Long-Term Care Planning :: Wealth Management

Long-Term Care Planning

The Need

Providing for your family's protection against an unforeseen financial loss is an important part of wealth management. Successful wealth management requires that part of the process of financial planning focuses a great deal on risk management. Long-term care costs can devastate a family's financial well being, if not appropriately planned for, and as life expectancies increase, a greater number of Americans will live long enough to need some sort of long-term care.

What is Long-Term Care?

Long term care is personal care in order to assist with the activities of daily living (ADL's). This refers to the daily tasks that people lose the ability to perform themselves when they have a disabling condition. The ADL's are bathing, dressing, continence, toileting, transferring or eating. Should you lose two of any of the listed ADL's, or develop a mental impairment such as Alzheimer's disease or dementia, who will take care of you? Where will you receive care?

The Cost of Care

The average cost of a nursing facility in North Carolina is $78,000/yr. The average cost of an assisted living facility in North Carolina is between $50,000 and $70,000/yr. Home health care aid can cost as much as $45 per hour to $75 per hour for a registered licensed nurse. And, these costs are expected to quadruple by 2030. Health care inflation is increasing at more than twice the rate of the federal government's CPI index.

Longevity risk, also known as the fact that people are living longer brings the added concern, "Did I adequately plan for this risk years ago when I planned for retirement?" The answer for most is no. By making long-term care insurance a part of your financial planning, you are taking an important step to meeting your retirement goals and objectives. How you plan today will determine how you live tomorrow. Purchasing long-term care insurance allows you to continue to have your independence as well as the peace of mind that you will not become a burden on your family. More than half of family caregivers report that their careers and personal lives are adversely affected by suddenly having to take care of ailing parent.

What about Medicare and Medicaid?

Many people mistakenly believe that Medicare will cover long-term care. Medicare is short-term medical care in a skilled nursing facility. You have to be hospitalized for three full days within 30 days of admission in order to qualify for Medicare. Then, Medicare only pays the full cost of a patient's care for the first 20 days of an approved stay, after which, you must make substantial co-payments, and, after 100 days, Medicare pays nothing. Your retirement nest egg then becomes the source to pay for your care. Why take this risk personally when you can shift the risk to a third party, that is, a qualified life insurance carrier? Purchasing a long-term care policy will provide you and your loved ones with the peace of mind that you can live your life the way you had planned, protecting your assets and your family along the way.

Medicaid has been an unintended provider of care in the past decades. The government is now placing many barriers on this practice as evidenced by the Deficit Reduction Act of 2005, which changed Medicaid's transfer of assets rule by extending the look back period from three years to five years. This Act also denies Medicaid coverage of nursing home care to any person with home equity that exceeds $500,000. So, except for the truly indigent, the expectation is that you should personally fund, in some manner such as purchasing long-term care insurance, your own long-term care funding needs.

The Next Step

Long-term care insurance is complicated. Policies are extremely difficult to fully understand, so even savvy consumers should seek advice from a qualified trained professional. Let Gordon Asset Management, LLC, assist you with ensuring you have the right policy today for tomorrow's unplanned event!

For more information, contact our Long-Term Care Professionals