No need to be broke, dead or both. Protect your assets and savings!
Lots of methods to protect yourself. For most folks with limited means, ways to avoid Welfare MedicAID spend down is the most important.
Let’s first look at the cost structure of Elder Care LTC you will face.
There are Direct Costs and Indirect Costs.
This is likely to be an exhausting Marathon, not a Sprint for your family and could last 2, 3 or up to 7 years or more.
The Care may start as Care at Home combined with daily visits to an Adult Day Care facility. In fact, this is a critical time because the choices for care made now can help prevent future problems.
A year or two may go by allowing time to adjust to the new way of life that is still fairly normal. Time to adjust to the difficult financial reality you’ll face. Time to explore other longer term care options.
How can you possibly ever pay for this?
But first let’s look at the costs and protection from spending that's involved in finding care and places for care that may be involved in the spend down.
Remember the alternate meaning of C.A.R.E is Can't Always Rely on Expectations. Costs are not always fully mentioned or explained when you inquire.
There are Direct Costs and Indirect Costs.
These may include Day Care Facility, Home Care Visits, Care Home "Houses", Assisted Living Facilities, Nursing Home, and even Continuous Care Campus Facilities to name a few. There are a bewildering number of different marketing terms for these.
Yearly base costs for these choices will range from $12 to many 10s of Thousands of dollars. And that does not include variable monthly costs.
A big variable cost is Medical and Hospital costs that are ongoing and not covered otherwise. Ambulance, Doctors and Hospitals are still ongoing as well as drugs and medical insurance. No, the facility doesn't treat many problems, it just calls 911. The house Doctor is only advisory and rarely visits to get involved in acute situations.
Other variable costs at these facilities include barber and beauty shop, snacks at the onsite store, outings, Oxygen service, diapers and, surprise, surprise... expenses for *extra hired help* to supplement the facility staff, sometimes day and night. Very costly.
Falling through this crack of life can make the person feel more Frail, Scared facing problems Alone without help.
If Family or Loved ones are out of state, an independent contracted Care Manager may be needed to insure local actions are properly provided and followed. And what about the personal monthly household bills that used to be done by the person now in care. You may need a registered Fiduciary to handle the Bank account, write the checks and other financial matters. None of this is cheap.
All of it is worrisome and time consuming. Will seem like a second job even if you are not involved in the actual care.
Managing the care is not easy, and can amount to a part time job, even if you are not the prime caregiver. It will be a marathon of discussions with the actual caregivers, even in the facility, scheduling home help or even extra help at a facility. What if they don't show up? Who calls who? And more discussions about care and behavior and more rescheduling.
And then the possibility of a move to a more "understanding" facility where the whole process starts all over again. How many days off work and number of visits?
You might even think of applying for At Home Care Welfare MedicAID through a Waiver program. Sadly, that is very hard to qualify for and takes time to get. Likewise, with Aid and Attendance for Veterans and Spouses. Also, Veterans Homes are few and full.
A Daughter or relative who elects to be caretaker might quit working their job or go part time, losing wages and benefits and surprise!... putting their own social security benefits in jeopardy so they get less or none when they retire. Speaking of Social Security, current payment checks will probably go to reimburse State Medicaid leaving expenses that it used to cover now uncovered. What about the stay at home community spouse who is not in care?
You may need to pay for nursing training and supplies if you decide on "do it yourself" caregiving. Special diets are expensive as well as diapers ($200/month minimum). Not to mention any house (ramp?) modifications needed.
Most folks who have lived through this say the Emotional Stress and Strain is the worst part of it.
If you have the wherewithal, consider protecting your own kids from this future stress. Plan ahead by considering insurance coverage early for yourself to protect not you... but them.
The number one concern for folks with limited means should be how to avoid the Welfare MedicAID spend down.
And how to avoid having the State "poking around" in all your Family, Financial and Lifestyle matters. The process is onerous with requirements for proof of most things in your life: age, citizenship, diagnosis, bank and broker records, house, mortgage and family arrangements.
How can you possibly ever pay for this? Continued
Friends, Family and Faith Help
Early on in a crisis you can find help with friends and family as well as essentially free resources offered by Federal, State and County information and support agencies and Faith Based programs.
The lingo in Government land is "Services and Supports" (see the section on Access Help next.)
Remember the payments required for Eldercare will come from your assets or family unless you are very poor and/or qualify for Welfare MedicAID.
You can use no tricks, no help, no escape unless you plan ahead.
You can't sell your house for a Dollar, get a quickie divorce, or change names on your accounts. The State will find out and deny coverage.
Another example: consider the consequences of relying on your Daughter as caregiver. Without other helpers, she may need to quit her job, put her family in jeopardy and drain her emotional and financial resources. Fights and family guilt issues will also loom and no one will be happy. Did you have plans help the kids with college costs? No more.
Methods and Solutions even if you have little Money
Up until now you were thinking about GROWTH of your Assets and Savings or at least keeping whatever money, you have safe. NOW you need to think about Protection from SPENDING.
You may also consider hiring an Elder Care Attorney to guide you through the MedicAID maze and shooting gallery.
Plan or you will be forced to Qualify at MedicAID Crisis Time! Otherwise you will be forced to spend most of YOUR own money first.
The money you were planning to use for other things will be gone. If you don't do things now, the State will step in and force you to do what is needed to qualify.
Even if you have limited Savings and Financial Resources you need to Avoid Welfare MedicAID spend down.
Here’s how to protect yourself from the "Welfare MedicAID Spend Down" that the State MedicAID Rules will impose on you and your family.
Remember: MedicAID is a joint Federal and State program with State specific rules that are stringent and confusing not only to the State workers who administer the program but also the Elder Care Lawyer who you may get to help you.
The most important rule is the 5 Year Spend Down Rule.
The year 2023 is the "Back Flip" date for 2018. That's the date when, IF, you need Elder Care in that future year, you will look back and congratulate yourself for putting assets in, for example, in your kid’s names or made gifts to them this current year. The State will be looking back to see whether your money could have been used to pay for your care first before you can qualify for MedicAID.
Otherwise your assets will be at risk from the State and/or you will drain your accounts until you're nearly broke so that you can go on "Welfare MedicAID".
There is no hiding place from the "5 year MedicAID look back". You're on the hook if you let it happen without a plan.
Why is the year 2023 important? That is 5 years from 2018. If you need care in 2023 and did not plan back then (now actually), you will have to "Spend Down" most of your assets to qualify for Welfare MedicAID It is about impoverishing you. Your money is spent by you first on whatever care you need.
Your money will be mostly gone. And if you are married?... what does that mean to your spouse and family? Look into ways early to protect yourself from the spend down, like gifting to family via Annuity or Life Insurance combos, selling and renting back your house, getting a Charitable Income Annuity, Etc. You must do these solutions early, however.
Ways to Pay for Care when you need it
You will find, when you have an Eldercare Crisis, many folks want to help you (or themselves in the form of a sale to you). This, is a crisis after all. And you or your family are desperate.
Is Your House the answer? What about other sources of cash?
You could sell your house, but 6% of the price goes for Realtor commission. That's 6% of the sale price. That means $12 grand on a $200,000 house. If you owe $100 thousand on the mortgage you get just $88 thousand in your hand, maybe enough for 1 year in a Nursing Home.
To spring the money fast you could get a Bridge loan at 12% cost or more to use until your house sells.
And don't even think of using a credit card with interest as high as 24% or more.
But will your house sell and when? How long will it take? Will you have fix up to sell costs after living there for 30 years?
What about a Reverse Mortgage? Well, it will cost you $10 Thousand in fees to spring $800 a month (10 Grand a year) from the $200K house. The taxes, maintenance and insurance still must be paid by you. Your family will end up getting whatever money is left when you pass but maybe the State will have a lien to be paid too.
Remember, costs for Elder care can be much more than $800 a month.
Cash in your IRAs. There will probably be a 10% penalty prior to age 59 1/2 and a 20% tax consequence.
Certificate of Deposit cash-ins may have a penalty.
You might Cash in and drain your investments. But, You could be forced to sell at a market bottom and of course... lose money and pay tax plus penalty on the proceeds, too.
Sell your Life Insurance at a loss. Yes, that is done. Your $100 thousand policy will be worth surprisingly little. Your family will no longer be your beneficiary... the new company who bought it will get the money when you pass.
You might get a policy loan or convert your life insurance to a policy with LTC coverage if you are young and healthy enough. Plan ahead.
If you are married you may think about a protection for your spouse. A Single Premium Immediate Annuity (SPIA) is recognized by most states to set up living expenses for a spouse (Community Spouse) if you are in a facility. The state becomes the beneficiary and is paid out what’s left when you pass.
Or, you might consider a Charitable Annuity that will pay a monthly amount to you and then leave the balance to the named charity or faith group, if the State permits.
The Federal Military, Veterans Aid and Attendance benefit may be available but only pays approx. $2100 a month tax free, but it’s hard to qualify for. They want you in the Veterans Home but there are few of them and few spaces.Those who aid you with this benefit will likely want to sell you an annuity for your spouse too.
You can purchase protection "ahead of time" if you can afford it.
And, if your health and age (below 80) qualify you. It all starts with health questions or exams. Believe it or not the Government tries to make it possible with some plan designs and tax benefits.
You can buy Traditional LTC Insurance for most Long-Term Care expenses, and even get paid for home care and extra purchased help in a facility. These are tax advantaged plans with approved tax credit up to $5110 to help with the expense for couples if you can take it.
At age 60 if you pass a health exam, you can buy a $5000 monthly benefit paid for 3 years after a 90 day wait. Cost is approx. $2000 a year that may be reduced by $1530 in Federal tax credits at that age.
That means you will spend $50 grand for this coverage, minus tax credits, if you can take them, over 20 years. If, and that's, if you spend 3 years in a facility at $96 grand a year you will have spent $50K to avoid spending $288 thousand. If you pass on without having used the coverage ... it's $50 Thousand gone. Just like your Auto Insurance you had the coverage just in case, but you don't get your money back. Other options are available that can return your money to you.
If you are still working, many employers offer group plans with payroll deduction for these types of coverage.
If you have a small business "C" Corporation you can actually deduct 100% (not a misprint) of what you pay for your employees LTC coverage. You are an employee too.
Be aware the insurance companies that offer LTC coverage, pay out Billions in claims benefits, but also often dispute claims that you may think legit. Know what you buy.
A different traditional LTC coverage is The State Partnership Program. Available in 36 states. This is a state sanctioned program (at the same prices) in partnership with Major LTC Insurance companies, that can shield you from the MedicAID Spend down to the extent your State Partnership policy has paid for care. For example, if you have a nest egg of $100 Thousand and you have this coverage you can keep your savings nest egg money up to the amount the policy pays for your care. In other words, you get to keep your $100 grand. It is shielded from the State, no matter what, if you have a Partnership Plan.
Without this type of coverage, your money is gone and it can't be left to your Heirs. Several Rated AA companies are members of this program in most states.
Co-op arrangements are available between many states in case Mom moves to your state to be near.
There are several things you can do with Life Insurance that you already own. It may be possible to convert your policy to one with LTC coverage.
And there is the possibility of springing part of the cash value while .... keeping the Insurance amount for your heirs. Health status and age again matters, however.
Existing IRAs and Annuities can actually be transferred (sec 1035) or converted to LTC plans... *Flash News*. When used for LTC care... any gains you have made over the years can be used for Care costs without paying Taxes on those Gains. That could be a 20% savings that is now available for care. That means you can "wash" the gains for taxes.
If you have the money, you could get one an ASSET linked Life or Annuity plans. Don't be put off by the word Annuity. There are good ones and this is one of them. Consider transferring balances or payments from IRAs etc. to an Asset or life linked LTC plan. BTW, you can have more than one of these plans, and someone else can be the owner, like your son for example.
Asset Based LTC plans are unique in benefits and flexibility. The health qualification rules (no exam) are easier than the Traditional LTC policies. Once again, a very beneficial feature is that any gains are "washed" for taxes. And depending on your health and age... you can actually have 2 to 5 times the amount you have put in available for LTC if you need it. That means $100 grand can be $2 or $3 Hundred grand when used for LTC purposes. And these plans can pay 1 to 2 % interest per year as well, also available for couples. Plans are available for as little as $25 Thousand and will rescue some or all of your savings should you ever need LTC. If you don’t need LTC you get your original money back plus. That means the money that you put in is available to your heirs if you pass away without using it.
Asset Based plans are available from "A" rated, large companies that will most likely always be there for you when you need the coverage.
Now that you have some idea of ways to pay for care…. Let’s look at suggestions to find services.