4 Financial resources to explore when planning for Assisted Living
When deciding what senior living community is right for you there are certain areas you pay close attention to: care, food, programming and most likely cost. The idea of finding a community that you feel comfortable in and is affordable may seem impossible but there are many ways and options to investigate when considering how to best pay for Senior Living. We are going to touch upon four resources you may be eligible for. Remember that most people pay for senior living with more than one source. Most options come with benefits and drawbacks so it’s important to look over all your options before deciding what is right for you.
Long Term Care Insurance
- To start the process of long term care insurance, you will need to fill out an application, answering health questions. The insurer may ask to see medical records and interview you by phone or in person.
- You will then choose the amount of coverage you want-policies usually cap at the amount paid out per day and the amount paid out during your lifetime.
- Once you have been approved for coverage and the policy has been issued you will begin paying premiums.
- Under most long-term care policies, you are eligible for benefits when you can’t do at least 2 of the 6 Activities of Daily Living. These Activities are:
bathing, dressing, caring for incontinence, eating, toileting (getting on or off the toilet), and transferring (getting in or out of bed or chair).
- When you decide you need care and wish to make a claim, you will need to contact your insurance company. They will review medical documents from your doctor and may send a nurse to do an evaluation. Before approving a claim, the insurer must approve your “plan of care.”
- Most policies will require you to pay for long term care services out of pocket for a certain amount of time (30,60 or 90 days) before they will start reimbursing you. This is called the elimination period.
- Once you start receiving care, most policies will pay up to a daily limit for care until you reach the lifetime maximum.
- Rates associated with long term care insurance are dependent on a variety of factors including: age and health, gender, marital status, amount of coverage, and insurance company. Note that prices vary among companies for similar coverage, so it is best to work with a planner who can gather the best rates for the level of coverage that you would like. These prices are not guaranteed and may go up after you purchase the policy.
When looking into how to pay for senior care one of your most valuable assets could be your home. Below are four ways to use your home to generate income or finances to pay for senior living.
a. Sell your home- if you are able to sell your home for a good price, money from the sale can be put toward assisted living for years ahead. Since you pay for assisted living on a monthly basis most of what you make from selling the house can be turned into an investment. Be aware that to qualify for certain benefits you cannot have assets totaling over a designated amount. We will talk more about this when we go over benefits available for Veterans.
b. Rent your home- this option comes with pros and cons
- Pro- you will have a steady source of income coming in from the renters. You are also able to keep the house- for some keeping the house within the family might be important.
- Con’s- You and your family are now landlords- this may create some stress and tension when issues arise. Renters may also put wear and tear on the house. Depending on how you rent the house, furnished or not, you will have to clear out most of your belongings that are not going with you to the community and keep them in storage.
c. Home Equity Loan- with this option you are able to start cashing in on your equity and maintain access to your home at the same time. Just be aware that if you do not keep up with payments you could lose your house.
d. Reverse Mortgage: if you are over 62 years old and either want to stay in your home yourself, or have a spouse that plans to, then a reverse mortgage may be your best option.
- Reverse mortgages will pay you a monthly sum on the condition that at some point the full amount will be paid back-most likely when you sell the home.
- The catch is that once no one is living in the house you can no longer keep a reverse mortgage. This option works best if only one spouse needs to move into a community and the other would prefer to live at home.
- The good news is that consumer protections ensure you’ll never owe more than the home is worth.
Life Settlement: A life settlement or senior settlement is when the policyholder (you or your loved one) sells a life insurance policy to a third party who then becomes the beneficiary of the policy. The seller receives more money than if they were to terminate the policy before it becomes payable, but less then what they would get if they waited until the policy became payable. The third-party purchaser will pay more than the cash surrender value of the policy but less than face value. The benefit to the seller is in addition to receiving the lump sum of money they no longer have to pay the monthly insurance premium.
General qualifications to be eligible for a Life Settlement:
- The policyholder generally must be at least 65 years old
- The life expectancy of the policy holder is usually less than 20 years
- Not all types of insurances are eligible for life settlements but the following types usually are-universal life, whole life, variable universal life, term, convertible term life, and second-to-die.
- Most life settlement companies require the policy have been in place for 2 or more years
- Policies must have a minimum face value of $100,000
- Payments are paid in one lump sum.
Veterans Benefit (Aid and Attendance): The Aid and Attendance benefit falls under a Non-service connected pension, this means that to qualify a veteran does not have to have suffered a disability due to his or her service in the military and it is also available to Veterans dependents. Qualifying Veterans are eligible to receive up to $2,295 per month.
Aid and Attendance benefits may be added to your monthly pension if you meet the following conditions:
- You require the aid of another person to perform personal functions required in everyday living (bathing, feeding, dressing).
- You are bedridden in that your disability or disabilities requires that you remain in bed aside from prescribed course of convalescence treatment.
- You are a patient in a nursing home due to mental or physical incapacity
- Your eyesight is limited to a corrected 5/2000 visual acuity or less in both eyes, or concentric contraction of the visual field to 5 degrees or less.
To receive pension a veteran must have served on active duty at least 90 days during a period of war and there must have been an honorable discharge.
Periods of war include:
- WWII- December 7,1941-December 31, 1946
- Korean Conflict: June 27, 1950- January 31, 1955
- Vietnam Era: August 5, 1964- May 7, 1975- for veterans who served “in-country” before August 5, 1964
February 28, 1961-May 7, 1975
- Gulf War: August 2, 1990- through a date to be set by law or presidential proclamation.
As part of the revised Aid and Attendance benefit beginning on October 18, 2018 a bright line net worth limit of $129,094 will be used and adjusted each year for inflation (current net worth limit as of December 2020). This net worth will include any assets you may have currently as well as in a 3 year look back period. Any decrease of assets must be spent on items or services for which fair market value is received. Note that VA does not differentiate between liquid and non-liquid assets, both will count toward your net worth. A primary residence is excluded in net worth with certain limitations, your main residence if it does not exceed 2 acres, or 87,120 square feet will not be counted in your assets. If any of the property over 2 acres is not marketable it will not be counted toward your assets. Any property over 2 acres will be included as part of your assets.
When determining qualification for benefits a special provision for calculating pension income allows household income to be reduced by 12 months worth of future, recurring medical expenses. These expenses may include: insurance premiums, cost of home care, cost of paying a person to provide care, cost of adult day care or cost of assisted living or nursing home. Applicants must submit appropriate evidence for a rating and for reoccurring costs to qualify for this special provision.
We encourage you to speak with a financial planner when navigating through the application process yourself as the information covered above is only a general overview.
As you've read there are many options to think about when planning for and paying for Senior Living. It may seem like an overwhelming task to find a combination of what works best for you, we recommend speaking with a financial planner or Elder Law Attorney when exploring your options. If you need recommendations feel free to reach out to your closest Northbridge community for a list of helpful resources!