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Keystone Financial Group

Planning for Long-Term Care

long-term care patient with medical professional

Assisted Living Costs in Alabama

Long-term care, traditionally perceived as a distant concern, demands attention due to its potential financial burden. According to the Genworth Cost of Care survey, the average cost of a private room in a long-term care facility in the Birmingham, Alabama metro area is a staggering $85,410 per year. Further insights from the American Healthcare Association and the National Center for Assisted Living reveal an average assisted living facility stay of 28 months, bringing the total cost to approximately $199,300.

These statistics underscore the significant financial implications of long-term care, making it imperative for individuals and families to include this aspect in their financial planning strategies. As we explore this topic, it becomes evident that planning for such expenses is not only practical but also essential for maintaining financial stability in the face of health challenges.

Exploring Medicare and Medicaid Challenges

Despite the increasing awareness of long-term care needs, traditional avenues such as Medicare and most health insurances do not cover the costs associated with custodial care. It is crucial to recognize that this type of care is not exclusive to the elderly; circumstances may necessitate custodial care for individuals not yet eligible for Medicare. clarifies that Medicare and most health insurances, including Medi-gap coverages, don’t pay for long-term care. Long-term care, often referred to as custodial care, usually falls entirely on the patient to cover the cost. While the majority of long-term care patients are elderly, scenarios might arise where individuals not of Medicare-eligible age require custodial care due to a chronic illness or disability.

Alabama residents facing this financial strain may explore Medicaid options. In 2023, the program approves facilities costing up to $2,742 per month. However, eligibility is subject to income limits of $2829 per month for individuals and $5658 per month for couples, with additional resource limits of $2,000 and $3,000, respectively. A Qualifying Insurance Trust (QIT) offers a legal pathway to Medicaid for those facing income or resource disqualification.

However, it’s essential to approach Medicaid as a last resort. Relying solely on Medicaid for custodial care may involve complex governmental paperwork and significant resource spend-down. This approach poses challenges for planners aiming to achieve client goals without disinheriting beneficiaries or surviving spouses.

A Look at Strategies and Penalties When Applying for Medicaid

One strategy individuals might consider to qualify for Medicaid is transferring their assets to beneficiaries before applying. However, dealing with a government agency involves strict rules. In Alabama, there’s a 60-month lookback period, meaning any assets sold below fair market value during this period, which goes back five years from the date of Medicaid application, will result in penalties.

These penalties have been applied for various transactions, including informal payments to caregivers or asset transfers initiated by a non-applicant spouse. The unpredictability of when custodial care will be needed makes asset transfer a risky endeavor, requiring careful consideration and understanding of the associated rules.

budgeting and saving symbols

Alternative Funding Options for Long-Term Care

Given the limitations and challenges of relying solely on Medicaid, individuals are encouraged to explore alternative funding options for long-term care well in advance of its need. Proper planning involves considering individual preferences for care, such as in-home care or specific facilities, to estimate potential costs.

Financial planners, like those at Keystone Financial Group, typically look for alternatives tailored to individual needs. Planning well in advance allows clients to articulate their preferences, whether for in-home care, private rooms, or specific facilities. Once the expected cost of care is estimated, planners evaluate various options to fund long-term care needs.

  1. Standalone Long-Term Care Insurance: This insurance specifically covers long-term care expenses, providing financial support for various care scenarios.
  2. Hybrid Life Insurance Policies: These policies include provisions to pay for long-term care, offering a dual benefit of life insurance coverage and potential custodial care funding.
  3. Annuity-Based Solutions: Certain annuities are designed to provide payouts that can cover long-term care expenses, offering a structured financial approach.
  4. Fixed Income Investments: Investments with predictable returns can be structured to provide periodic payments to cover long-term care costs.
  5. Self-Insurance: Setting aside funds in a stable value account is a form of self-insurance, allowing individuals to cover potential long-term care expenses.

    Of course, these are common solutions one might use to address the long-term care planning challenge and should not be considered an all-encompassing list. Each of these options addresses the unique circumstances of individuals, emphasizing that there’s no one-size-fits-all solution to long-term care planning.

Census Reveals Significant Spike in Baby Boomers

While statistics paint a vivid picture of the potential need for long-term care, it’s essential to address the skepticism of those who believe they may not require such care. The 2020 census reveals a significant demographic shift as 10,000 baby boomers turn 65 every day until 2030. According to the US Department of Health and Human Services, 7 out of 10 people will require long-term care in their lifetime.

Statistically speaking, the likelihood of requiring custodial care is higher than not needing it. This underscores the importance of proactive planning, ensuring that individuals and families are prepared for the financial implications of long-term care, regardless of their current health status.

Conclusion and Additional Resources

In conclusion, navigating the complexities of long-term care demands careful consideration, strategic planning, and a proactive approach. While Medicaid may provide a safety net, exploring alternative funding options tailored to individual needs ensures a comprehensive financial strategy. Readers seeking more information or guidance on custodial care planning or financial planning matters can consider Keystone Financial Group as a valuable resource.

It is crucial to note that legal advice should be sought from legal experts. This is especially important when delving into Medicaid applications as Medicaid advice should be sought from Medicaid specialists. As individuals and families embark on the journey of long-term care planning, the key lies in understanding the options, considering personal preferences, and crafting a financial strategy that ensures peace of mind during challenging times.

Seth J. Edgil and David Guttery offer products and services using the following business names: Keystone Financial Group– insurance and financial services | Ameritas Investment Company, LLC (AIC), Member FINRA/SIPC – securities and investments | Ameritas Advisory Services, LLC (AAS) – investment advisory services. AIC and AAS are not affiliated with Keystone Financial Group. Information is gathered from sources believed to be reliable; however, their accuracy cannot be guaranteed. Data provided is for informational purposes only and should not be construed as a recommendation to purchase or sell any investment product.

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