In 2014, only about 11% of adults aged 65 and older were covered by a long-term care insurance policy. Compared to the 52.3% of seniors who will require long-term care at some point during their retirement, retirees are underprepared for covering costs. But as people age, long-term care (LTC) coverage becomes cost prohibitive, which leaves seniors and their families wondering: “Where do we find the money to cover assisted living?” Here are five financial assistance and funding options to consider.
1. Life Insurance Conversions
Many people don’t realize that their life insurance is a financial asset that may benefit them today. If your loved one owns life insurance they no longer need, or premiums have become too expensive to justify the benefit, converting their life insurance policies into long-term care funds can help you cover assisted living costs.
This can be done in several ways. First, you can check with your insurance agent about the possibility of cashing in your policy, or receiving accelerated or “living” benefits. These are all different terms for the same process: the insurance provider will buy back the policy for a portion of its value (usually around 50-75%) so that the policyholder can apply those funds to long-term care or medical expenses. Some providers only cash in policies for policyholders who are terminally ill, while others are more flexible.
Another option is converting a life insurance policy to a “life assurance” benefit. This allows you to switch a life insurance benefit into regular long-term care payments, which can go towards all forms of LTC and senior housing.
2. VA Aid & Attendance Benefit
If your loved one is a veteran, they may be eligible for benefits that help to pay for long-term care and housing.
The Veterans’ Administration offers a special pension with Aid and Attendance (A&A) benefit that is largely unknown and often overlooked by wartime veterans and their families. Paid on top of a wartime veteran’s monthly pension, the A&A benefit allows for Veterans and surviving spouses who require assisted living additional monetary benefits. Most Veterans who are in need of assistance qualify for this pension. Aid and Attendance can help pay for care in the home, in a nursing home, or in an assisted living facility. While the amount you can expect from the benefit varies, the average is a maximum benefit is $1,949 a month for married veterans, $1,644 for single veterans and $1,056 for a surviving spouse.
Visit the US Department of Veterans’ Affairs for more information about eligibility and applying for the benefit.
3. Tax Benefits
Costs related to senior living at an assisted living community may be tax deductible for both the community member and their family caregiver if they meet the Internal Revenue Service requirements. This article from the AARP has more information.
4. Your Home
There are several ways for your loved one to leverage their home to help pay for assisted living. While it may not be the preferred method, selling the home outright can help to cover a significant portion of the cost of assisted living. Another way for seniors to access their home equity is through a reverse mortgage. While this does require the homeowner to live in their home as a permanent residence, it can make sense in certain cases. For instance, if one spouse is able to live independently but the other requires memory care, a reverse mortgage can help the borrowing spouse pay for their partner’s long-term care.
If home equity accounts for a large portion of their net worth, however, seniors and their families should consider opting for a less immediate strategy. Converting the home to a long-term rental property, for example, gives you and your loved one access to steady income that can be put towards long-term care. However, managing a rental property does take quite a bit of work, and will affect your property taxes, so it’s not a decision to be taken lightly.
PACE, or Programs of All-Inclusive Care for the Elderly, is a Medicare and Medicaid program that helps seniors get the care they need. To be eligible for the PACE program, you must:
- Be age 55 or older
- Live in the service area of a PACE program
- Require a high level of care (varies by state)
Cost shouldn’t hold your loved one back from receiving the care they need and the life they want. Check with your financial and tax advisors to see what strategies make sense for you, or contact a Vista Springs community today.