How Are You Thinking About Long-Term Care Costs in Estate Planning

Long Term Care Payment Options Continue to be Limited

The Wall Street Journal continues to report on the struggles of the long term care insurance market.  Why is this important?  Long term care insurance was viewed as the middle class solution to affording long term care.  Without long term care insurance, options are limited for many individuals approaching retirement.  Even with limited options, it is important for families to be proactive in their financial and estate planning to limit the risk of long term care costs.  Consider:

·         More than half of individuals over 65 will need long term care

·         For those requiring care, the costs could exceed $200,000

·         25% of households have no retirement savings; the median retirement savings is $75,000

What steps should individuals take?

Meet with your Financial Advisor

Do an assessment of your financial situation.  List your assets and liabilities.  Identify your sources of income.  Map out expenses you anticipate to cover your basic needs.  How much more does it cost to live a comfortable lifestyle? Run a scenario where you are forced to sell certain amounts of assets to cover the cost of nursing home care.  How does your cash flow situation change?  Are you still be able to afford basic necessities?  Does your lifestyle change significantly?  If you don’t feel your financial situation can weather the cost of long term care, your estate planning attorney may be able to help.

Discuss Estate Planning Options with your Attorney

An estate plan can be drafted to accomplish your retirement goals and protect against the risk of long term care costs.  For example, assets can be protected from creditors to ensure they will be available to pay for long term care costs.  If your assets are not sufficient to cover long term care costs, consider Medicaid as an option.  A good estate plan can ensure that you will qualify for Medicaid long term care benefits without unnecessarily forcing you to spend down all your assets.  Additionally, an estate plan can protect assets from state recovery laws.  This ensures more assets are left to your spouse and children.

It’s a good idea to plan for long term care well in advance of the need arising.  For example, Medicaid rules contain a five year look-back period that can impact estate planning strategies.  Planning in advance will also give you the peace of mind to be able to live the life you always envisioned.

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