As a financial planner, one of my main focuses is on risk management. Long term care is a major risk that could cost anywhere from $100,000 to over $1M per person over the life of a long term care event. Chances are pretty high that you will need some type of long term care during your lifetime. Long term care costs can range from $3,000-$10,000 a month depending on the type of care you need. Long term care is generally not covered by Medicare as Medicare does not pay for any custodial care.
People always ask me if long term care insurance is a good idea. The answer is, “it depends.” Are you able to pay $3,000 to $10,000 (in today’s dollars) every month indefinitely without significant impact to your family or your finances? If you have assets over $5,000,000 you probably can self insure, although this may still not be the best thing to do. One of the ways to deal with this risk is to buy Long term care insurance. Long term care insurance provides you with a pot of tax free money that can be used to pay for care whether you receive that at home or in a facility. Cost of the policy will vary with your age, health, and the amount of coverage you are buying. A typical starting point would be to get a policy that pays $200 a day for 3 years. Policies can be structured in many ways to reduce the cost. Premiums may also be partially or totally tax deductable.
People always ask me what if I never use the insurance. My answer is do you want to make a big mistake or a little mistake. The big mistake is you don’t get the insurance and you need it and don’t have sufficient income to pay LTC expenses. This can leave you, your spouse, or your family in a precarious position. The little mistake is you use a small amount of your assets to pay for long term care insurance and don’t need it.
If you do not qualify for long term care insurance there are other programs such as Medi-Cal and Veterans “Improved Pension” that you may be able to qualify for. These programs will allow you to get cash to pay for long term care as long as you meet certain criteria such as income and asset tests. Keep in mind that these tests usually require one to considerably spend down assets. And Medi-Cal will not pay for in home care so your freedom to get care where you want (at home or in an assisted living facility) will be restricted to a Medi-Cal nursing facility. The VA “Improved Pension” can pay for home care and the benefit can be up to $2,000 a month. If you would like to know more about long term care insurance or the above programs, you can contact our office. We periodically do educational events that go into more details about these matters.
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