We are going to look at long-term care insurance in this post. If you are not concerned because you will have Medicare, you should take a moment to absorb some background information.
Custodial Care
Medicare provides a strong health insurance underpinning, but it does not cover everything in full. It will pay for 80 percent of treatments that are provided by physicians and other health care professionals, and there are deductibles, premiums, and other types of coinsurance.
In addition to these gaps that are manageable for most people, there is a huge void in the coverage. Medicare does not pay for custodial care. This is the type of care that you would receive in a nursing home, and in-home caregivers provide professional custodial care.
Many people are surprised to hear that the majority of elders will incur long-term care expenses of some kind. About one-third of seniors will reside in nursing homes, and over half of people that receive paid care need the assistance for more than a year.
Long-Term Care Costs
The average cost for a year in a nursing home in Oklahoma is over $65,000 according to the state. Genworth Financial conducts surveys that examine long-term care costs as well, and they found that the median annual cost for in-home care in Oklahoma City last year was $60,060.
These numbers can add up in a hurry, and they can be doubled for married couples. Plus, in-home care costs went up by almost 13 percent last year, and nursing home expenses are on the rise as well.
Long-Term Care Insurance
After you process this information, you can understand why long-term care insurance is worth some consideration on the surface. This coverage will provide a benefit if you need long-term care under circumstances that are covered under the terms of the policy. The rates are calculated based on your age, your gender, and your health.
To give you an idea, the average annual premium for a woman that is 55 years of age is $3700. The premiums go up every year, so the figure will be much higher when a person reaches the age of 75. You have to put out all this money to protect yourself, but you may never incur long-term care expenses.
The so-called “elimination period” is another element that makes long-term care insurance less appealing. If you do require living assistance and you file a valid claim, you have to pay out-of-pocket for a particular interim. It is either 30, 60, or 90 days depending on the policy details.
All things considered, long-term care insurance may provide some peace of mind, but at what cost?
Medicaid Planning
Fortunately, long-term care insurance is not the only option if you want to prepare for potential living assistance costs. Medicaid will cover these expenses if you can gain eligibility, but there is a $2000 limit on countable assets.
There is also a five-year look back period. You are ineligible for five years after you transfer assets out of your name at more than fair market value. With this in mind, advanced planning is key if you want to qualify for Medicaid at the right time.
A lot of people would not be able to give their savings to their loved ones a number of years before they may need long-term care. This is understandable, and an irrevocable income-only trust can provide a solution.
You can convey income-producing assets into this type of trust. While you are still living independently, you can continue to accept distributions of the trust’s earnings. After five years have passed, you can apply for Medicaid, and the principal would not count against you.
We Are Here to Help!
When you take the right steps at the right times, you can be ready to address long-term care costs effectively. If you would like to get started, you can send us a message or call us at 405-843-6100 to set up a consultation at our Oklahoma City elder care planning office.
Since founding Parman & Easterday in 1985, Larry has led over 1,000 free, community-service education programs and helped more than 10,000 Oklahoma families go from putting off their estate plan to getting it done. His goal for every client is the same: to become the person their family calls "the one who took care of everything."
Larry is the author of three books: The Straight Shooter's Guide to Estate Planning; Estate Planning Basics; and Guiding Those Left Behind in Oklahoma. He served as Oklahoma's Secretary of State and Secretary of Commerce, and his firm is the only member of the American Academy of Estate Planning Attorneys in the state.
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