How Do I Afford Senior Living?
By Rachelle Lavalier
While most people presume that senior living care must be paid out of their own pockets, it is good news to many that other methods exist. Everyone has unique circumstances that help determine how they can best fund the senior living options selected. Aside from the sale of a home or traditional savings, you may qualify for some of the additional ways that provide flexibility and access to resources for assisted living financing. Here are some that exist.
Government Funding Support
Social Security Benefits
With average Social Security benefits of $1,261 per month, and maximum benefits of above $2,500 per month, this income amount helps many seniors cover a portion of the costs for their care needs.
Veterans Aid and Attendance Pension Benefit
Veterans who served during wartime and their spouses may be eligible to receive nearly $2,000 per month to help defray the cost of assisted living, in-home health care or other nonreimbursed medical care through the Aid and Attendance Program. (See Department of Veterans Affairs (VA) information regarding same-sex marriage benefits at www.va.gov/opa/marriage.)
Medicare is a federally funded program designed to cover a variety of health care costs for those who are aged 65 and over. There are no income or asset means tests to establish eligibility, so this benefit is utilized by most older Americans. There are four distinct parts of Medicare:
Medicare Part A covers medically necessary services like hospital stays, lab tests, surgeries, and supplies like wheelchairs and walkers. Medicare Part A may also cover skilled nursing care up to 120 days after a 3-midnight hospital stay, hospice, and some home health services.
Medicare Part B helps cover doctors’ and other health care providers’ services, outpatient care such as therapy services, durable medical equipment, and home health care. It also covers some preventive services to help maintain health and to keep certain illnesses from getting worse.
Medicare Part C offers health plan options run by Medicare-approved private insurance companies. Medicare Advantage Plans provide an alternate option for receiving benefits and services covered under Part A and Part B. Most Medicare Advantage Plans cover Medicare prescription drug coverage (Part D). Some Medicare Advantage Plans offer extra benefits to attract younger and healthier customers, but often restrict care to manage the overall cost of care expenses.
Medicare Part D helps cover the cost of prescription drugs and is offered through Medicare-approved private insurance companies. Rehabilitation and nursing care in Medicare-licensed nursing homes may be covered following a day stay in a hospital. Medicare Part A may cover 100 percent of care costs during days 1–20 and may cover 80 percent of costs for days 21–100. A Medicare Supplemental Insurance policy often covers the remaining 20 percent of costs during days 21–100. Benefits for those who have selected a Medicare Advantage program will vary according to the plan and insurance provider chosen. Medicare does not generally cover any of the costs traditionally offered by independent living, assisted living, and memory care communities, other than costs of ancillary therapy, home health, or hospice services that may be needed while staying at the community.
About 20 percent of the U.S. population qualifies for their state’s Medicaid benefits, with financial eligibility limits based on strict asset ($2,000 limit in most states, excluding the value of an owned home) and income limits. Medicaid is funded with a combination of both state and federal resources. Sixty percent of those in nursing homes across the U.S. are eligible for Medicaid benefits. More than half of all states have enacted various types of Medicaid-waiver programs to provide funding options in the lower cost settings of licensed assisted living and memory care communities.
Conversion of Assets to Income
Life Insurance Settlements — A life insurance settlement is the sale of an in-force life insurance policy by the policy owner to a third party. Instead of continuing to pay the premiums, the party that purchases the policy will be responsible for paying the premiums, and will collect the proceeds of the policy when you die. Unfortunately, individuals often let a policy lapse and just stop paying premiums when money is tight, not realizing that they could have sold the policy for an actuarially-based offer. The cash settlement received can be used for any purpose, including the current funding of your care needs. The Life Care Funding Group has helped many families easily and quickly convert a life insurance policy into needed cash in as little as 30 days.
Reverse Mortgage — Reverse Mortgages represent a type of loan for homeowners over the age of 62 that converts the equity saved up in a home into an income stream. Be aware that these loans have historically required relatively high transaction and administration costs.
Bridge Loans — When care needs develop today but the time is not right to sell a home to help fund the needed care, you should consider a bridge loan or “senior living line of credit” from firms such as Elder Life Financial. The Elder Life Financial Concierge can help you learn more about financial options, such as an unsecured line of credit or secured lending options, such as a home loan. They can also help you by:
- Accessing real estate specialists that will assist with selling your home
- Working with Veterans Administration to apply for assisted living benefits, including Aid & Attendance
- Converting your life insurance policy into a long-term care benefit
- Helping you consider a senior living line of credit. This product offers a way for retirees to secure credit to help pay for senior living. This financial option is especially valuable if you need time to sell a home or other assets in order to pay for care or fund an entrance fee community initial payment. It can also be helpful if you are waiting for federal benefits to start, such as Veteran’s Assistance. These lines of credit are accepted at thousands of communities. They allow seniors to borrow only what is needed on a monthly basis to help finance their senior housing and care needs and like any loan, the line of credit is subject to credit approval.
Private Long-term Care Insurance — Find the policy and ask your insurance agent to help you clarify what benefits are available to help you afford the senior living solution you need. Approximately 10 percent of American seniors have an in-force long term care insurance policy. These policies often cover in-home care, adult day care, assisted living, and skilled nursing care.
Financial Help from the Kids
The advances of medical technology have extended the length of life for older adults beyond the period of time that they planned for, and the reality for 52 percent of older Americans is that they no longer have the income to meet their basic needs. Often their adult children have stepped in to help pay for their needed care and support. These payments have become more creative as more family members have needed to fill the gap between their parent’s income, savings, and expenses, using vehicles such as the following:
- Giving an annual gift to parents of up to $14,000 in 2013. This can give the parent a measured sense of independence. Be aware that such gifts may impact eligibility for Medicaid or Supplemental Security Income.
- Direct payment of bills to a qualified medical provider won’t count toward the IRS gift limitation — this includes payments for hospital or physician care, assisted living care, and nursing care.
- Paying bills directly also keeps money out of their estate to avoid possible tax consequences upon their death.
- If an adult child covers more than half of their parent’s financial support, the parent might qualify as a dependent for the child’s tax return.
- For parents who struggle emotionally with accepting direct financial support, the answer might be an Interfamily Loan that charges very low IRS prescribed applicable federal interest rates. Such loans also avoid boosting the parent’s estate or tax burden.
- Becoming more commonplace over the last five years are “upward trusts” with the parents as the named beneficiaries. The parents live off of the income generated by the assets without needing to or being concerned about tapping the core assets. Trust attorneys and accountants should be consulted to create this type of trust.
We hope the information you’ve received helped you better understand not only the myriad of senior living and service options available, but also how much each costs and ways you can explore to fund your ideal senior living solution. Brookdale associates are ready to listen, seek to understand, and then partner with you to customize a plan that enriches life today and while providing solutions for all the places life can go. Please go to www.brookdale.com to find a near-by Brookdale community if you have questions or need help navigating your journey.