While the cost of assisted living varies drastically and can, at times, seem overwhelming, there are several ways to circumvent the bulk of this financial burden.
1. Veteran’s Benefits
Veteran’s benefits cover residential care under multiple circumstances:
- If your loved one or their spouse has service-related injuries or disabilities, benefits can be applied toward the cost of assisted living.
- Aid and Attendance benefits are available to any disabled veteran (or spouse) whose income is below a given amount.
In order to receive the benefits to which your loved one is entitled, you’ll need to go through the Veteran’s Administration, which can be a complicated, time-consuming process. Therefore, consider working alongside a geriatric planner who’s familiar with the ins and outs of the system and can help simplify the process of qualifying for benefits. Often, senior living communities offer financial concierge services that will guide you through the process of applying for benefits.
2. Life Insurance
While most purchase life insurance with their beneficiaries in mind, policies can be applied toward “living benefits,” if needed. Based on the policyholder’s monthly premiums, age, and health, the company will likely buy back the policy for 50-75% of its face value. Some policies will not offer “accelerated” or “living” benefits unless the policyholder is terminally ill, while others are much more flexible.
If your loved one’s insurance policy does not allow for living benefits, there are still options for you to consider. For example, they can sell their policy to a third-party company in return for a “life settlement” or “senior settlement,” which usually consists of 50-75% of the policy’s value. After purchasing the policy, the monthly premiums become the responsibility of the third-party company, and that company receives the full value of the policy after the original policyholder dies.
Another option, known as the “life assurance” benefit or “life insurance conversion program,” allows seniors to convert their policy benefits directly into long-term care payments. Life insurance conversion typically pays less than a life settlement–generally between 15 and 50 percent of the policy value–but is available for policies of lesser value that might not qualify for life settlement.
3. Pooling Family Resources
If you’re worried about Mom or Dad living alone, other family members may be worried, too. Getting everyone together to talk about it sometimes makes it possible to find a solution, such as pooling assets and trading money for time. For example, if one or two siblings or family members handle the majority of daily care, such as driving to medical appointments, others with less flexible work schedules might contribute money instead. If there’s a family home that no one wants to sell yet, siblings with available funds might pay for assisted living with the promise of repayment when the house is sold.
The research and paperwork associated with finding and selecting assisted living facilities and qualifying for financial support can be tedious and overwhelming. Sometimes families get stuck because no one feels qualified to take on the task. It can be a huge relief to work with a geriatric care manager or senior move manager who is familiar with the resources in your area. A care manager can work with the entire family to present options, resolve roadblocks, and help you find the perfect situation for your loved one.
Money matters can also cause family tension. If you’re having trouble communicating about this challenging topic, learn more about how to handle family conflicts. You might also enlist the help of a mediator.
4. Long-Term Care Insurance
If you or your loved one purchased care insurance, consider yourselves lucky. Long-term care insurance policies apply to assisted living care–all you need to know is how to collect your benefits. Some long-term care policies have a specific designated benefit for nursing home care, based on a mental or physical diagnosis, which can be used to pay for assisted living.
The policy may also set a designated payment for home care, which can then be paid directly to the assisted living facility or to the beneficiary, who can then use it to pay for assisted living.
If your loved one hasn’t already purchased long-term care insurance, it’s likely too late to do so now. However, there’s still time to sign up for a long-term care policy yourself to avoid putting your own family in the same situation in the future.
If you have a nest egg but you’re concerned about outliving your resources, an annuity might be a good option to consider. When you purchase an annuity, you pay a lump sum upfront and receive regular payments back over a predetermined period of time–usually the rest of your life.
An annuity can help stretch your savings and ensure that you’ll always have some reliable income. Their big benefit is that you continue to receive money regularly, even if your purchase premium runs out. If you live for a really long time, you will get more back than you put in. The underwriter takes the risk that you might live longer than the money lasts–and makes extra profit if you die early. Underwriters don’t go into the annuity business expecting to lose money, but annuities can still be a better deal for you than just depleting your bank account every year.
Another benefit is that annuities aren’t fully counted as assets by Medicaid when you apply for government assistance. The income from the annuity is counted as a “resource,” but the full sum originally used to purchase the annuity is not.
Annuities are complex financial tools with many variations. Some require initial purchase to receive future payments, while others deliver immediate payments; some are based on a fixed interest rate, others work off variable rates. You’ll want to do some homework and talk to a trusted financial adviser about which annuity options might be appropriate for your situation.
Be very cautious when investing in annuities. There are unscrupulous marketing schemes pushing phony annuity deals that target vulnerable seniors through community centers, adult education seminars, telemarketing, and slanted advertising. And outright annuity fraud is more common than most people realize. Always use your common sense filter: If it sounds too good to be true, it might be a scam. You’ll want to choose a reputable company when you buy an annuity and work with a highly-recommended representative. And make sure your representative helps you think through some of the trickier details like inflation.
6. A Reverse Mortgage
If your loved one owns a home outright or is close to paying it off, a reverse mortgage might be the solution you’re looking for.
A reverse mortgage allows you to cash out the value of your home equity, either in full or in a series of monthly payments. The bank decides on a value based on what the home is worth, interest rates, the applicant’s age, and other factors, and the loan balance gradually increases over time. (If a bank holds a mortgage on the house, it has to be paid back before you can begin receiving payments.) The borrower can stay in the home until death even if the loan balance exceeds the home’s worth. Upon death, the loan balance must be repaid, which usually requires selling the home.
Reverse mortgages were originally developed to help widows remain in their homes after the breadwinner passed away. Today, they work best when one parent needs assisted living but the other can remain in the home. To apply for a reverse mortgage, one homeowner must be over the age of 62 and one person must continue to live in the home.
Be sure to spend time researching the pros and cons of reverse mortgages, as they aren’t for everyone. For example, it’s probably not a great choice for a beloved property that you want to keep in the family.
Finally, a reverse mortgage is a big commitment, so it’s important to work with a reputable company. Make sure you understand the terms and read the fine print, as there are many rules about homeowners’ insurance and mortgage insurance and keeping the property well maintained. There may also be high fees involved or clauses that make it easy to lose the home. The Consumer Financial Protection Bureau recently reported that reverse mortgage scams and foreclosures are on the rise.
7. Renting Your Home
If only one parent is currently living, or if both parents need assistance with daily living, the family home can be an important resource. Selling is an option, of course, but for many families, Mom and Dad’s house is cherished, and family members aren’t ready to make this decision.
In this case, consider renting out the house and using the rental income to pay for assisted living. The idea of being a landlord might seem scary, but for a fee, you can hire a service to manage the property for you and still generate enough income to ease the burden of assisted living costs.
For more information, visit: https://www.caring.com