Long Term Care Planning – Part 1

Urmas Lupkin

Long term care awareness

These days it seems that there is a day or month for everything. November is no different. November is long term care awareness month. I chuckle at most of these awareness days or months but not this one. I have found that most people aren’t aware of the facts on this important topic or worse, choose to put their head in the sand because it is too difficult to think about it. We all know someone who has had to spend time in an assisted living facility or in a nursing home. What a lot of people may not know is the financial and emotional toll it can take on the family.

Who has long term care

Let’s take a moment to consider the facts. According to Morningstar, only 7.25 million American have long term care insurance which amounts to only 2.3% of the population. Contrast that to the fact that a married couple aged 65 has an almost 70% chance of one of them needing long term care at some point, and as life expectancy goes up, this percentage has gone up as well.

The other available option

So it is easy to say that most folks don’t have a plan for long term care. But the bad news is that for those that don’t, the government has a plan for you and it’s called Medicaid. According to Morningstar 62.3% of those who need long term care have it funded by Medicaid. For some people, those without significant assets, this is the best way to plan for this unfortunate situation. However, for those with a significant amount of savings, investments or property, Medicaid is not the ideal scenario. In order for Medicaid to pay you must spend down almost all of your assets first. Depending on the amount of assets that you have this could seriously cut into the lifestyle of your spouse and also will reduce or eliminate the money that you were hoping to pass on to future generations. So if it’s important to you that your assets not be spent down you should really consider talking to your financial advisor about the many options available today to protect your assets. Otherwise there is already a plan for you and it may not be ideal.

Part 2 of long term care

This post is the first in a series. In the next post we will dive into ways to manage this risk.

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