Read Time: 4 Min

Long-Term Care: What You Need to Know

February 21, 2019

While it might be hard to imagine now, chances are you’ll need some help taking care of yourself later in life. Whether for injury/surgery rehabilitation, a chronic medical condition or advanced-age limitations, the time may come for aid.

Long-Term Care (often abbreviated as LTC) refers to acquiring custodial assistance with activities of daily living such as bathing, dressing, eating, etc. What most people don’t realize is how common the need for LTC is. More than half of all Americans will require LTC at some point in their lives, and planning for that time of need is crucial. The problem is that LTC is expensive.

In 2018, the cost of LTC in New York State was staggering. The median cost of long-term home care was $57,200, assisted living was $50,220, and long-term nursing home care was $146,274. Those numbers can only be expected to rise in the future. Further complicating matters, LTC is typically not covered by Medicare or private health insurance.

So, understanding the potential burden of being hit with unexpected LTC costs, what can you do to prepare? The first thing to note is that LTC is a vital expense and as such should be addressed with other important financial planning areas. Secondly, it is never too soon to start planning. The earlier your LTC plan is in place, the more at ease you will be knowing that should the need for it arise, you and your loved ones will be financially secure.

In terms of creating a plan, there are four important funding avenues to consider: LTC insurance, hybrid insurance products, Medicaid, and self-funding.

LTC insurance is private insurance that can cover the cost of LTC expenses. With the proper coverage, this insurance can be an excellent financial move for those considering an LTC plan. Costing an average of $3,490 annually, the premiums can be pricey, but compared to the high cost of out-of-pocket LTC, a well-planned insurance policy may be worth considering. However, keep in mind that should your coverage end up being insufficient for your needs, you may still be hit with out-of-pocket expenses. That’s why careful planning is critical in order to make an LTC insurance policy worthwhile.

Some insurance products, like life insurance, can be bundled with an LTC insurance policy, allowing for a death benefit if the LTC insurance isn’t used.  While this may require a higher premium initially, it can also lessen the feeling that you are wasting your LTC insurance premiums in the event that you never use that portion of your policy.

If LTC insurance is not in your budget, or if you have been denied coverage, Medicaid may be able to help. However, qualifying for Medicaid is difficult unless you are walking on the poverty line. This could take some additional planning, and it is best used as a backup plan to consider if you run out of assets to cover your LTC expenses.

Finally, self-funding is always an option if you are either already financially prepared or capable of saving money over time. If you choose this option and never end up needing LTC, you’ve saved and invested your money to your benefit and to the benefit of your family. But if you do end up needing LTC, you’ll be prepared. The downside to this option is that it is impossible to predict the future cost of LTC and how long you will require LTC. Those who combine LTC insurance or hybrid insurance options with a savings and investment plan will be the best prepared for managing those costs.

There are several approaches to LTC planning, but everyone’s life situation is unique. We suggest discussing LTC funding with an Estate Planning professional in order to tailor the approach best suited to your needs. To schedule a meeting with our Estate Planning team, call us today at 716-636-7600.