Like many people, you may be worried that you (or your spouse) will need long-term care during your retirement years. While there are things you can do to prevent the need for long-term care (LTC), the reality is that you may end up needing a nursing home. With that in mind, an attorney at Wilcox Attorneys, PA explains how you can plan for your future by deciding how you will pay for long-term care.
Will You Need Long-Term Care?
Eventually, the natural aging process catches up to all of us. At some point, our bodies will begin to deteriorate, making simple tasks more difficult than they once were. Unfortunately, many people end up needing long-term care for reasons completely out of their control. One unpredictable medical event can lead to the need for a nursing home. It is wise to plan for the worst and hope for the best when it comes to long-term care.
Long-Term Care Costs
To fully understand why you need to plan for LTC costs, you also need to know what those costs are likely to be. Nationwide, a year in LTC averaged just over $100,000 in 2022. In Arkansas, a semi-private room averaged about $73,000 and a private room $80,000 that same year while a year in an assisted living facility averaged just over $45,000.
Once you reach retirement age, you will likely depend predominantly on Medicare to cover healthcare expenses. Unfortunately, however, Medicare only covers LTC under very limited circumstances and even then, for a limited number of days. If you retain private health care insurance, that policy is also unlikely to cover nursing home expenses. For most seniors, that leaves long-term care insurance, Medicaid, or paying out of pocket for nursing home costs.
Should I Purchase Long-Term Care Insurance?
Long-term care insurance is a separate insurance policy that is limited to covering costs associated with LTC. It works much the same way flood insurance works for your home. Because most homeowner’s insurance policies don’t cover flood damage, insurance companies offer homeowners the option to purchase a separate flood insurance policy that only covers losses resulting from flood damage. LTC insurance works the same way by only covering expenses that are related to long-term care. Be aware, however, of a few important aspects of most LTC insurance policies, including:
- Waiting period. The applicable waiting period length can vary but you could have to wait months before an LTC policy will start paying out benefits, meaning you must pay out of pocket in the meantime.
- Maximum benefits. Some policies have a yearly, per occurrence or lifetime maximum benefit.
- Automatic termination. Does the policy terminate at a specific age or after a specific number of years?
- Cancellation policies. If you miss a single payment, will the policy cancel? What type of grace period do you have, and can you reinstate the policy with the same premiums if it is canceled?
- Coverage out of state or abroad. Many retirees move out of the state, or country, which could make your policy worthless if it won’t provide coverage.
Medicaid Planning
While Medicare will not pay for LTC, Medicaid will; however, you must first qualify for Medicaid. Medicaid is a federal program governed by the states at the county level and is intended to help cover healthcare costs for individuals and families. Consequently, the program uses income and asset limits when determining eligibility. In Arkansas, the asset limit is $2,000 for an individual. Although some assets are excluded when determining eligibility, the average senior has acquired enough assets over the course of a lifetime to have non-exempt assets worth more than the program limit. If your assets exceed the limit your application will be denied, and you will have to rely on your retirement nest egg to cover nursing home costs. To prevent that outcome, consider including Medicaid planning in your estate plan early on.
Contact an Attorney
For additional information, please sign up for one of our FREE estate planning webinars. If you have additional questions or concerns about planning for long-term care, contact us at Wilcox Attorneys, PA by calling 479-443-0062 or emailing info@wilcoxattorneys.com to schedule your appointment today.
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