Alzheimer’s and dementia, among other illnesses of old age, are afflictions many think won’t happen to them or those they love, but 42-year-old Jefrey Jones knows otherwise. His 80-year-old widowed, childless aunt, Joan Willis, suffers with dementia. As the primary steward for her estate, Jones also knows how paying for eldercare can drain resources, both financially and emotionally.
Adding to the difficulty is the 2,000-mile distance between Jones and his aunt. She lives in Los Angeles and he, in Atlanta. “It’s a challenge to take care of two households simultaneously,†he says, in spite of weekly conference calls with his aunt’s case manager and quarterly visits to L.A.
Fortunately, before Willis became ill, she made provisions through attorneys and accountants, including a living trust. Jones asserts that trusts are not just for the wealthy; his aunt is far from that. What has helped him most was his aunt’s sound money management, which relieved some of the financial strain that came with having to enlist the services of caregivers.
Jones has arranged for his aunt to receive in-home care services eight hours a day–which costs between $1,000 and $1,500 a week. “Nobody wants to get ill as they get older,†says Jones. “But you have to plan for that possibility.â€
Creating an eldercare plan before illness strikes is ideal, says Senior Financial Planner Vicki Brackens of Brackens Financial Solutions Network (www.vbrackensfp.com), an office of MetLife Syracuse in Syracuse, New York. While those in their 40s might think they’re too young to prepare for eldercare, Brackens says that’s actually the perfect time to consider long-term care insurance, which can often be obtained through your employer or separately from an insurance company. Many people may need money for assisted living or adult daycare well before needing skilled nursing, she adds.
The continuum of supervision starts with in-home care, in which workers assist patients with services such as cooking and cleaning, and provide companionship. According to a recent report by the MetLife Mature Market Institute, the average annual rate of home care ranges from $19,760 to $21,840. The same report shows that the average daily rate of adult daycare services is about $70, which adds up to $18,200 a year. The annual cost of assisted living communities is nearly double that of
home care, totaling, on average, $41,724 annually. Nursing homes are the most expensive long-term care options. Average rates for a semi-private room come to $78,110 annually; for a private room, the cost jumps to $87,235.“We have to realize and accept that we will get older, and as we get older, especially between the ages of 70 and 75, the need for care increases 50% to 60%,†says Brackens. This point may be most salient for black women, who have a life expectancy of 77 years. But with heart disease, cancer, stroke, and diabetes plaguing black women, they may be living longer than men but are more likely to be in poor health. Over the course of a lifetime, women spend nearly $100,000 more than men on healthcare costs: $361,192 compared with $268,679.
(Continued on next page)
Brackens says it’s important to plan as if you’re going to live for a long time. This is especially true if you’re seeking government entitlements such as Medicaid. Assisted living or nursing home costs could eat away at your retirement savings and other assets if measures aren’t taken to protect them.
Key strategies to help you prepare for eldercare:
Understand Medicaid eligibility. When people have assets to cover their medical expenses, the government expects them to use up their own money first. Once those assets are exhausted, Medicaid covers the rest. According to the National Clearinghouse for Long-Term Care Information, Medicaid covers medical care and long-term care services, including those provided in nursing home facilities. Assisted-living facilities do not, however, accept Medicaid. Financial eligibility requirements for Medicaid vary by state, but the cap is generally set at the poverty guideline, which for 2012 is $11,170 for one person (in most states). The government includes the following income sources: Social Security payments, Veterans benefits, pensions, salaries, wages, and interest from bank accounts. Lori Anne Dougl
ass, partner at the New York-based law firm Moses and Singer L.L.P., recommends hiring an elder law attorney who will represent your interests and help you save money. Many people try to spend down their money or transfer their assets to loved ones, but later find that they’re still not eligible. In all 50 states, Medicaid requires applicants to turn over five years of financial records. In some states, such as New York, applicants must account for every transfer greater than $1,000.Hire an elder law attorney. “What elder law attorneys do for the most part is help the elderly prepare the medical and financial directives they need,†says Douglass. “Medicaid pays for long-term care, but applicants must meet the financial requirements to receive assistance.†Trying to become Medicaid eligible on your own could backfire. Check with the National Academy of Elder Law Attorneys (www.naela.org). Also enlist the aid of an estate planning attorney. Contact the American Academy of Estate Planning Attorneys (www.aaepa.com).
Use trusts to protect assets. A trust legally protects and holds a person’s assets, usually for a beneficiary. Trusts have nothing to do with how much money someone has. You must use a trust that is specifically Medicaid eligible. “If someone just sets up an irrevocable trust and transfers assets, it might have benefits for estate planning purposes,†says Douglass. “But if that part is done incorrectly, your Medicaid eligibility can be adversely affected.†She recommends working with an elder law attorney who will protect your assets and assist you in becoming Medicaid eligible.