If you and your spouse have purchased long-term care insurance to help defray some of your expenses if one or both of you eventually require skilled nursing care, you may be alarmed by the rate at which your premiums continue to rise—especially if you still have years (or decades) before you expect to use this insurance. In other cases, a long-term care insurer may go out of business years before you ever make a claim, rendering all your years of prompt payment for naught.
What are some alternatives that can help you and your spouse protect the assets you've spent decades amassing while still pursuing your long-term care options? Read on to learn more about some ways to protect your assets while paying for long term care.
Asset protection trust
Unless you're part of the very wealthy, the high cost of long-term care has made it difficult to afford to pay out of pocket. For those who are married and "common potters," paying for long-term care for one spouse may have the potential to bankrupt the other. As a result, putting your assets into an asset protection trust may be the best way to ensure that both you and your spouse can receive the care you need while still preserving some assets to pass down to your children or other heirs.
An asset protection trust allows an individual to qualify for Medicaid benefits, which (unlike Medicare benefits) can cover the cost of long-term care. However, in order to qualify for Medicaid, one must have next to no assets in his or her own name; the asset protection trust essentially removes these assets from individual ownership and titles them in the name of the trust. These trust transfers are subject to a five year "look back" period, and Medicaid has the ability to claw back any transfers that were made within this five year period if these assets could have been used for long-term care. However, an asset protection trust is often a better way to preserve funds for the benefit of the other spouse than transferring these funds to children or other family members, as this trust (in accordance with its name) protects these assets from seizure or attachment. Meanwhile, funds transferred to a non-trust individual could be subject to judgment if this person is sued, incurs medical debts, or has unpaid child support.
If your assets include a paid-off home, a reverse mortgage may provide the monthly income you need to fund a long-term care facility without dipping into your other assets. Unlike a traditional mortgage, in which you sign a promissory note and make regular monthly payments until the loan principal is paid, a reverse mortgage provides either a lump sum or monthly payments in exchange for the title to the home. One unique benefit of a reverse mortgage is the life estate granted to the spouse; until the term of the mortgage ends, the spouse has every right to remain in the home. This stability can be quite a comfort to someone already dealing with a spouse who requires long-term care.
Although the prospect of a visiting nurse or home health care aide can sound expensive, this is often much less pricey than inpatient long-term care, especially for individuals who just need a bit of help with certain activities rather than constant supervision or aid. If these nursing services are needed in connection with a medical event (like an injury or sudden illness), they may even be covered by Medicare for a short period of time. Often, spending a few years with a home health aide in lieu of inpatient care can help you save enough money to fund a higher level of care for the very end of you or your spouse's life.
To learn more about which option is ideal for your, contact services like Family Focus Financial Group.