In Part 1, we met Joe and Claire, now age 65, and reviewed their need for age-appropriate health care and decision-making documents. We left off with the question, “What planning can Joe and Claire do now to prevent losing everything in the event their health fails?”
The costs of long-term care can be staggering. According to the Genworth 2018 Cost of Care Survey, Florida home health aides can cost, on average, $46,904 per year, based on care provided 44 hours per week and a median hourly rate of $20.50. Nursing home care in Florida, on average, is nearly double that – $97,820 per year for a semi-private room.
What are Joe and Claire’s chances of needing long-term care? According to the Department of Health and Human Services, someone turning 65 today has a 70% chance of needing some type of long-term care services in their remaining years. This means Joe and Claire should be considering how they will pay for that care in the event one or both of them are part of that 70%.
Joe and Claire’s choices include: 1) paying out of their own pocket for care, 2) purchasing long-term care insurance, 3) qualifying for government assistance programs, or 4) any combination of these choices.
By planning early – before there’s a health care crisis – Joe and Claire can take advantage of all three options, yet protect their home and any other cash or assets they wish. This type of asset protection is done using a specially designed irrevocable trust. Only a portion of Joe and Claire’s assets would be transferred to the irrevocable trust, with the remainder either remaining in Joe and Claire’s name, or held in a revocable trust with special provisions for the surviving spouse.
By transferring assets to an irrevocable trust, those assets would not be counted in the future (in most cases, after 5 years) if Joe or Claire needed to qualify for government assistance to help pay for their long-term care. If Joe or Claire is a wartime Veteran, there are additional cash assistance programs available through the Veterans Administration that should be explored as another means to help pay for their care.
To round out the asset protection package, Joe and Claire would also complete their other estate planning documents, such as financial Powers of Attorney, Health Care Advance Directives, and Living Wills. They would also explore purchasing an appropriate long-term care insurance policy in the event one of them needed care sooner than expected.
By planning early, Joe and Claire have the documents and tools in place to protect their home and other assets should one or both of them need care in the future – and there is a 70% chance they will. Joe and Claire have also lessened the emotional and financial stress placed on a family when a health care crisis does happen. They’ve taken care of the heavy lifting with regard to their assets, so their family can just focus on what really matters – making sure they have the best care possible.
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