![[personal profile]](https://www.dreamwidth.org/img/silk/identity/user.png){kind=small}
If you or a loved one are 60 and over, now is the time to buy a private long term care insurance policy. Many of assume that Medicare will pay for nursing home coverage. It pays for only 100 days. The state (Medicaid) may pick up the tab after you 'spend down' your assets to $2000. Usually the family home* and one car is excepted.
*but only up to $500,000 in value - if your house is worth more than that - you have to use any excess equity to pay for the nursing home. Which may mean you have to sell it. Sorry little old lady whose husband was just shipped off to the nursing home. You need to find some place else to live.
No problem, you may say. I never had that much money to start with anyway. But what happens to the spouse who is not in the nursing home? States will impose limits on assets (money in the bank, retirement accounts) that the non-nursing home spouse (or the community spouse) is allowed to keep. Holding assets separately or holding assets in individual 401ks/IRAs accounts are still considered 'available' to the spouse in the nursing home. $100,000 of the married couple's assets can be shielded. The rest will have to be 'spent" on supporting the nursing home spouse.*
*there are a few exceptions to how this money can be spent - it can be spent on repairing the home, but you may have a specific window to do the repairs after one spouse enters the nursing home. Oh and you can rush out and buy a brand new car or toss some cash into a fancy burial plot. Like I said, this stuff is complex.
But a bigger problem comes when you start looking at the available income of the community spouse - your pension, social security, part time work. If the income is in your name only, you get to keep it. All your spouses income (pension, 401ks proceeds, social security) and any income that has both names on it, goes to the nursing home. You - the community spouse - also cannot count on your assets as a source of income. Remember, both spouses 401k, IRAs etc have to spent on the nursing home spouse.* And if that means pulling money out of taxable accounts and paying penalties - tough. And don't try no fancy annuities either. Oh, and if you happen to earn more than $2700/month in individual income - Medicaid will ask for 25% of your own income to be transfered to the nursing home.**
*except for the $100k mentioned above.
**But they ask nicely and I've been told you can say no
So let's look at the numbers. The most you can make from $100,000 of assets is around $3000 a year. Or $250 month. Social security may bring in another $1500-2000. Most of us will not have pensions. Working will be the only option to increase the income of the community spouse. But what if the community spouse is disabled and cannot work? How far will $2000 go if that has to cover cover food, medical insurance, medical bills, household repairs, taxes on the home, car insurance, clothing - everything.*
* Note: The community spouse's $2000 income will also be taxed. So the community spouse may take home less than that. Of course, he/she can try to live off the $100k they've been allowed to keep. If spent carefully and combined with social security and assuming no high medical bills, the cash could last another 5 years. But most of us will live for 20 years after retirement.
So what to do? Buy yourself a private Long Term Care insurance policy. In California, a 3 year plan will cost around $1300 a year or $100/month if you start buying at 65. You may also want to look into the new Partnership Long Term Care Plans that allow you to shield more assets and still qualify for Medicaid.
The other solution that American seniors are contemplating in increasing numbers: divorce.
The topic of long term care and benefits is complex. For every 'rule' I am am stating, there are exceptions and work-arounds, caveats and codicils. Consult an experienced Elder Law attorney.
*but only up to $500,000 in value - if your house is worth more than that - you have to use any excess equity to pay for the nursing home. Which may mean you have to sell it. Sorry little old lady whose husband was just shipped off to the nursing home. You need to find some place else to live.
No problem, you may say. I never had that much money to start with anyway. But what happens to the spouse who is not in the nursing home? States will impose limits on assets (money in the bank, retirement accounts) that the non-nursing home spouse (or the community spouse) is allowed to keep. Holding assets separately or holding assets in individual 401ks/IRAs accounts are still considered 'available' to the spouse in the nursing home. $100,000 of the married couple's assets can be shielded. The rest will have to be 'spent" on supporting the nursing home spouse.*
*there are a few exceptions to how this money can be spent - it can be spent on repairing the home, but you may have a specific window to do the repairs after one spouse enters the nursing home. Oh and you can rush out and buy a brand new car or toss some cash into a fancy burial plot. Like I said, this stuff is complex.
But a bigger problem comes when you start looking at the available income of the community spouse - your pension, social security, part time work. If the income is in your name only, you get to keep it. All your spouses income (pension, 401ks proceeds, social security) and any income that has both names on it, goes to the nursing home. You - the community spouse - also cannot count on your assets as a source of income. Remember, both spouses 401k, IRAs etc have to spent on the nursing home spouse.* And if that means pulling money out of taxable accounts and paying penalties - tough. And don't try no fancy annuities either. Oh, and if you happen to earn more than $2700/month in individual income - Medicaid will ask for 25% of your own income to be transfered to the nursing home.**
*except for the $100k mentioned above.
**But they ask nicely and I've been told you can say no
So let's look at the numbers. The most you can make from $100,000 of assets is around $3000 a year. Or $250 month. Social security may bring in another $1500-2000. Most of us will not have pensions. Working will be the only option to increase the income of the community spouse. But what if the community spouse is disabled and cannot work? How far will $2000 go if that has to cover cover food, medical insurance, medical bills, household repairs, taxes on the home, car insurance, clothing - everything.*
* Note: The community spouse's $2000 income will also be taxed. So the community spouse may take home less than that. Of course, he/she can try to live off the $100k they've been allowed to keep. If spent carefully and combined with social security and assuming no high medical bills, the cash could last another 5 years. But most of us will live for 20 years after retirement.
So what to do? Buy yourself a private Long Term Care insurance policy. In California, a 3 year plan will cost around $1300 a year or $100/month if you start buying at 65. You may also want to look into the new Partnership Long Term Care Plans that allow you to shield more assets and still qualify for Medicaid.
The other solution that American seniors are contemplating in increasing numbers: divorce.
The topic of long term care and benefits is complex. For every 'rule' I am am stating, there are exceptions and work-arounds, caveats and codicils. Consult an experienced Elder Law attorney.