Funding Different Types of Long-Term Care

♠ Posted by Marc J. Soss in assisted living care,Care Options,health planning,Life Insurance,Long Term Care,long-term care facility,skilled nursing care,specialized care

Even if you are currently in perfect health, there is a significant chance you will eventually require some form of long-term care as you age. While it is common to do some sort of planning for the expenses of retirement, fewer people prepare in advance for long-term care, with the result being that many people end up blindsided by the sheer amount of expenses on a month-to-month basis. The cost of care is only increasing, and current government programs will not cover all facets of long-term care. This is why it is important to begin planning for long-term care as early as possible to ensure you or an aging loved one will receive the best possible care, without having to go into debt or sacrifice your needs. Here are some ways you can begin preparing today. Be prepared to pay for the cost Education is critical when you are planning for long-term care. For instance, how much do you know about the inner workings of Medicare and Medicaid? Contrary to popular belief, Medicare does not actually provide coverage for the ‘care’ part of long-term care. In other words, while it generally will help with critical care hospital visits and prescriptions, Medicare will not cover the cost of a nursing home, senior care facility, or an untrained caregiver over an extended period of time. There are many other circumstances, as well, in which Medicare will not cover the cost of long-term care. By planning and taking action early on—for instance, like signing up for long-term care insurance when you are younger—you can save a large amount of money. Rates increase by 2 percent to 4 percent in your 50s, compared to 6 percent to 8 percent in your 60s. Starting early will allow you to find a reasonable premium that will allow you to rest easy about long-term care decades in advance. One way to pay for long-term care is to sell your home. If you’re considering this option, make sure to either get your home professionally appraised or use an online home-value estimate. You can also sell a life insurance policy for a lump sum of money. Medicaid may cover the costs of doctor visits, as well as in-home or nursing home care services—however, seniors must meet some stringent requirements to qualify, which you can learn more about here. To learn more about your options and how to overcome financial or legal headwinds you may encounter when planning for long-term care, it’s a smart idea to contact an elder law attorney. Marc J. Soss specializes in handling elder law, estate planning, and much more. Know your long-term care options Unless you begin planning now, you run the risk of being blindsided with having a large portion of the cost of long-term care fall directly on your shoulders. Most people drastically underestimate the yearly cost of long-term care. While the specific number varies depending on your location, the quality of the facility, the amenities available, the level of specialization, and so on, expect to pay around $50,000 per year for the most basic level of care. There are several major categories of long-term care, each with their own pros and cons. Home healthcare allows you or your loved one to age in place, staying in your own home, with a skilled aide or nurse coming to provide assistance with basic necessities, like getting dressed and moving around, as well as with more serious medical situations requiring specialized knowledge and experience. This is typically the least-expensive option (the hourly rate increases as the aide’s experience and training becomes more extensive). Next, there are assisted living facilities, which strike the balance between care and independence. Assisted living facilities provide observation, assistance with daily living, and easy access to healthcare professionals and emergency services. Finally, you can also choose skilled nursing homes, which offer continuous care and support for the highest price. Which option is best depends on your needs and abilities. Long-term care shouldn’t be a burden. By planning for the cost in advance, you will help make the decisions surrounding long-term care much easier on your family, should they be necessary. To learn more, contact Ted James at tjames@tedknowsmoney.com.

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DEDUCTING THE COST OF LIFE IN AN ASSISTED LIVING FACILITY

♠ Posted by Marc J. Soss in alf,assisted living facility,internal revenue code,IRC Section 213(a),long-term care,medical tax deduction,skilled nursing care,tax planning

Many individuals in our aging population are transitioning from home ownership to life in an assisted living facility (“ALF”). Many ALF’s require a onetime entry fee and ongoing monthly charges for housing and services (meal plans, housekeeping, transportation, and social and recreational activities). The benefit of an ALF is that when a resident’s health and personal care needs become more acute, they are not forced to move to a new facility, as their level of service can be increased to include long-term care and skilled nursing care. Although the costs of an ALF can be substantial, a percentage or all of the costs can be deducted as a medical expense income tax deduction either by the individual or third party if they are providing more than half of the resident’s support. Section 213(a) of the Internal Revenue Code (IRC) allows as a deduction any expenses that are paid during the taxable year for the medical care of the taxpayer, his or her spouse, and dependents who are not compensated by insurance or otherwise. Estate of Smith v. Commissioner, 79 T.C. 313, 318 (1982). The deduction is allowed only to the extent the amount exceeds seven and one-half (7.5%) percent of adjusted gross income. Sec. 213(a); sec. 1.213-1(a)(3), Income Tax Regs. For purposes of Sec. 213 the term “medical care” includes amounts paid “for the diagnosis, cure, mitigation, treatment or prevention of disease, or for the purpose of affecting any structure or function of the body.” The entire ALF cost, including room and board, can be fully deducted on a federal income tax return as a medical expense if the individual’s health problems are classified as being “chronically ill” and if the appropriate services are “provided pursuant to a plan of care prescribed by a licensed health care practitioner” (physician, registered professional nurse or licensed social worker). An individual will qualify as “chronically ill” if a licensed health care practitioner certifies that the individual: (i) is unable to perform at least two (2) basic activities of daily living (including eating, toileting, transferring, bathing, dressing) without assistance from another individual due to loss of functional capacity for at least ninety (90) days; or (ii) requires substantial supervision to be protected from threats to health and safety due to severe cognitive impairment.

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