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- 4 Ways to Finance Long Term Care in Minnesota
- By: RON HAGBERG
The approaching “senior tsunami” – the aging of Baby Boomers especially – will catch a great many seniors short when the time comes that they or a family member need long term care. The American population is going to be expected to assume much more responsibility for financing their own medical and long term care needs than previous generations. And, many studies have shown that the majority of Americans are woefully unprepared for their retirement years. How will future seniors finance their care if they haven’t set enough aside? Here are four possible ways that more and more people will be using to finance their long term care needs: 1.Long Term Care Insurance (LTCI) The Wall Street Journal stated that “Failing to consider long-term care insurance needs is the #1 mistake investors are making with their retirement savings” (Cracks in the Nest Eggs, 10/22/2001). There are many misconceptions and myths about the concept of LTCI. One is that care will be covered by some government program. The fact is that most long term care is needed for activities of daily living, such as eating, bathing, using the toilet, or getting dressed, which is not covered by health or long term disability insurance. And Medicare only pays for short periods of skilled care and Medicaid only covers the very poor. LTCI is really about protection of your retirement nest egg, so you don’t have to tap into assets that have been built up over the years. The earlier you buy it, the lower the cost. And, the longer you wait, the better the chance that you may not qualify if you later receive a medical diagnosis of a condition that is not covered, such as diabetes or M.S. 2.Reverse Mortgages A 2005 study by the National Council on Aging showed that reverse mortgages could be used by over 13 million Americans to pay for long-term care expenses at home, allowing many to remain independent in their homes longer. As the NCOA study said, “Most elders own their own homes and 74% of them own them free and clear.” Reverse mortgages are loans that allow homeowners aged 62 and over to convert their home equity into cash while living at home for as long as they want. Borrowers continue to live in their homes and DO NOT need to make any monthly payments. The loan comes due only when the last borrower moves out, dies, or sells their home. There are no restrictions on how the proceeds may be used, and the amount you owe can never exceed the value of the home. 3.Life Settlements You may already own a valuable asset and not even know it – an unwanted or unneeded life insurance policy. Tapping the value of that policy to pay for long term care may be a smart solution. In most cases, a policyholder can sell their life insurance policy for much more than the cash surrender value. Why would anyone consider selling their life insurance policy? Consider this fact: “Over 88% of all universal life policies never pay a benefit. This occurs because people surrender their policies to the insurance company for minimal cash, or worse, their policies lapse, generating zero value for the policyholder. A life settlement enables older individuals, businesses, and other organizations to sell policies they no longer want or need for as much as 2 or 3 times the cash surrender value. There is an active market for life settlement transactions and many companies willing to provide a quote for the value of your policy. 4.The Veterans Administration “Aid and Attendance Pension Benefit” If you are a Veteran, chances are that you have never even heard of the Aid and Attendance Benefit. The VA itself estimates that at least 2 million (probably more) Veterans and surviving spouses could qualify for this program, yet the VA does little or nothing to publicize it. Most simply, this is a special pension benefit program that provides monetary help for those who require the aid and attendance of another person to help them with eating, toileting, bathing, and dressing and undressing. It is also designed for individuals who are blind or are a patient in a nursing home because of mental or physical incapacity. Those in assisted living can also qualify. It is not, however, a benefit to pay for housekeeping, respite care, or part-time care. The Aid and Attendance Pension Benefit is designed for low-income Veterans who need daily help. Some of the qualifying conditions include: the individual must have served in the Armed Forces during at least one day during an active war; must have served at least 90 days; must have a doctor’s order that they need the aid and assistance of another individual every day; must have received an honorable discharge; may not qualify if on Medicaid or some other subsidized program. The award can be up to $1,519 per month for an individual, $976 per month for a surviving spouse, and $1,801 per month for a couple. Although it typically takes 4 to 6 months to be approved, benefits are retroactive to the date of the application.