In part one, we met Bill and Nancy, now age 65, and reviewed their need for age-appropriate health care and decision-making documents. We left off with the question, “How can Bill and Nancy take steps to prevent losing everything in the event their health fails?”
The costs of long-term care can be staggering. Home health aides can cost, more than $40,000 per year. Nursing home care in Arkansas (based on the annual survey by the Arkansas Department of Human Services) will average $60,000 per year.
What are our chances of needing long-term care? According to the Federal Department of Health and Human Services, someone turning 65 today has a 70% chance of needing some type of long-term care services in their remaining years. This means Bill and Nancy should be considering how they will pay for that care in the event one or both of them are part of that 70%.
Bill and Nancy’s choices include:
- paying out of their own pocket for care,
- purchasing long-term care insurance (or one of the new life insurance policies with long term care riders); and
- qualifying for government assistance programs,
- or any combination of the first 3.
By planning early, before there’s a health care crisis, Bill and Nancy can take advantage of all three options, yet protect their home and any other cash or assets they wish. This type of asset protection is done using a specially designed irrevocable trust. Only a portion of Bill and Nancy’s assets would be transferred to the irrevocable trust, with the remainder either remaining in Bill and Nancy’s name, or held in a revocable trust with special provisions for the surviving spouse.
By transferring assets to an irrevocable trust, those assets would not be counted in the future (in most cases, after 5 years) if Bill or Nancy needed to qualify for government assistance to help pay for their long-term care. If Bill or Nancy is a wartime Veteran, there are additional cash assistance programs available through the Veterans Administration that should be explored as another means to help pay for their care.
To round out the asset protection package, Bill and Nancy would also complete financial powers of attorney and health care advance directives along with living wills. They would also explore purchasing an appropriate long-term care policy in the event one of them needed care sooner than expected.
By planning early, Bill and Nancy have tools in place to protect their home and other assets should one or both of them need care in the future – and there is a 70% chance they will. Bill and Nancy have also lessened the emotional and financial stress placed on a family when a health care crisis does happen. They’ve taken care of the heavy lifting with regard to their assets, so their family can just focus on what really matters – making sure they have the best care possible.
Helping protect individuals and families from the risk of dying broke in the nursing home is an important part of what we do at ILP + ARKANSAS. If you are interested in exploring how to protect your assets from the rising cost of long term care, please call us to learn more.