Creating a comprehensive estate plan requires you to consider several factors that might impact you as you age, including the likelihood that you, or a spouse, will need long-term care. If you do end up needing long-term care (LTC), the cost of that care could put your estate assets at risk if you failed to plan for the possibility ahead of time. One way to protect assets is to purchase LTC insurance. Long-term care insurance, however, is not right for everyone. To help you decide if it is right for your estate plan, a Charlotte elder law attorney at Potter Law Firm explains how long-term care insurance works and what to consider when deciding to purchase a plan.
Why Is Long-Term Care Planning Important?
Long-term care planning should be part of every estate plan given the probability that you will need care and the high cost of that care. When you enter your retirement years (at age 65) you will already stand a 50 percent chance of eventually needing some type of long-term care. With every passing year, those odds increase. If you are married, your spouse shares the same odds of needing LTC. Nationwide the average cost of a year in LTC was over $100,000 for 2021. The average cost of LTC in North Carolina has historically run about the same as the national average. What makes the cost of LTC so problematic though is that neither private insurance policies nor Medicare will cover expenses related to LTC.
Long-Term Care Insurance Explained
One way to plan for the possibility that you, or a spouse, will need to pay for LTC is to purchase long-term care insurance. As the name implies, long-term care insurance is a separate insurance policy that specifically covers costs associated with LTC. Understanding the details of a LTC policy can be challenging, and no two policies are the same. Before you consider purchasing a LTC policy it is imperative that you are clear on what the policy does cover, and what it doesn’t cover. For example, a LTC insurance policy may cover some, or all, of the following:
- Nursing home care
- Home health care
- Respite care
- Hospice care
- Personal care in your home
- Services in assisted living facilities
- Services in adult day care centers
- Services in other community facilities
Like any other type of insurance, a long-term care insurance policy may also exclude certain types of treatment or care. It is common, for instance for a LTC policy to exclude mental or nervous disorders or diseases, other than Alzheimer’s disease or another dementia. They also frequently exclude alcohol or drug addiction as well as attempted suicide or self-inflicted injuries. While these exclusions may not pose a significant problem, some of the limitations of the policy may.
Things to Consider When Contemplating a LTC insurance Policy
- The cost you will pay over the lifetime of the policy. Premiums increase the older you are when you take out a policy; however, even a lower annual premium will add up if you are paying that premium for 20, 30, or even 40 years before you use the coverage.
- Waiting period. Many LTC policies have a waiting period, or “elimination period,” during which time the policy will not cover expenses, meaning you will be responsible for covering them.
- Maximum benefits. Be sure you understand if the policy has an annual or lifetime maximum because you will be responsible for any expenses that exceed those maximums.
- Coverage away from home. Will the policy cover you outside of the U.S.? If not, are you planning to remain in the U.S. when you retire?
- Automatic termination. Some LTC policies terminate at a specific age or after a specific number of years, once again leaving you responsible for additional expenses.
What Is Medicaid Planning?
Only you can decide if long-term care insurance is right for you; however, talk to your estate planning attorney about Medicaid planning before deciding to purchase a LTC insurance policy. The cost of a LTC insurance policy can be prohibitive for many people. While Medicare won’t cover LTC expenses, Medicaid will. Medicaid eligibility can be problematic, though, if you failed to incorporate a Medicaid planning component in your estate plan.
Contact Charlotte Elder Law Attorneys
For more information, please download our FREE estate planning worksheet. If you have questions or concerns about long-term care insurance or other elder law issues, contact the experienced Charlotte elder law attorneys at the Potter Law Firm by calling 704-944-3245 (Charlotte or Huntersville, NC) to schedule your appointment. You can reach our Ashland, KY office at 606-324-5516, and our Florence, KY office at 859-372-6655.
John’s practice focuses on the use of Wills and Living Trusts in Estate Planning to help individuals protect their families and preserve their legacies after their deaths, but his practice also focuses on the critical issues of protecting individuals with dementia or other diminished capacity, assisting individuals in qualifying for Medicaid and other government benefits to offset the costs of long-term care, and providing special needs planning.
John is admitted to practice law in North Carolina, South Carolina, Kentucky, and Ohio, and he is accredited by the Department of Veterans Affairs.
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