearby whenever you speak about planning for the future with your finances. Make sure you speak with your insurance agent or find one if you do not have one.  

First and foremost, you need a Senior Advisor to help find and wrangle all of these people. A good advisor will have the super-rolodex of helpers and specialists to help make this journey a little more manageable.  

Good Planning Is The Key For Long-Term Care:

So, how will your parent ever afford care as they age? Very slowly and methodically. The thought of spending thousands of dollars a month of hard-earned cash is daunting. Remember that good planning is the key.

However, if someone forgot to plan, there are ways to put all the pieces together and there are experts that can help. The most important thing to remember is to not try this alone. Put on your oxygen mask, take this list of sources and get some help.

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Cynthia Perthuis

About the Author:

Cynthia Perthuis left her cushy life in Corporate America in 2018 to use her personal experience with her parents and her entrepreneurial background to help the 10,000 people a day turning 65 in the US. The stress of helping aging loved ones and working full-time and caring for her own family while living over 1500 miles apart was overwhelming at times. She often wished there was a non-conflicted industry professional to help when facing these life-changing decisions. She has created her team at Senior Care Authority (www.scanyfl.com) for that purpose. Her team supports over 300 families a year as they navigate these decisions.