The question of "What Should I Know About Long-Term Care?" is a great one to ask! For example, did you know that you can buy insurance for long-term care situations? Long-term care insurance is a specialty type of insurance that helps pay for costs that are typically connected with long-term care. This can include items such as care given in a hospital, nursing home services, care services provided in your home and treatment for dementia.
WGN’s recent article entitled “10 Crucial Things to Know about Long-Term Care“ looks at these important items.
- The Biggest Financial Threat. The most significant threat to your financial nest egg is long-term care. About 70% of people over 65 will need long-term care during their life. The national average for home health care services is $16,743 per month. However, there are ways to manage this without buying a traditional long-term care insurance policy where “you use it or lose it.”
- Long-Term Care Insurance is Really “Lifestyle” Insurance. It is NOT nursing home insurance.
- Reverse Mortgages. These have become a popular and accepted way of paying for expenses, including the cost of long-term care. Reverse mortgages are designed to keep seniors at home longer. A reverse mortgage can pay for in-home care, home repair, home modification and other needs. Yet, in most cases we have found reverse mortgages are not needed and can greatly complicate the process of Asset Protection/Medicaid Planning and Estate Administration/Probate later on.
- Using Medicaid to Pay for Long-Term Care. While you might see this as a last resort to pay for long-term care, it also may be the only way to protect family assets! Medicaid will pay for long-term care, but certain criteria must be satisfied. You must speak to a Certified Elder Law Attorney like Robert Haley before applying for Medicaid!
- Important Considerations When Selecting a Long-Term Care Plan. Four things to consider: (i) go with a company with an AM BEST rating of A+ or better; (ii) the assets of the insurance company should be in the billions; (iii) some long-term care insurers will allow for group discounts through employers, or “affinity” group discounts through a local organization; and (iv) the tax advantages for tax-qualified long-term care insurance plans. At the federal level, premiums for long-term care insurance fall into the “medical expense” category. On the state level, 26 states offer some form of deduction or tax credit for long-term care insurance premiums.
- The Annuity-Based Long-Term Care & The Pension Protection Act. In 2006, this law was enacted to permit those with annuity contracts to have long-term care riders with special tax advantages. The Act allows the cash value of annuity contracts to be used to pay premiums on long-term care contracts.
- Asset-Based Long-Term Care Solutions. The best planning approach for those who choose to self-insure is to “invest” some of their legacy assets so the assets can be worth as much as possible whenever they may be needed to pay for care. If unneeded, the money would then pass to the intended heirs, with no “use it or lose it” issues as with conventional long-term care insurance.
- Long-Term Care Strategy Using IRA Money. Most people use their IRA to supplement retirement. However, sometimes waiting until age 72 when mandatory required minimum distribution rules apply, some people have instead opted to take a portion of their IRA and fund an IRA-based annuity which then systematically funds a 20-pay life insurance plan with long-term care features. This type of IRA-based long-term care policy is unique in the sense that it starts out as an IRA annuity policy, also known as a tax-qualified annuity, and then over a 20-year period makes equal distribution internally to the insurance carrier and funds the life insurance.
- Important Documents for Long-Term Care Planning. Ask an experienced estate planning attorney about a power of attorney for health care and financial power of attorney, as well as an advance directive or living will.
- Using Veterans Benefits to Pay For Long-Term Care. The VA offers a special pension: the Aid and Attendance (A&A) Benefit. This is a “pension benefit” and is not dependent upon service-related injuries for compensation.
This shows you just how complex paying for long-term care can be! So, when asking yourself "What Should I Know About Long-Term Care?", just know that we are here to help! Even if you think long-term care is right for you, give us a call and let's discuss it before you speak to an insurance company. In many cases, you do not need a “gold-plated” plan that will pay for services for the rest of your life! We can craft plans where your long-term care insurance is the bridge to protect much of your estate! If you or a loved one are concerned about issues with situations like this, and in estate planning and elder law concerns including Asset Protection/Medicaid Planning and questions regarding long-term care and the nursing home, reach out to us! Book a call with us on our website: www.VAElderLaw.com to get started. We have offices in Bassett, Danville and Lynchburg to serve you.
Reference: WGN (2022) “10 Crucial Things to Know about Long-Term Care“