Written by Seth Edgil, Financial Advisor, Keystone Financial Group
In the field of financial planning, where asset management often plays a central role, one important but often overlooked aspect is planning for unexpected challenges, especially the complexities of long-term care. . This discussion explores the multifaceted landscape of long-term care, including its associated costs, limitations of traditional coverage, and strategic planning for financial security during declining health.
Seth Edgil, Financial Advisor – Keystone Financial Group
Long-term care, traditionally perceived as a distant concern, requires attention because of its potential financial burden. According to the Genworth Cost of Care Study, the average cost of a private room in a long-term care facility in the Birmingham, Alabama metropolitan area is a staggering $85,410 per year. Further insight from the American Medical Association and the National Center for Assisted Living reveals that the average length of stay in a nursing home is 28 months, with a total cost of approximately $199,300.
These statistics highlight the significant financial impact of long-term care, making it imperative for individuals and families to include this aspect in their financial planning strategies. When considering this topic, it becomes clear that planning for such expenses is not only realistic, but essential to maintaining financial stability in the face of health challenges.
Despite growing awareness of the need for long-term care, traditional measures such as Medicare and most health insurance policies do not cover the costs associated with care. It is important to recognize that long-term care is not just for the elderly. In some situations, protective care may be required for individuals who are not yet eligible for Medicare.
Medicare.gov makes clear that Medicare and most health insurance plans, including Medigap coverage, do not pay for long-term care. Long-term care, often referred to as residential care, is usually paid entirely by the patient. Although the majority of long-term care patients are elderly, scenarios can arise where people who are not old enough to qualify for Medicare require care due to a chronic illness or disability.
Alabama residents facing the financial burden of long-term care may consider Medicaid options. In 2023, the program will approve facilities for up to $2,742 per month. However, eligibility has income limits of $2,829 per month for individuals and $5,658 per month for couples, with additional resource limits of $2,000 and $3,000 each. Qualified Insurance Trusts (QITs) provide a legal path to Medicaid for people facing income or asset disqualifications.
However, it is essential to approach Medicaid as a last resort. Relying solely on Medicaid for protective care requires complex government paperwork and can significantly reduce the expenditure of resources. This approach presents challenges for planners who aim to achieve their clients' goals without disinheriting beneficiaries or surviving spouses.
One strategy that individuals consider to qualify for Medicaid is to transfer their assets to a beneficiary before applying. However, dealing with government agencies comes with strict rules. Alabama has a 60-month look-back period, and any property sold for less than fair market value during this period will be subject to penalties retroactively five years from the date of the Medicaid application.
These penalties apply to a variety of transactions, including informal payments to caregivers and asset transfers initiated by spouses who are not the applicant. Because you can't predict when custodial care will be needed, transferring assets can be a risky undertaking, and the relevant regulations must be carefully considered and understood.
Given the limitations and challenges of relying solely on Medicaid, individuals are encouraged to consider alternative financing options for long-term care before long-term care becomes necessary. Proper planning includes estimating potential costs, taking into account the individual's preferences for care, such as home care or a specific facility.
Financial planners like those at Keystone Financial Group typically look for alternatives to suit an individual's needs. By planning well in advance, clients can clearly communicate their wishes, such as home care, private rooms, or specific facilities. Once the expected cost of care is estimated, the planner evaluates various options for financing long-term care needs.
1. Single nursing care insurance: This insurance specifically covers long-term nursing care costs and provides financial support for a variety of nursing care situations.
2. Hybrid life insurance policy: These policies include long-term care payment provisions, giving you the dual benefit of life insurance coverage and potential custodial care funding.
3. Pension-based solutions: Certain annuities are designed to provide payments that can cover long-term care costs and offer a structured financial approach.
Four. bond investment: Investments with predictable returns can be structured to provide regular payments that cover long-term care costs.
Five. self insurance: Setting aside funds in a Stable Value Account is a form of self-insurance that allows individuals to cover potential long-term care costs.
Of course, these are general solutions that can be used to address long-term care planning challenges and should not be considered an exhaustive list. Each of these options addresses an individual's unique situation and emphasizes that there is no one-size-fits-all solution for long-term care planning.
While the statistics paint a vivid picture of the potential need for long-term care, it is essential to address the skepticism of those who believe they do not need such care. The 2020 Census revealed a major demographic shift, with 10,000 baby boomers turning 65 every day until 2030. According to the U.S. Department of Health and Human Services, 7 out of 10 people will need long-term care during their lifetime.
Statistically speaking, the chance of needing protective care is higher than the chance of not needing protective care. This highlights the importance of planning ahead to help individuals and families prepare for the financial impact of long-term care, regardless of their current health status.
Conclusion and additional resources
In conclusion, navigating the complexities of long-term care requires careful consideration, strategic planning, and a proactive approach. While Medicaid may provide a safety net, considering alternative financing options tailored to your individual needs will ensure a comprehensive financial strategy.Readers looking for
For more information and guidance on protective care planning and financial planning, consider Keystone Financial Group as a valuable resource.
It is important to note that legal advice should be sought from a legal professional. This is especially important when scrutinizing a Medicaid application because Medicaid advice should be sought from a Medicaid professional. As individuals and families embark on the long-term care planning journey, the key is to understand the options, consider personal preferences, and develop a financial strategy that guarantees peace of mind during difficult times.
Seth J. Edgil and David Guttery offer products and services under the following business names: Keystone Financial Group – Insurance and Financial Services | Keystone Financial Group Ameritas Investment Company, LLC (AIC), Member FINRA/SIPC – Securities and Investments | Ameritas Advisory Services, LLC (AAS) – Investment Advisory Services. AIC and AAS are not affiliated with Keystone Financial Group. Information is collected from sources believed to be reliable. However, we cannot guarantee its accuracy. The data provided is for informational purposes only and should not be construed as a recommendation to buy or sell any investment product.
