Ask These Questions to Fund Your Parent’s Long-Term Care

It’s a challenge that many baby boomers face. How do you continue to prepare for your own retirement while also supporting your elderly parents and their long-term care needs?

According to the U.S. Department of Health and Human Services, Americans age 65 and older have a 70 percent chance of needing long-term care at some point in their lives.¹ Long-term care is support and treatment required when a person is unable to perform basic activities of daily living, such as eating, dressing and using the restroom.

Long-term care is often provided in nursing and assisted living facilities. However, it can also be provided by in-home caretakers or even by family and friends.

No matter how it is provided, though, it is usually costly. If your parents don’t have long-term care insurance or substantial assets, it may be difficult for them to pay for the level of care that you and they want. You may feel obligated to pay for a portion of the care yourself, even though you have your own financial needs and obligations.

You have options available. Before you start draining your assets or stopping your own retirement savings, be sure to examine all available funding sources. Here are a few questions to ask:

Do your parents qualify for Medicaid?

Many retirees assume that Medicare will cover long-term care. That’s usually an incorrect assumption. Medicare will temporarily provide partial support in some instances, but it’s not a long-term funding solution.

Medicaid, however, will pay for long-term care provided in qualified nursing and assisted living facilities. The catch is that your parent needs to be nearly destitute to qualify. In most states, a person must have less than $2,000 in assets to qualify, not including their home, car and other exempted assets.²

Additionally, your parent can’t simply transfer their assets to you to get under the threshold. Medicaid has a five-year look-back period to count assets under the person’s ownership.²

While Medicaid may not be an ideal solution, it could be the most effective one. If your parent needs long-term care, it’s very possible they will drain their assets to fund the care. After they run out of personal assets, Medicaid could be the next best option.

Is your parent a veteran?

Veterans are also eligible for long-term care funding assistance through a special program called Aid & Attendance. This program provides pension benefits for veterans and also allows them to receive advances on their benefits to pay for long-term care.

The amount of benefit depends on a number of factors, including length of service, age and income. There are also income and asset limitations, but those limitations are generally more flexible and forgiving than Medicaid limits. Contact your local Veterans Affairs office for more information.

Do they have any life insurance with cash value?

Another option is to investigate your parent’s life insurance policies. They may have purchased permanent policies that have cash value, which is a growing reserve of cash within the policy. If they have held the policy for a long period of time, they may be able to withdraw some of that cash to pay for long-term care.

You could also consider surrendering the policy to take the entire cash value. While the death benefit would also go away, a full surrender may allow you to obtain more cash to pay for the long-term care. That could help you avoid a sizable medical bill after your parent passes away.

You obviously want the best for your parent, but you also want to attend to your goals and needs. These decisions are often complex. You may benefit from consulting with an experienced professional. We’re happy to sit down with you and your parent to find the most suitable solution.

¹http://longtermcare.gov/the-basics/how-much-care-will-you-need/

²http://longtermcare.gov/medicare-medicaid-more/medicaid/medicaid-eligibility/financial-requirements-assets/

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15815 – 2016/6/17