Staying independent if you need long-term care

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 Q. Long term care insurance is so expensive, but I’m afraid of what will happen if I can’t take care of myself when I get older. I’m 59 now, and have one child but he’s taking care of his family and I don’t want to be a burden. I live on Social Security and a small pension, and I do own my home. How do I know if I should get a policy?

A. Long-term care insurance is costly, but so is the actual price for long-term care.

In New Jersey, the average cost of a nursing home stay is between $8,000 and $9,000 per month, said Alison Williams, a certified financial planner with Stonegate Wealth Management in Oakland. She said assisted living facilities average around $4,000 per month.

With costs that big, long-term care insurance can be a huge help.

That doesn’t make the decision to buy a slam dunk.

Williams said you need to consider your current health. Conditions such as Alzheimer’s, multiple sclerosis, Parkinson’s and strokes often make individuals ineligible to purchase a policy, she said.

Then there’s the cost.

“If you do not have much discretionary income, purchasing coverage may not be an option,” Williams said. “If this is the case, it’s important to remember that if you exhaust your resources, Medicaid will kick in and you will still receive care.”

More on Medicaid in a moment.

She said she’s had some clients who have more than enough to cover a lifetime of premiums, but they still choose not to purchase long-term care coverage.

“Since this is a policy you may never use, some would prefer to self-insure,” she said. “This entails saving enough money to cover expenses that you would otherwise use insurance to cover. ”

A long-term care insurance policy will cost you about more than $2,500 per year and up to $4,000, depending on the amount of daily benefit you buy and whether you have an inflation rider, said Reed Fraasa, a certified financial planner with Highland Financial in Riverdale.

“If you needed long-term care, most people want to stay at home as long as possible,” he said. “You need to look at the amount of surplus income you have now and compare that to the average cost of home care.”

If you do not have the funds to buy long-term care insurance, Fraasa said, you have options so you don’t have to burden your family should you ever need future care.

“You will use your Social Security and pension income to pay for care and if that is not enough, you will need to spend down almost all of your assets,” Fraasa said. “Then if it is determined you need to be in an acute care facility and you are expected to stay for more than six months, your family can apply for Medicaid payments.”

He said if that happens, your house will be considered an asset, recoverable under Medicaid.

“So if Medicaid pays the difference for you, they will have a lien on the home to recover any costs after your home is sold or you pass away,” Fraasa said. “But your family will not be liable for any of the costs.”

As you make your decision, Williams said, you should consider the longevity of your older family members, their quality of life in their later years, as well as health concerns with hereditary links.

“If long-term care coverage is something you’re considering, it never hurts to obtain a quote,” she said “It’s important to recognize that premiums will increase as you get older, so sooner rather than later.”

There are plenty of options which can increase or decrease your premiums and personalize the coverage to what you anticipate your cash needs to be, should you file a claim in the future, Williams said.

Also, be very careful of attorneys who claim to be Medicaid qualifying experts and who charge thousands of dollars to fill out forms and apply for deferral of assets for Medicaid qualification, Fraasa said. Your family can do this for you with a social worker for very little cost.

And there are no tricks for hiding your assets.

“There is really no way to avoid having your assets not be subject to Medicaid unless you give away everything you own more than five years of applying for Medicaid,” he said. “That means you will be living in poverty and depend on your family to use your assets to support you. However, unless those assets are held in trust, they are subject to claims from creditors of you children.”

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This story was first posted in June 2015. presents certain general financial planning principles and advice, but should never be viewed as a substitute for obtaining advice from a personal professional advisor who understands your unique individual circumstances.