When it’s time to relocate loved ones to an assisted living community, the one of the first questions that arises is “How will we pay for it?” There are many resources out there, but it takes some legwork and research to figure out what programs your loved ones qualify for and which are a good fit for the situation. We hope our article, “10 Financial Options to Fund Assisted Living Care” will be beneficial.
- Bridge Loans
A bridge loan is a short term/emergency option intended for when a family is waiting to sell a house so they can move their parent into assisted living. One of the biggest benefits to a bridge loan is that they are structured so payments are made directly from the lender to the assisted living community. It is a viable option for loved ones entering assisted living and they’re selling a home, waiting for Veterans or other benefits. An alternative to Reverse Mortgages, or in cases of limited life expectancies, it is a funding option to consider. - Reverse Mortgages
Couples who are trying to finance assisted living care for one spouse while the other remains at home can be stressed about how to pay for it. A reverse mortgage can be a viable option. Available to homeowners who are 62 or older, a reverse mortgage is a loan that coverts the equity in their home into cash. The loan does not have to be paid back until the last borrower (often couples will both sign) passes away or moves from the home for one full year. The loan is not normally paid back in increments, but when the home is sold, the lender is paid back the full loan amount plus interest. - HELOC or Home Equity Line of Credit
Using their home equity for a line of credit, some individuals choose to accept loans from family or friends for their care. HELOC or Home Equity Lines of Credit are private reverse mortgages or retirement mortgages where the home is used as security to the lender. This is often done with selling a home, when the financially secure adult children are set to inherit the home. - Medicaid
Medicaid is intended to pay for health and long-term care for persons with limited financial resources. Although Medicaid will only cover about 10 percent of assisted living services, it should still be on your list to pay a portion of the assisted living fees. Do note that is it financially based assistance. Medicaid rules do not allow your loves ones to give away money to other family members in order to qualify for Medicaid. Medicaid now conducts a five-year "look-back" period - they will examine all financial dealings for at least the past five years. If money was transferred or gifted during those five years, there will be a penalty/delay in Medicaid eligibility. Many state programs offer assistance with assisted living costs for those who have no financial resources. Qualifying for such assistance usually means you have less than $2,000 in assets, although exact program requirements can vary from state-to-state. - Medicare
Medicare is a Federal health insurance program for aged (65+) regardless of income. Medicare is comprised of two parts that unfortunately does not provide much (if any) assistance with assisted living facilities, although it is critical for medical treatment and prescriptions. Visit Medicare’s website for information on coverage for Part A (Hospital Insurance) and Part B (Supplementary Medical Insurance). - Long-Term Care Insurance (LTCI)
Long-term care insurance can cover the cost of long-term care in certain types of care facilities, depending upon the policy. Policies may cover stay in assisted living, licensed nursing facilities and home health care. Premiums for Long-Term Care Insurance are based on the age of the person at the time of purchase, the benefit amount, the benefit time period, elimination or deductible and special options (i.e. inflation adjustment, non-forfeiture benefits and spousal discounts). There are different types of LTCI – and tax implications with certain policies. Here’s an article from AARP - Understanding Long-Term Care Insurance - with good information for consideration. - Supplemental Security Income (SSI)
SSI is a monthly cash payment from the government for eligible individuals in financial need who are aged 65 or older or persons who are blind or have a disability. To qualify for SSI, a person must have no or little income, assets of less than a few thousand dollars, have U.S. citizenship or qualified alien status, and U.S. residency. Here’s where you need to do your research, in certain circumstances, the SSI payment may be used towards some housing and care needs of the individual. Learn more about SSI here. - Life Settlements
If funds are needed that can be utilized in many ways, a life settlement may be of interest. It is the sale of an existing life insurance policy to a third party. The sale will be for more than the cash surrender value but less than the death benefit. Proceeds from a life settlement can be used for any purpose, including financing senior living and healthcare needs. - Senior Living Line of Credit
Responding to the growing senior population, Senior Living Lines of Credit are tailored for families who want to move to senior living and assisted living. This payment option is helpful if your loved ones need time to sell a home or other assets to pay for long term care or if a senior is waiting for federal benefits to start. Typically structured as a signature or personal line of credit of up to $50,000, these lines of credit allow families to borrow only what is needed on a monthly basis to help finance their loved ones senior housing and care needs. Like any loan, a Senior Living Line of Credit is subject to credit approval. - Veterans Benefits
The Veteran’s Aid & Attendance Pension, is a program that can provide financial help to those who require assistance with activities of daily living such as eating, bathing, dressing and undressing or taking care of the needs of nature. To qualify financially, an applicant must have on average less than $80,000 in assets, excluding their home and vehicles. It can pay up to $1,632 per month to a veteran, $1,055 per month to a surviving spouse, or $1,949 per month to a couple for veterans and surviving spouses. One of the biggest benefits of the Veteran’s Aid and Attendance Pension is that it allows you to keep more assets than most state aid programs, and it provides a higher level of assistance. Unfortunately, seniors cannot receive benefits from both the Veterans program and state programs. This is the time to do your research to see which set up is most beneficial. Learn more regarding benefits, limits and spousal coverage at the Veteran’s Aid & Attendance Program.
"At the end of the day, your options for paying for long-term care in this country are two: You pay (completely) out of pocket or you pay out of pocket until you get to the point where you impoverish yourself and then go on Medicaid," says David Kyllo, executive director of the National Center for Assisted Living, or NCAL, in Washington, D.C. in an article entitled, “Paying for long-term care”. Planning for assisted living care can be challenging emotionally as well as financially. "One of the things that we don't do well as a society is educating and training people to plan, not for their retirement years, but for the last years of their life," Kyllo says. "We don't like talking about that, so we avoid those kinds of issues." But if most would prefer to skip the discussion, there is one reality they cannot escape. "About 70 percent of the people who turn 65 in a given year will need long-term care services during the remaining years of their lives," Kyllo says.
Have you had discussions with your family regarding assisted living care for a loved one? What plans are already in place?
