Long-term care insurance was sold aggressively in the 1980s, 90s and thereafter to offset the costs of seniors needing to live in a nursing home, assisted living or needing at home health care. Now, however, there are less than twenty insurers who sell long-term care products, and for most seniors, it is unaffordable. It is not uncommon for a policyholder to face a fifty percent increase in their premium while some of the worst cases are upwards of ninety percent. This leaves our aging population with two choices: Pay the money or leave your coverage after paying into it for years, and sometimes decades.
But other choices are available. CNBC has recently reported about this very issue and suggests getting financially creative for long-term care. (https://www.cnbc.com/2018/02/27/heres-a-surprise-source-you-can-tap-for-long-term-care-services.html) There is a surprising source that you can tap in order to maintain protection for yourself but it requires planning, professional help and time.
The strategy is simple: become asset poor, and qualify for Medicaid which pays for nursing home care and services. This does not mean abandoning the financial legacy you have planned for your family. However, it does require some careful planning. To pull it off, you'll need to retain the services of an attorney with a solid understanding of the options that are available to you. Your attorney may, in turn, also need to bring in an accountant and a financial advisor.
In an ideal situation, you will be able to wait five years before needing long-term care and the help of Medicaid. If there are assets transferred during the “five-year lookback” it may be subject to penalties or make the applicant ineligible for some period of time requiring them to pay out of pocket.
If you are healthy, your greatest advantage right now is that you have time on your side. However, before you begin transferring assets into different financial vehicles, it's important to understand the effect that those transfers can have on your family. The vehicle chosen for transfer of assets is very important not only for the older individual but the recipient as well. In the case of an outright gift of appreciated assets (i.e. stocks or real property), there would be no stepped up cost basis which could lead to crushing capital gains taxes when it is time to sell.
Though you may never have thought you would find yourself creatively trying to qualify for Medicaid while protecting assets, the current long-term care premium prices preclude a large portion of seniors from being able to pay the cost of the policy. Genworth Financial reports the national median cost of a private nursing home room to be $97,455 a year. It doesn’t take long to be wiped out at that cost without long-term care. Medicaid may be your solution and time is of the essence for planning.