When considering estate planning, people usually have many questions. These questions involve probate, wills, revocable trust, irrevocable trusts, land trusts, farm trusts, mineral trusts, joint tenancy, transfer-on-death designations, estate taxes, limited liability companies, corporations, and other related topics.
Almost all these questions involve administering an individual’s assets when the person dies. But, what about while the person is living?
The largest threat to individuals, their families and their assets is long-term care. However, the issue of long-term care is rarely discussed in estate planning. Long-term care is not necessarily care in a nursing facility. Long-term care is much broader than care in a nursing facility. Long-term care can involve care at home, in an assisted living facility or in a nursing facility.
The Centers for Medicare and Medicaid Services, the federal agency managing Medicare and Medicaid, along with several research organizations, reports one out of every two individuals will need some type of long-term care in their lifetime. Furthermore, they report the total cost of long-term care in the Midwest can easily cost between $10,000 to $15,000 per month. Long-term care at home is even more expensive depending upon the requisite care. These amounts do not consider additional medications or out-of-pocket medical or care expenses, which can easily exceed $1,000 per month.
CMS and the research organizations also report the average length of care for a non-dementia or non-Alzheimer’s patient is slightly over three years. However, the average length of care for a dementia or Alzheimer’s patient is just more than 11 years. Based upon these findings, long-term can easily cost an individual and his or her family $300,000 to $400,000 in the absence of dementia or Alzheimer’s disease, and well over $1 million with dementia or Alzheimer’s disease. With a 50% probability of individuals incurring such costs, long-term care is a real and significant threat to individuals, their families and their assets. Yet, most individuals and their attorneys may overlook this issue.
Basically, there are five ways to pay for long-term care. First, individuals can self-fund their care meaning they can pay for care out of their assets. There is nothing wrong with people spending their assets to pay for their care. This is the easiest option to implement since they do not spend any time or money on addressing the issue. However, it can be the most costly for individuals and their families. Choosing not to do anything is choosing to self-pay for care.
The second option is using long-term care insurance. CMS reports less than 5% of the population has any type of long-term care insurance. Of that 5%, most are underinsured. It can be very difficult to medically qualify for long-term care insurance. For those persons who can medically qualify for long-term care insurance, it many times will be cost prohibitive to purchase.
Medicaidis the third option in paying long-term care expenses. All working individuals have paid for their Medicaid benefits. Contrary to popular belief, individuals can qualify for Medicaid benefits having a significant net worth. People having a net worth as little as $50,000 to as much as $5 million regularly receive Medicaid benefits. The net worth of most individuals receiving Medicaid is between $100,000 to $2 million.
Medicareis not an option for paying long-term care expenses. It has a very restrictive and limited skilled nursing benefit, which is not designed to pay long-term care costs. It only pays a limited number of days of skilled nursing necessary for rehabilitation. If no progress with rehabilitation is being made, or once the limited number of days are exhausted, Medicare does not pay for any skilled nursing care.
Fourth, there is a limited benefit from the Department of Veteran Affairs to help pay for long-term care for veterans and their spouses. The fifth and final option in paying for long- term care is a combination of the preceding four options.
For more information about Medicaid, Medicare, VA benefits, Social Security disability, estate planning and asset planning, visit the website of Senior Resource & Benefits, LLC at www.SRBLLC.com or call toll-free 1-800-407-9302.
Craig Riffel is an attorney and CPA with the law firm of Riffel, Riffel & Benham, PLLC with offices in Enid, Fairview, Kingfisher and Woodward, Oklahoma.
