How to Pay for Long-Term Care

It used to be that purchasing long-term care insurance was the best way to finance long-term health care costs, whether it be provided at home, with an aide, or in an assisted living or nursing facility.  If one currently has long-term care insurance, then you should consider yourself very lucky and you should hold onto the policy (ies).  The reason is that long-term care companies offered policies at what many believed to be somewhat reasonable rates, but the claims they paid out were huge.  Many companies will not sell the policies any longer, and the ones which do charge exorbitant prices.

One option of financing long-term care is to purchase an insurance policy with a long-term care rider. Unfortunately, while these policies provide decent life insurance benefits, the long-term care portion of the polic is not usually very substantial.  One other option is to self-insure, assuming you have a decent income in retirement and substantial assets. 

For some clients, self-insuring will impoverish them, as their assets and income are not significant.  In that instance, clients will establish medicaid trusts, in order to protect assets and eventually be eligible to receive government benefits for health care needs.  In order to safeguard assets, you need to create and fund a trust at least five years in advance of needing a nursing home and thirty months of needing home health care.  Procrastination in setting up these trusts is common, mainly because most people do not like giving up control of assets.  One asset to consider placing in a medicaid trust is the family home, as the trust, while irrevocable, can offer flexibility. 

When should clients start thinking about long-term health care planning?  Starting to devise a plan should occur by age 70, unless medical issues are known to exist prior to that, is a good rule of thumb.  Of course, if one is comfortable with the concept, planning can begin at any age.  

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