A solid estate plan should not only provide for your assets after you pass, but also plan for your long-term care while you're alive. With the median cost of a long-term care facility approaching $8,000 per month, paying for long-term care has the ability to impact just about every nest egg.1 What's more, if you fail to make a plan in advance of needing long-term care, your options may be more limited. What else should you know about factoring long-term care into your estate plan?
How Likely Are You to Need Long-Term Care?
Currently, only about 19% of U.S. residents will spend more than three years in long-term care during their lives.2 But many long-term care stays may be shorter than that—whether a brief stay while rehabbing from an injury or a longer stay at the end of life. And even these shorter stays have the ability to drain your finances, especially if you have a spouse who doesn't need long-term care.
How Can Your Estate Plan Cover Long-Term Care?
There are a few steps to take, and issues to discuss with your financial professional and estate planning attorney, when making provisions for long-term care.
Make an Educated Guess At Your Care Needs
Although it's all but impossible to predict your health and mobility over the next several decades (or longer), there are some clues you can glean from family history:
- Are there major medical conditions that run in your family?
- Did your parents or other loved ones require long-term care?
- Do you have chronic conditions like diabetes or high blood pressure?
- If you are likely to require long-term care, at what age are you most likely to need it?
By answering these questions, you may have a better idea of what type and level of care to provide for in your estate plan.
Investigate Long-Term Care Insurance
Since Medicare or health insurance may not cover the cost of long-term care, another way to defray these expenses is long-term care insurance. These insurance policies will pay a portion of the cost of long-term care for a specified period of time. However, there are a few things to consider before purchasing one of these policies:
- Is the premium affordable?
- Is the company financially strong?
- How much may the premium increase over time?
Answering these questions can reduce the risk of purchasing a long-term care insurance policy that ultimately prices you out or doesn't provide the level of coverage you need.
Consider a Living Will or Trust
One major concern about the cost of long-term care is that it will consume assets intended for a spouse or other loved ones. If you or your spouse needs long-term care and the other doesn't, it may be tough to cover the cost of this care while also paying for the upkeep of a home. And while Medicaid will pay for long-term care, it does so only if the person needing care has already exhausted their own assets.
One way to preserve assets for your heirs is to transfer them into a trust well in advance of the time long-term care is needed. Because these assets belong to the trust, not the individual, they're not "countable" for Medicaid purposes. And after death, trust assets are transferred to heirs outside of probate. Always talk to a financial professional first to see whether a trust is the right option for you. Contact me for further insight.
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual, nor is intended to provide specific advice or recommendations for any Long Term Care Insurance. To determine which product(s) may be appropriate for you, consult your financial professional prior to purchasing.
This information is not intended to be a substitute for individualized legal advice. Please consult your legal advisor regarding your specific situation.
LPL Financial Representatives offer access to Trust Services through The Private Trust Company N.A., an affiliate of LPL Financial.
All information is believed to be from reliable sources; however LPL Financial makes no representation as to its completeness or accuracy.
This article was prepared by WriterAccess.
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1 Costs of Care, LongtermCare.gov.
2How Likely Are You to Need Long-Term Care?, ElderLawAnswers.