Tuesday, January 1, 2554

You, your parents and long-term care

3 March 2011 by Rick Miller, CFP ?

Even after they have all grown up, your parents may still have a big impact on your life. Even if they want to be independent, and you want them to be, you may feel the need to help them in various ways both formal and informal. Many children are helping their elderly parents directly – doing chores, running errands, pay bills, to provide care. Some children provide financial support, too. As with many aspects of life, interact with your elderly parents may run more smoothly with some preparatory and planning discussion.

A recent article in the Wall Street Journal , "' talk ' with MOM and Dad" described an area that many children help their parents with – the decision on which should live as you get older and need more help. The choices can be staggering – stay at home and get help, move into an independent living arrangement or witnessed, possibly a continuous care retirement communities, and if a lot of help is needed, a nursing home.

As the article suggested, however, decisions beyond the nature of the agreement are also important. What area you live in – who know and where are their friends, or one close to you, so that it is not easy for you to visit and lend a hand? And, once you decide on a location, there are often several choices within a category – some bigger, with more resources, some smaller and friendlier – some closest to you, others more distant.

I'm going to concentrate on another aspect of this decision – how to pay for this and especially how to pay for long-term care.

Firstly, what is long-term care? It comes to medical care. Long-term care is help with activities of daily living or ADL (eating, bathing, dressing, transferring and using the bathroom). If your parents need help with some of these, they need long-term care. Can receive long-term care in all places that I mentioned earlier – at home, assisted living, retirement communities or care in a nursing home.

In addition to finding the right place, there are two further problems with long-term care: can be expensive, and it is uncertain if your parents will be required and if so, for how long. While the conversation may be difficult, it can be very useful to discuss it with your parents well in advance of when they need long-term care. In fact, it is almost impossible to start soon enough.

Why the need for long-term care is uncertain, and the potential cost is very great, is a natural opportunity for insurance. Today, the Government of the United States and States providing insurance for all those who cannot afford care through the Medicaid program. However, to be fully eligible for Medicaid, your parents will have very few goods and very low income and eligibility requirements were tightening.

Alternatively, your parents can self insure – can simply plan to pay for any care are need. If they need little or no treatment, or if their assets are very large, this work well. However, if you need a lot of care, cost can dramatically reduce their estate, they (and you!) can be found to be very painful. Also, if you end up paying the Bills, and you're looking at the assets drain away as you pay for their care in the long term, you may end up worrying about whether there will be enough and what to do if the assets run out.

Finally, there is no insurance for long-term care. Insurance long-term care provides a sum of money that is available to finance long-term care. Insurance for long-term care to describe their benefits in terms of daily benefit (e.g., $ 100 per day) and a benefit period (say, 2 years). The total is the total value of the dollar benefits newspapers (in our example, $ 100 per day times 365 days a year times 2 years or $ 73,000).

Your parents can buy a small (a small total benefit) or a lot (a great benefit) of insurance for long-term care. Important if your parents decide to buy insurance, they don't need to buy enough to cover the full cost of care. For example, if you have $ 24,000 per year in social security benefits, which will cover the first $ 24,000 a year (or so) of the costs of long-term care.

How you can help your parents decide the best approach for them? The first step is to start the discussion. You can ease into it by talking to help them remain independent for as long as possible (at home vs. an institution, assisted living vs. home care). Then you can talk with them as you would pay for long-term care. Thinking through the three great choices (Medicaid, self-insurance, insurance for long-term care) with them.

If you decide to insurance long-term care would be sensible, help them examine the alternatives. Policies of long-term care can be very complex, with lots of options. Two heads may be much better than one in coming to a decision.

In addition, purchasing a policy sooner rather than later has two important advantages. Annual premiums are lower for people who buy a policy early in life. And, the longer your parents wait, the more chance there is for their health to deteriorate. Insurance companies, strongly prefer to sell insurance for long-term care to healthy people. If your parents wait too long, it may not be able to get coverage.

Finally, if your parents decide who cannot afford insurance, long-term care, you and your brothers can offer help to pay premiums. Even if your parents are eligible for financial benefits from their insurance, long-term care, you and your brothers may be intangible benefits. Knowing that your parents will be able to afford some long-term care, and together they made steps to protect your inheritance can provide a significant peace of mind.

rickMillerRick Miller, CFP ?
Sensible financial planning & Management
Cambridge, MA

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