Although the primary focus of your estate plan may be to ensure that your estate assets are distributed according to your wishes after you are gone, another important consideration in any well thought out estate plan is long-term care planning. The high cost of long-term care (LTC) in the United States makes planning ahead essential to protect your retirement nest egg. One way to do that is to purchase an LTC insurance policy; however, another is to incorporate a Medicaid planning component in your estate plan. The Harrison Medicaid planning attorneys at the Law Offices of Kobrick & Moccia discuss long-term care insurance vs. relying on Medicaid.
The Cost of Long-Term Care
When you reach retirement age (at age 65) you will already stand at least a 50 percent chance of eventually needing some type of long-term care. Each year thereafter those odds increase. Nationwide the average cost of a year in LTC was around $100,000 for 2018. Residents of New York State, however, where almost everything costs more, paid over $146,000, on average, that same year. The cost of long-term care could deplete your retirement nest egg in short order if you are forced to pay out of pocket – and there is a very good chance you will have to do just that if you failed to plan ahead because Medicare will not cover expenses related to LTC. If you retain private health insurance, the odds are very high that it will also exclude expenses related to LTC. Unless you can comfortably pay out of pocket for LTC, that leaves purchasing an LTC insurance policy or ensuring that you are eligible for Medicaid as the only viable options for covering LTC expenses.
What Is Long-Term Care Insurance?
Long-term care insurance, as the name implies, is a separate insurance policy that specifically covers costs associated with LTC. Like any insurance policy, the benefits and exclusions can be confusing. Despite the complex nature of a prospective policy, it is important that you have a clear understanding of what you are getting before you commit to purchasing a long-term care insurance policy. Of the utmost importance, of course, is knowing what the policy covers because an LTC insurance policy may cover any, or all, of the following:
- Nursing home care
- Home health care
- Respite care
- Hospice care
- Personal care in your home
- Services in assisted living facilities
- Services in adult day care centers
- Services in other community facilities
Is A Long-Term Care Insurance Policy the Best Choice for You?
Ultimately, only you can decide if investing in an LTC insurance policy makes sense for you. Some important factors you may wish to consider when making that decision, however, include:
- How much will LTC insurance cost you over the lifetime of the policy? Premiums increase the older you are when you take out a policy; however, even a lower annual premium will add up if you are paying that premium for 20, 30, or even 40 years before you actually use the coverage.
- Is there a waiting period? Some LTC policies impose a waiting period during which time the policy will not cover expenses.
- Are there annual or lifetime limits? Like some dental insurance plans, or other types of insurance, some LTC insurance plans also have annual or lifetime maximums that could leave you paying out of pocket after all.
- What exclusions apply? Make sure the policy does not exclude mental or nervous disorders because Alzheimer’s and other dementia diseases are often classified as such.
- Will the policy cover you outside of the U.S.? This might not matter right now, but many retirees decide to move out of the country to a country where the cost of living is cheaper. If that is even a possibility for you, make sure the plan will cover you when you are outside of the U.S.
- Is there a termination date or age? Does the policy terminate at a specific age or after a specific number of years?
Is Medicaid Planning the Better Choice?
Relying on an LTC insurance policy is one way to plan for the high cost of LTC; however, Medicaid planning might be a better choice. What many people do not realize is that while Medicare won’t cover LTC expenses, Medicaid will. If you believe there is even the possibility that you will need to rely on Medicaid in the future, including a Medicaid planning component in your estate plan utilizes legal tools and strategies that ensure your assets are protected and that you are eligible for Medicaid if the time comes that you need long-term care in the future.
Contact Harrison Medicaid Planning Attorneys
Please feel free to download our FREE estate planning worksheet. If you have additional questions or concerns regarding long-term care insurance or Medicaid planning, contact the Harrison Medicaid planning attorneys at the Law Offices of Kobrick & Moccia by calling 800-295-1917 to schedule your appointment.
Saul Kobrick
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