According to the U.S. Census Bureau, almost 10% of the population in 2011 was 65 years of age or older. Make no mistake, our population is aging and our life expectancy is growing well beyond what any of us could have imagined. Consequently, paying for one’s long-term health care is an ever-increasing problem. With the cost of long-term care exceeding $10,000 per month in many jurisdictions, your entire life savings could disappear quickly. Many people still believe that Medicare will cover all of their long-term care needs, but nothing could be further from the truth. Medicare covers much of one’s general health care after the age of 65, but should you need to move to a nursing home, assisted living facility, or specialty Alzheimer’s facility, Medicare covers only a portion of the first ninety days of your stay. Instead, when it comes to long-term care, you have three choices:
- Deplete all of your assets and let Medicaid (a government social welfare program) pick up the balance,
- Purchase long-term care insurance, or
- Transfer your funds to an Asset Protection Trust.
Although Long-term care insurance may be part of the solution, it is not a panacea. Even if you are healthy enough to qualify, policies can be expensive, particularly if not purchased at a young enough age. But, even if you qualify and you purchased the policy early so that premiums are affordable, problems remain, particularly when it becomes time to collect the benefits. Last year a report from CBS News told the story of a 93 year old father of 5, who attempted to collect on his long-term care health insurance after a serious fall that left him unable to care for himself. His insurance company, Bankers Life, repeatedly lost documentation that was faxed and mailed, and denied his claims for over a year. The company finally paid up, but shortly afterwards, concluded that the 93 year old was too healthy to continue receiving home care, a decision his family disputed. An article published this month in the New York Times, Fine Print and Red Tape in Long-Term Care Policies, describes similar problems encountered by other families when attempting to obtain long-term care benefits under their insurance policies. .
Although most reputable insurance companies are more reliable than those mentioned above it is important when planning for the future, that you don’t rely on just one source for your long-term care needs. Otherwise, when it becomes time to pay up, you may find yourself out in the cold. Often the best solution is a combination approach that supplements a long-term care policy with a properly drafted estate plan including an Asset Protection trust. We will discuss the benefits of the Asset Protection Trust in an upcoming issue of this newsletter.