My grandmother turns 91 this month. Last year, the day after her 90th birthday, she was admitted to the hospital and, soon thereafter, admitted to a nursing home. November 19th will mark a year since she’s been able to live on her own, or even walk. This is the second time in four years that I’ve had a grandparent in this position. Neither was from a generation that knew they might need to plan for this eventuality.
As a financial advisor, one of my most difficult tasks is helping people who still feel, and are, perfectly healthy; understand that one day—sooner or later—their health will change. I’ve seen clients in their 50s diagnosed with Alzheimer’s and witnessed the combination of fear and anger that comes with not being able to navigate the streets they have known their entire lives. Other clients have died suddenly and peacefully in their sleep at an old age, after having led a complete and fulfilling life.
Long-term care (LTC) planning is not about planning for the best case scenario. If it was, we’d all just plan to never need it. LTC planning is about ensuring that, if we do need care, we’re able to be provided for in a dignified way while protecting our assets so that our families can be unburdened financially, and can care for us emotionally.
So, what is LTC?
When people need help completing some or all of the activities of daily living, which include bathing; dressing; continence; eating; moving from place to place, or those with Alzheimer’s or dementia, they require some form of LTC. LTC can range from part-time assistance at home, to full-time custodial care and everything in between. Understandably, most people prefer to receive care in the familiar surroundings of their home for as long as possible and your LTC plan should work to facilitate that. As conditions change, more help may be needed, but a good LTC plan provides for as much independence as possible in order to help maintain a sense of dignity and morale, which is beneficial for overall health and wellbeing.
Many people incorrectly think that Medicare will provide for their LTC needs when, in fact, Medicare will only provide for care up to 100 days; and only if the patient shows progress. Once progress stops, so do Medicare payments and that’s when financial stress begins to pile on top of the emotional stress for your family.
LTC can cost, on average, around $9,000 per month. A lifetime of savings, and the standard of living it provides for the healthy spouse, can disappear in the blink of an eye, before finally being depleted to the point that Medicaid will step in. Medicaid is a social welfare program and the only way to qualify for Medicaid LTC benefits is to become impoverished. What will your spouse’s standard of living look like, after you’ve depleted your family’s assets to finally qualify for Medicaid?
The average patient requires LTC for about three years, with women needing care for more time than men. As cognitive impairments like Alzheimer’s and dementia become more prevalent, we’re seeing the average length of care increase dramatically. In fact, according to the Alzheimer’s Association, one in three seniors will die with Alzheimer’s or dementia. A married couple today (having four parents between them) is almost certain to have to provide care for an elderly parent who develops the illness. This is the staggering new reality that didn’t exist a generation ago.
Far and away the easiest way to plan for LTC expenses is to purchase a private insurance policy in your 50s or 60s, which will provide benefits in your home, in assisted-living, and in a nursing home, depending on what level of care you need. A person in their 60s today can expect that LTC costs will have more than doubled to over $200,000 per year by the time they are likely to need care. Proactively planning for a premium expense is far simpler and more effective than reactively trying to shelter assets once LTC is needed.
New York State has been innovative (when is the last time you heard someone say that?) with the development of the NY Partnership for Long-Term Care. By purchasing a policy which qualifies under the Partnership, you can ensure that, should you need care after exhausting the benefits of your policy, you will be able to qualify for Medicaid benefits without needing to spend-down your assets–that is, without impoverishing your spouse. This is a brass ring extended by the state to encourage you to purchase a private LTC policy, thus reducing the burden on the state.
If health issues preclude you from obtaining LTC coverage, then other avenues should be explored, including gifting and trust work. Since laws around gifts and trusts are constantly changing, we find this strategy to be much less bulletproof than private insurance, which is why we consider it a backup strategy. That being said, for those for whom LTC insurance is not an option, any planning is far better than no planning at all.
More and more, we are finding ourselves squeezed as part of the “sandwich generation,” with the threat of having to provide care for elderly parents, while raising our children and planning our own retirement. It is important to encourage your parents to plan for their LTC so that you can spend your time caring about them, without being burdened by having to care for them. Likewise, don’t overlook your own LTC when planning for retirement to be sure you receive dignified care, without burdening your children.
Consult with your spouse, your children and your financial advisor to determine the best course of action to meet your family’s needs. You might also consider researching the NYS Partnership at nyspltc.org to learn about the range of options under the partnership.
Stephen Kyne is a partner at Sterling Manor Financial in Saratoga Springs.
