Long-Term Care 101

November was Long-Term Care (LTC
LTC
) Awareness month and a great time to increase our understanding and knowledge of this important subject. November is also the month when we celebrate Thanksgiving and reflect on the significance of family connections. I see a strong link between these two events. Planning for LTC is a way to demonstrate love for family and help relatives avoid the anxiety and discord that typically accompanies admission to a nursing facility or hiring a home healthcare aide. For couples, an LTC plan can be a true act of love. It preserves assets so the healthier spouse can maintain their standard of living and choose how much hands-on caregiving they do.

Let’s take a deeper diver into long-term care – what it means, the odds of needing it, how much it costs, and the options for advance planning.

The definition of long-term care

LTC involves custodial care and assistance with the basic activities of daily living such as eating, bathing, dressing, getting in and out of a chair, and more. As longevity increases and we live into our late eighties, nineties and beyond, many of us will need this type of help and enter a nursing facility, hire a home health care agency, or pay a relative, neighbor or friend to provide informal care.

Long-term care statistics

According to A Place for Mom, 70% of people over age 65 will need care at some point in their lives. That’s a sobering statistic, and one that may rise as medicine advances further and longevity continues to increase.

Good care doesn’t come cheap. A 2021 survey by CareScout showed the national median cost of a private room in a nursing home was $108,405 a year. Receiving in-home care was also expensive. That same survey had homemaker services averaging $61,776 annually.

Costs like these can have a big impact on a retired couple’s finances and state of mind. I’ve seen what happens to couples with a comfortable $1,000,000 portfolio and no LTC plan. It doesn’t take long for the healthier of the two spouses to become concerned about their finances, lifestyle, and legacy. And rightly so.

Options for LTC planning

There are a variety of different ways to approach advance planning:

Self-insure

We can self-insure if we have enough money or want to take a gamble on not needing care.

Establish a trust

We can establish an irrevocable trust with the help of an elder law or estate planning attorney. The trust owns whatever assets we put into it, such as a house or a retirement portfolio. Giving up our ownership allows us to protect assets by qualifying for Title 19 or Medicaid earlier. Certain rules must be followed for the asset protection.

Give away assets

A third option is to give away our assets and property. When we own little to nothing, Medicaid or Title 19 picks up our LTC expenses.

Many of us don’t choose this option because it generally means giving up control of assets to our adult children. Can you imagine asking their permission to have money for vacation? And what if they spend irresponsibly, experience an acrimonious divorce, or are found liable in a lawsuit? Well, we’re out of luck. We could lose it all.

Buy traditional LTC insurance

By buying LTC insurance, we’re transferring the risk of having to pay for LTC to an insurance company. Buying this coverage can be a good option when we’re healthy, and middle-aged or younger. When we’re older, the premiums could be $10,000 or $12,000 annually IF we can even qualify for coverage due to a pre-existing condition.

The drawback to owning this type of insurance is forfeiting the premiums if we never file a claim. In other words, if we don’t need LTC, we won’t get our money back.

Buy a hybrid policy

This is basically LTC insurance wrapped up in a life insurance policy. If the LTC isn’t used, the policy pays a death benefit to the named beneficiaries. This addresses the “use it or lose it” issue that’s associated with traditional LTC insurance.

Plan now

Now’s the time to decide on an LTC plan. Resist the temptation to procrastinate until the “ideal” solution presents itself. Planning options will narrow considerably as time passes.

Remember: LTC planning is about protecting the people we love, not about protecting ourselves. Let’s do it for them.