It’s a situation every child fear, but one that is a painful reality for many families. A parent, after spending decades raising a family, building a career and maintaining a home, no longer has the physical or mental ability to care for themselves. They either need care and support in their home, or they need to transition into an assisted living facility.
According to the U.S. Department of Health and Human Services, 70 percent of Americans age 65 and older can expect to use long-term care at some point in their lives. On average, they will need care for three years, although 20 percent of retirees will need it for five years or more.1
If you’ve already started exploring your care options, you know how costly these services can be. In some cases, you may be looking at thousands of dollars per month for several years. If your parent doesn’t have significant assets or long-term care insurance, that could be a tough bill to pay.
At the same time, you may be preparing for retirement, or you could be newly retired. You might not have the resources or financial flexibility to shoulder some of the burden. While you may want to help your parent get the care they need, you also don’t want to sabotage your own plans.
Fortunately, you have options available. Below are three sources to explore as you plan your parent’s long-term care:
There are a variety of government assistance programs you may want to look into. While Medicare is the most prominent, it often doesn’t cover long-term care costs. The exception is if the long-term care is a direct result of a hospitalization. In that case, Medicare may cover costs temporarily, but it usually isn’t a long-term solution.
Medicaid will cover long-term care almost as long as it is needed. The catch, though, is that your parent will have to be nearly destitute before they’re eligible. To qualify for long-term care, you must have a very low level of cash and few other assets.
Finally, if your parent is a veteran, they may qualify for a program known as Aid & Attendance (A&A) from the U.S. Department of Veterans Affairs (VA). The A&A program is designed to help housebound veterans with their care expenses.
The A&A benefit is paid monthly in addition to any existing military pension. The VA uses a complex formula to arrive at the A&A benefit amount, so you’ll want to consult with the agency for more information.
If your parent needs long-term care, you’ll probably start your planning process by evaluating their bank accounts, pension plans, investment accounts and more. Those are all great resources to consider.
However, there may be other assets that are just as helpful. For example, your parent could have old permanent life insurance policies that have been accumulating cash value in the form of dividends or interest for years or even decades. You could tap into that cash value to pay for care.
Also, look at your parent’s physical assets. It may be difficult to part with a treasured car, art collection or even the family home, but if it gets your parent the care they need, it could be worth it. You could also consider a reverse mortgage to tap into the home’s equity without surrendering the house itself.
Family Care Agreements
If you have siblings, you may find that the most efficient way to provide your parent with care and support is to handle it within the family. This could be especially true if your parent needs help only with basic activities like cleaning, dressing and bathing, rather than with medical issues.
In some families there’s one sibling who may have the time, temperament and skills to provide such care. Of course, it also may not be fair for that sibling to shoulder the entire burden. In that case, you may wish to create a family care agreement. That’s a document by which the siblings who aren’t providing care contribute compensation to the sibling who is handling the day-to-day care and support.
While it may be uncomfortable for siblings to pay one another, that kind of arrangement could also make it more feasible for your parent to stay in their home and to get care from someone they know, love and trust. If you opt for this strategy, make sure you create a formal, legal document and spell out every detail.
Ready to develop a long-term care strategy for your parents and yourself? Let’s talk about it. Contact us today at Retirement Peace Project. We can help your family develop and implement a plan. Let’s connect soon and start the conversation.