Elder law attorneys assist clients who are concerned about legal and financial matters they may face as senior citizens, and long-term care is at the top of the list. It is a major source of concern because Medicare does not pay for the custodial care that nursing homes and in-home caregivers provide.
We looked at the state of long-term care costs in the Naperville area in a recent post, and the results of a 2020 survey were attention-getting to say the least. According to Genworth Financial, the median annual charge for a private room in a nursing home last year was $102,383.
Long-Term Care Insurance
It is possible to purchase insurance that would help to pay for a stay in a nursing home. During the 1990s, you could purchase this coverage from over a hundred different companies. Due to low interest rates and uncertain future costs, there are only about a dozen insurers left in the marketplace.
The rate that you pay will fluctuate depending on your age, gender, health, location, and the level of coverage that you choose. To provide an example, the average annual premium for a 65-year-old woman in our area with $200 a day coverage for two years is right around $3250.
Long-term care insurance premiums can go up after you obtain the coverage, and this is a major negative. The premiums can increase significantly over time.
Another significant drawback is the so-called “elimination period.” After you make a claim, you have to wait either 30, 60, or 90 days before the coverage will begin. The average length of stay in a nursing home is one-two years. This means some people will pass away before the elimination period has expired. The elimination period will also eat away at the family’s savings.
Calculating the Potential Benefit
Alzheimer’s disease and other forms of dementia are one of the reasons why people need nursing home care. It strikes 10 percent of all senior citizens, but the figure rises to 32 percent for people who are 85 years of age and older.
A study that was conducted in 2012 found that the average age at the time of admittance into a nursing home was 79. Approximately half of nursing home residents are 85 years of age and older.
According to the United States Department of Health and Human Services, 35 percent of elders will ultimately reside in nursing homes.
Medicaid May Be An Alternative
There is another solution in the form of Medicaid coverage. This jointly administered federal/state government health insurance program will pay for long-term care if you become eligibile. Since it is a need-based program, you cannot qualify if you have significant assets in your name.
However, you can create an irrevocable trust and transfer some of your property to that trust to develop a financial profile that will lead to Medicaid eligibility in the future. Advance planning is key, because the funding must take place at least five years before you apply for Medicaid coverage.
If you violate this rule, your eligibility will be delayed for a period of time that is tied to when you transferred your property to the irrevocable trust.
To explain through the use of a simple example, let’s say the average annual cost for a nursing home is $90,000. You created an irrevocable trust and transferred $300,000, and six years later, you find out that you need nursing home care. As long as you don’t have any other assets, you will qualify for Medicaid coverage for the nursing home cost.
Schedule a Consultation Today!
We are here to help if you would like to work with an attorney to develop a nursing home asset protection strategy. You can send us a message to request a consultation appointment, and we can be reached by phone at 630-568-8611.