Why Factoring Long-Term Care Into Your Estate Plan Pays Off
For most people, thinking about estate planning means focusing on what will happen to their money after they pass away. But that misses one pretty significant consideration: the need to plan for long-term care. The last thing any of us want to contend with when a health issue arises later in life is having to throw together a hasty estate planning solution in the face of mounting medical costs. Your best defense is careful planning with the help of a trusted expert.
Why it’s so important to plan for long-term care
While only about 19 percent of current U.S. residents will need to reside under long-term care for a period of over three years, that number sharply increases when factoring in nursing home stays of a shorter duration — which will still have a substantial impact on your estate.
Whether the care you need takes place in a nursing home, assisted living facility, or with an in-home provider, the costs can mount with alarming speed. For example, national average rates for assisted living hover around $4,000 per month, while the costs on Long Island can easily approach upwards of $7,000 – $9,000 per month. As those costs add up, you could see your assets dwindle much sooner than you’d hoped. Luckily, estate-planning attorneys who focus on elder law issues and the costs of long-term care can help in a number of ways.
What to go over with your estate attorney
If long-term care isn’t factored into your estate plan, you are probably not looking at a truly realistic and accurate representation of your assets. Talk to your estate-planning attorney about the following factors in order to get on the right track:
1. Set reasonable expectations for long-term care
It’s impossible to know what life will bring, but we can certainly make educated guesses. For example, are there any major diseases that run in your family? There is a chance you will have the good fortune of staying healthy well into your golden years, but estate planning is an aspect of your financial life in which it’s helpful to protect yourself against worst-case scenarios.
In the estimated likelihood that you will require such care, at what age could you reasonably predict you’ll need it? Do you have any current health conditions to take into account? Exploring these possibilities may not be the most enjoyable exercise, but it’s far better than facing the reality of long-term care with no plans in place.
2. Consider a long-term care insurance policy
As Medicare or standard health insurance may not cover your costs, a long-term care insurance policy is one way to protect yourself against draining your financial assets. Ask for resources for finding an affordable premium that isn’t likely to increase prohibitively over time. Begin this process as soon as possible, as your premium will be lower the younger you are when you apply. Another potential oversight is assuming Medicaid or Medicare will automatically cover your long-term care. You should discuss government benefits planning as an option to help pay for long-term care should the need arise in the future, and get authoritative insights about your unique financial situation and the benefits of proactive long-term care asset protection and estate planning.
3. Get smart about advanced directives, powers of attorney and trusts
In order to best prepare your loved ones for complex medical decisions, go over advance directives. In addition, discuss options for setting a revocable living trust, and possibly one or more irrevocable trusts, like a Medicaid Asset Protection Trust as part of your estate and long-term care planning.
It’s also important to create a plan that allows someone you trust to access and utilize your financial resources for your benefit in the event of unforeseen medical circumstances. One common mistake is tying up most of your assets in investments that aren’t liquid when you might need them most. For example, money locked into annuities can result in a fee for early withdrawal. Having a balanced approach to financial planning, that includes asset protection considerations, is often the best medicine when facing the prospect of paying for long-term care. Part of this planning, is to make sure that you have a very comprehensive power of attorney in place that is specifically designed to provide the most flexibility in planning for the costs of long-term care and the concomitant preservation of assets. A basic boilerplate power of attorney often fails at the time it's most needed. Working with a team of professionals that includes an estate-planning attorney, financial advisor, CPA and insurance professional can provide you and your family with the best overall solution.
Take the time now to talk to an estate-planning attorney and your financial advisor, CPA or insurance professional about the best ways to maintain financial security in tandem with the demands of long-term care. Even if you don’t end up needing long-term care, you can enjoy the peace of mind knowing you’ll be covered and that you have created an estate plan that will protect you and your loved ones.
The process of completing an estate and long-term care plan may sound complex, but we’re here to help you by making it a streamlined experience to put you and your family in a more secure position for the future.