What Is Long Term Care?
When most people think of estate planning they focus on how their assets will be disposed of when they are deceased. A well drafted estate plan, however, can and should take into consideration the need for long term care.
Long-term care provides a range of services and support for you individuals who are unable to care for themselves due to a chronic illness or disability. Most long-term care isn’t medical care, but rather help with basic personal tasks of everyday life, sometimes called activities of daily living. All too often, individuals and families wait until a medical crisis actually happens before considering long term care, which usually leads to throwing together a hasty estate plan in the face of mounting medical costs.
Why Consider Long Term Care?
Long term care costs can easily drain one’s finances in a relatively short time. According to the Harvard University Study in Compensation & Benefits Review, 72% of Americans become impoverished after just one year of nursing home care. Long term care isn’t typically covered by private medical insurance and major medical insurance plans. Medicare only pays for skilled and rehabilitative care after a three-day hospital stay; this excludes custodial care, the assistance someone needs for daily living. Medicaid only covers nursing home bills after a loved one is bereft of assets.
Whether the care you need takes place in a nursing home, assisted living facility, or with an in-home provider, the costs can mount with alarming speed. According to the Genworth 2016 Annual Cost of Care Study, the cost of receiving long term care continues to rise sharply year over year, especially for services in the home, where the vast majority of Americans receive long term care and for a longer period of time than facilities. The median monthly costs for the services of a homemaker or an in-home health aide for 44 hours a week are $3,813 and $3,861, respectively. The average monthly cost of a private nursing home room is $7,698, up 1.24 percent from 2015. The cost of a semi-private room is up 2.27 percent to $6,844 per month. Assisted living communities saw a slight increase in costs of .8 percent to $3,628 per month.
Long Term Care Planning in Your Estate Plan
As with all major life situations, careful planning will ensure the financial resources are available when they are needed. If your estate plan does not consider long term care, chances are you haven’t taken a realistic look at your assets and how the potential need for long term care may affect them. Talk to an estate planning attorney about the following factors to get on the right track:
- Set Reasonable Expectations for Long Term Care
While we can’t predict what will happen to us and when it will happen, we can take an educated guess. For example, are there any major diseases that run in your family? Are you involved in any kind of activity that could affect your body long term? While considering these things may feel uncomfortable, it is far better to consider them early on and plan accordingly, rather than face the reality of long term care with no plan at all.
- Consider a Long Term Care Insurance Policy
Since it is highly likely that Medicare or medical insurance will not cover long term care costs, a long term care insurance policy can ensure that your financial assets are not drained due to long term care costs. Most people assume that long term care will be covered by Medicaid and face the rude awakening of having their financial assets drained after learning that it doesn’t.
Consider and discuss long term care insurance policies with affordable premiums that won’t rise drastically over time. Begin this process as early as possible, as the younger you are when you apply, the lower the long term care insurance premiums are.
Benefits of Long Term Care Insurance Policies Include:
– Preserve savings and assets for family and friends;
– Help maintain one’s financial independence from family and friends, often eliminating the need to borrow money for long-term care costs;
– Relieve family and friends of caregiving tasks, as paying for professional care becomes an affordable option;
– Allow a loved one to choose where he receives care. If Medicaid pays for care, a nursing home is the only option. People can design their policy depending on where they want to receive care: in a nursing home, in the community, at home, or in an assisted living facility; and
– Expand the range of services a loved one receives, including: care from visiting nurses, home health aides and friendly visitors programs; home-delivered meals and chore services; and time in adult daycare centers and respite services for caregivers.
- Have Your Advanced Medical Directive, Power of Attorney, and Trust(s) Drafted
In the event that you are unable to make medical decisions for yourself, the last thing you want is for your family and/or friends to fight over them. Have an estate planning attorney draft you an Advanced Medical Directive outlining the treatment you want to be given if you are unable to do so. Otherwise, you run the risk of a lengthy court process in which a court will appoint someone to make decisions on your behalf.
Revocable or irrevocable trusts, such as a life insurance trusts have proven to be effective long term care planning tools for individuals of all ages, as they provide tax benefits and allow the donor to direct how the life insurance proceeds will be disposed of at the donor’s death.
While planning for long term care may seem like a daunting task, those who do plan are able to live with the peace of mind of knowing that they are covered if a need for long term care ever arises. Contact our office today to learn how we can help you create an estate plan that includes long term care.