Have you planned to cover long-term care costs?

On Behalf of | Jun 29, 2024 | Estate Planning |

A lot of people make the mistake of thinking that estate planning is only about leaving assets to loved ones. While this certainly makes up a significant part of the estate planning process, it’s not the only issue that you need to take into consideration. You should also prepare for the possibility of incapacitation, thereby warranting an advance healthcare directive and a power of attorney, as well as the likelihood of long-term care.

Studies have shown that as many as 48% of those 65 and older will need some sort of paid long-term care in their lifetime. And with those costs oftentimes exceeding $100,000 per year, these expenses can quickly eat away at the wealth that you’ve worked so hard to accumulate.

How can you plan for long-term care while protecting your assets?

There are steps you can take to ensure that your long-term care needs are met while still shielding some of your assets. Here are some of your options:

  • Engage in Medicaid planning: To qualify for Medicaid, your income and assets have to fall below a certain threshold. Meeting that requirement necessitates careful planning, as you’ll likely need to reduce your assets to become eligible. There’s a five-year lookback period, too, which means that you should start planning sooner rather than later. Since certain assets aren’t countable for eligibility considerations, you can also invest in those assets, such as by remodeling your home. This can be a complicated and nuanced process, though, so be sure to talk it over with your attorney before embarking on this path.
  • Secure long-term care insurance: A long-term care insurance policy could provide you with the assistance you need if it turns out that you need long-term care. These policies can be expensive, though, and you have to carefully read the policy’s terms so that you understand what’s covered and the requirements that have to be met before the insurance company will chip in to help cover costs.
  • Use a health savings account: This investment account allows you to effectively save funds for your future care needs. Although the tax incentives associated with this type of account can be favorable, there are limits on the amount of money you can invest in the account each year. Therefore, you’ll have to start saving early on if you want to accumulate enough to cover your potential long-term care needs.
  • Fully consider your options: There’s a variety of long-term care options out there. Before choosing one, you need to understand the avenues available to you so that you can make the best decision possible. You may find that there are cheaper long-term care options that suits your needs, thereby making it easier to cover your costs.

There are other options out there that are less favorable, such as obtaining a home equity loan or acquiring a second mortgage on your home, but these should be options of last resort. Instead, we encourage you to think about how you can use your estate plan to prepare for the worst, and to carefully consider how you can use Medicaid planning to your advantage.

Do you have questions about estate planning and potential long-term care needs?

If so, then carefully seek out the information and guidance you need to have your questions answered. Perhaps then you can comfortably move forward with an estate plan that meets your needs. And if you’re looking for a starting point, then please continue to read our website and browse through our blog posts.