By Kerry Peabody, CLU, CLTC, Long Term Care Insurance Specialist
Say “long term care” and everyone immediately pictures a 94-year-old woman tucked away in a nursing home. It’s that perception that prevents many people from planning for long term care. Nobody wants to envision themselves in a nursing home, so they simply refuse to think about it. Ironically, NOT planning for long term care makes it more likely they’ll end up in that nursing home, while actually having a plan will keep them in control of care decisions longer.
There are four steps to creating an effective long term care plan:
First, you need to have a deep, heart-to-heart discussion with yourself about this. What’s your health like? Are you in great shape, or do you have significant health issues? When you need help with things like bathing and dressing, do you want to stay in your own home as long as possible? Who will provide that help? Do you have an existing support network? Where are you likely to be when long term care happens? Is your home set up for this? Will you feel more secure in a community with other people who share your needs, and where you have more social opportunities?
When you’re having this little talk with yourself, you’ll be drawing upon your own experiences with long term care, and the things you’ve seen in other families. If you had a grandmother with Alzheimer’s who spent six years in a nursing home, your concerns will be different than those of someone who’s never experienced LTC in their family. If you have three daughters, all of whom live within ten miles of you, you’re going to have different expectations than someone whose only son lives on the opposite coast. Think hard about what you want, what you want for your family, and where and how you want to receive care. This is a good time to start learning about local retirement & care communities, or communities near your children. Talk to friends who’ve had experience with these places. Look for open houses. Call some communities, and ask for tours, or drop in and ask to visit with the community’s marketing director. Chances are you’ll be quite surprised at how nice many of today’s continuing care communities are, and by the amenities they offer.
Second, once you’ve come to grips with what you want, then it’s time to let your family and close friends know. Be clear with them about what your expectations are. Tell them who you want making decisions, and why. You can’t worry about hurting their feelings; this is too important. If something happens and you can’t make decisions for yourself, you don’t want the kids fighting over what’s best or what’s right for you. (I can tell you from experience, this can quickly tear a family apart.) Tell the kids where you want to be cared for, who you want to provide your care, who you want making crucial decisions if you’re unable, and who’s going to handle your finances. All of this may fall on the shoulders of one family member – your spouse, for instance – or you may spread it across a couple of family members. Regardless, you need to have these discussions now.
Third, back all of this up with legal planning tools – most importantly your advanced health care directive and/or durable power of attorney. Telling your daughter, Jane, that you want her in charge of health care decisions isn’t enough; enforce it via the advanced health care directive. (If you have more than one child, I still advise – strongly – that you pick ONE to be the primary, then another as the contingent. If you put multiple children down with equal say, you’re just setting them up for conflict.) The durable power of attorney will give your agent (the person you’ve chosen to act on your behalf) the ability to make decisions and take action on things like finances and other legal matters. Be sure to name primary and contingent agents on all of these, because you don’t want to leave any of this to chance. These documents vary from state-to-state, and must be done correctly, so be sure to work with an attorney who specializes in this. The laws around estate planning and elder law are complex and ever-changing, and you want to be sure that it’s done right – remember, once these things need to be used, it’s too late for a re-do. The more decisions along these lines you make now, the less conflict and hurt feelings the family will deal with later. Once you get everything in place, be sure to review it annually to be sure nothing has changed that will impact your plan.
Finally, you know what you want your care to look like, and you know where you want to be cared for – but how will you pay for it? This is a crucial element in your long term care plan. Medicare does not pay for long term care. Medicaid will, in some cases, but only after you’ve impoverished yourself, and then you’re no longer in control. Remember, he who pays the bills, calls the shots. So, how will you fund your long term care plan?
Hiring a home care agency to provide overnight help in your own home is a great option, but where does the money come from? Saying you want to move to Golden Glen Retirement Village when you need care seems like a wonderful decision, but if it costs $7,500 a month to live there, you need to be able to pay for it. If you’re unfortunate enough to end up in a nursing home, you could easily be on the hook for $10,000 a month or more – and that’s today. What will these costs be in 15 years, or 20, or 25? No matter where you need care, it’s going to cost money, and potentially a lot of money.
Depending upon your financial circumstances, you may be limited in your options, or, conversely, you may have so much money that you can do any of this and not worry about it. Most of us, though, are squarely in the middle, and need to have a strategy for funding our future care needs.
There are lots of ways to pay for care. You can use your regular income. You can use your savings. You can pull money out of IRAs or other retirement accounts. You can tap into home equity, using either a home equity loan or reverse mortgage. These are all perfectly valid ways to pay for long term care – but they all have one thing in common – they’re all your money. If you want to lessen the risk of spending down your assets for LTC, you may want to consider some form of long term care insurance.
There are numerous types of long term care insurance today, so there’s a plan for almost any budget, or set of circumstances. These include stand-alone LTC insurance, life insurance with long term care or chronic illness riders, long term care annuities, and short term care insurance. A well-designed insurance plan will be affordable and effective, and can make a huge difference when it comes to paying for care. (Want to verify this? Don’t take my word for it, I’m an insurance guy. Instead, just pick up the phone and call some local, well-established home care agencies, and ask them how many of their clients are using long term care insurance to pay for their care. It’s going to surprise you.)
Insurance can be effective, but you have to look at your options now, while you’re as young and healthy as you’re ever going to be. If your health changes, you may not be able to get long term care insurance at any price, and that means you’re limited to using your own money to pay. So, find an agent who specializes in LTC planning, because just like the legal planning tools, these products are complex, and you need to get it right the first time.
Putting together a plan for long term care isn’t fun, but it is necessary. We all know that the worst time to plan is during a crisis, because by then, it’s too late. If you’re lying unresponsive in a hospital bed, it’s too late to tell the kids what your wishes are. You’ve put the burden on them, and they’ll have to live with their decisions, and any friction created by them, for the rest of their lives. Back up your wishes legally, with the help of a qualified attorney, and get your LTC funding plan in place. By doing these things now, you’ll reduce the burden and strife your family will face, you’ll be able to afford the care you want in the setting of your choice, and most importantly, you and your family will be in control of care decisions, and far more likely to be sure that your wishes are fulfilled.