We would all love to pass on a decent-sized legacy to our heirs. But too many estates are all but entirely consumed by the high costs of medical care, especially as we get older.
Yes, we have Medicare to cover the major medical expenses of those Americans over age 65. But many people fail to realize that long-term and nursing home care is not covered under Medicare.
Meanwhile, Medicaid can help with basic expenses — but generally only after you have impoverished yourself by spending your assets down to less than $2,000, depending on your state.
Until then, you’re going to have to either fund long-term care costs out of your own savings and pension income, or have long-term care insurance in place.
Consider these sobering statistics:
- One in three individuals who buy a long-term care policy at age 60 with a 90-day elimination period (benefits kick in after 90 days of chronic disability) will need those benefits before they die.
- Half of everyone over 60 will have a need for nursing home/custodial care at some point.
- The average woman who needs long term care spends 2.6 years in a facility. The average man spends 2.3 years.
- Ten percent of those who enter a nursing home will stay there five years or more.
The cost of long-term care
The median rate for a semi-private room in a nursing home was $8,669 per month in 2023 — $104,000 per year — according to the latest “Cost of Care Study” by Genworth. The median price of an assisted living facility was $5,350 per month, or $64,200 per year.
That’s easily enough to consume most or all of a private pension, and/or your Social Security income — leaving you and your family little or nothing left over in retirement for living expenses and savings of your own.
If you don’t have a lot of income coming in, it’s also enough to quickly eat away at most peoples’ retirement savings nest eggs.
Medicaid requirements have teeth
If you have assets like a home, and you receive Medicaid benefits, the state may place a lien on your home. When you pass away, the state may seize your home out from under your heirs and sell it to recover any Medicaid benefits that were paid to you, under a state Medicaid Recovery Program.
What you can do
Get long-term care insurance in place, if you qualify. Even a small amount of coverage can make a big financial difference for you and your family, should you ever have a claim.
Consider the Long-Term Care Partnership Program. If your state participates in this program, purchasing a qualified long-term care insurance plan may help you shelter a certain amount of your estate from any Medicaid recovery program.
That is, if you purchase $250,000 of long-term care protection, you may be able to exempt that amount from Medicaid collectors, thereby ensuring that you will be able to pass your family home and/or other assets on to heirs.
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