Thanks to advances in medical science and technology, people in the U.S. are living longer than ever — but those extra years of life sometimes come with serious financial and estate planning challenges.
Experts estimate that at least 5 million people in the United States today suffer from age-related dementia, and the U.S. Department of Health and Human Services (HHS) reports that 70 percent of Americans who reach the age of 65 will need some form of long-term care, like assisted living or nursing home care, during their lives. The average duration of this care, according to HHS, is three years.
The cost of a stay in long-term care ranges from $4,000 per month for a shared room in an assisted living facility with no skilled care attached to $10,000 per month or more for skilled care in a reputable facility. For the 70 percent of Americans who need long-term care, then, the average three years of care could easily add up to $360,000 or more. These costs have risen almost 19 percent since 2011, according to a report last year from the Associated Press.
So why do long-term care costs keep rising, and what can families do about it? In this article, we’ll talk about the nature of the problem and some of the legal strategies that older Americans and their families can use to protect themselves against massive medical costs with the help of an experienced estate planning attorney.
Why Does Long-Term Care Cost So Much?
In the earlier part of the 20th century, women often stayed home and played an important role as caretakers, and most women acquired some practical nursing skills by raising and helping to deliver children as well as caring for sick family members. In addition, extended families often lived together or settled nearby. All of these factors made it more practical in the past to manage at-home care for older family members who experienced dementia or other disabling issues, which kept the costs of this care down.
Today, though, it’s becoming harder and harder for us to care for aging family members ourselves. Many children of Generation X have both aging parents and young children, and ease of travel and long-distance communication means that many family groups have scattered, reducing the number of people who are able and willing to share the responsibility of caring for older relatives. Meanwhile, far more women enter the workforce today compared to previous generations, and many of them work 40 hours a week or more.
With so many Americans unable to adequately care for aging parents and relatives themselves and people living far longer today, more and more older people are seeking professional long-term care in assisted living facilities and nursing homes or from home health aides — which means that demand for these services keeps rising, driving costs up year after year.
Relying on Medicaid: A Costly Solution
Unfortunately, Medicare won’t cover the cost of long-term care, which means that older people who don’t want to pay out of pocket need to either have private long-term care insurance or qualify for Medicaid. Not everyone qualifies for private insurance; some people, for example, have pre-existing conditions which prevent them from qualifying (the Affordable Care Act’s 2009 ban on denying health coverage to people with pre-existing conditions doesn’t apply to long-term care insurance). Others have reached an age where premiums are so high that purchasing long-term care insurance products has become impossibly expensive.
This creates a situation where many people who need long-term care only have one option: Watch an entire lifetime of savings be eaten up by medical costs until their remaining assets are so low that they qualify for Medicaid. This usually comes as a shock for people with more than $100,000 in assets, who have generally not had to rely on Medicaid in the past.
The reality, though, is that with quality long-term costing $120,000 per year or more, older people with dementia or disabling medical conditions who have less than $1 million in assets often don’t have enough to cover the enormous financial burden of medical care, and they’re at serious risk of losing their entire fortunes to medical costs.
Addressing the Problem with Trusts and Estate Planning
By now, you may have thought of one simple solution to this problem: Couldn’t you simply transfer all your money to a relative so it looks like you have much less money available than you really do?
Unfortunately, the answer is no. Lawmakers and Medicaid administrators have already thought of this possibility, so the program looks at all transfers of money up to five years before long-term care becomes necessary in order to make sure that individuals aren’t just giving away assets so they can qualify for Medicaid coverage.
There are trusts that an attorney can prepare to cover your supplemental needs and transfer your wealth to your children, but you need to have these in place well before long-term care becomes a reality because of Medicaid’s five-year rule. With proper planning, these options can help families with $100,000 to $1 million in wealth preserve their assets to support their future needs.
Working with an experienced estate lawyer to plan for the cost of long-term care is far and away the best option, but our team at Devolder Law Firm can also help families who face immediate long-term care needs by doing crisis planning that may save assets from unnecessary expenditure on long-term care and preserve those assets for the patient’s supplemental needs and estate plans.
These solutions can help save tens of thousands of dollars for your family, yet they generally cost less than what a patient would pay for a couple of months of long-term care, making them a solid investment in asset protection.
The Devolder Law Firm: Helping You Protect What Matters Most
Talking about financial issues related to aging and illness can be difficult, but creating an effective estate plan with the help of an experienced attorney can put your mind at ease and give you confidence that you or your loved ones won’t have to deal with the added stress of wondering how to deal with medical costs at a challenging time. When you work with the dedicated team at the Devolder Law Firm, we’ll guide you and collaborate with you every step of the way so you know that your loved ones will be taken care of now and for many years to come.
Ready to get started today? Call us at 813-724-3880 or fill out our convenient online contact form and we’ll get in touch with you right away to schedule an initial consultation.
Associated Press. (2016, May 10). Long-term care costs continue to rise. Modern Healthcare. Retrieved from http://www.modernhealthcare.com/article/20160510/NEWS/160519999
FAQ. (n.d.). Institute for Dementia Research and Prevention at Pennington Biomedical Research Center. Retrieved from http://idrp.pbrc.edu/faq.htm
Tompson, T., Benz, J., Agiesta, J., Junius, D., Nguyen, K., & Lowell, K. (2013, April). Long-term care: Perceptions, experiences, and attitudes among Americans 40 or older. The Associated Press-NORC Center for Public Affairs. Retrieved from http://www.apnorc.org/PDFs/Long%20Term%20Care/AP_NORC_Long%20Term%20Care%20Perception_FINAL%20REPORT.pdf
The content provided here is for informational purposes only and should not be construed as legal advice on any subject.