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How to Pay for Assisted Living in 2021

The effects of COVID-19 have many American families reeling from financial loss. So what do you do when your loved one needs to move to assisted living? How do you pay for critical senior living services in a time of financial hardship? Luckily, there are many options to help offset, or even entirely cover, the costs of a nursing home or assisted living facility. Depending on when your loved one needs to be entering long-term care, there are several avenues to explore.

 

How can I pay for assisted living now?

Life Insurance – Some life insurance policies contain a “Life Settlement” program. If you are able to take advantage of this option, there are some caveats you need to consider. The settlement from the policy may be taxed as capital gain and you may be subject to a broker fee, usually around 6% of the face value of the policy. Your loved one may have to undergo a medical exam, and could be disqualified for Medicaid.

Long-term Care Insurance – In short, long-term care policies can be used to cover your loved one’s stay, depending on the policy terms. Although they were originally designed to help with chronic conditions or disabilities, some policies cover stints in a long-term care center, assisted living facility, or even in-home care. They usually have very strict requirements, as well as limits on how long your loved one can stay, or what percentage of the fees are covered. You will still need to maintain payment of the policy premiums, even if they increase.

Veterans’ Programs – Through your senior family member’s veteran pension, they may qualify to receive assisted living benefits. Confirm your eligibility for the “Aid and Attendance Program” by contacting the U.S. Department of Veterans Affairs.

Smiling happy retirees studying at the desk

 

How can I use my parent’s home to pay for a nursing home or senior care?

There are two main ways you can use your loved one’s home to help pay for their assisted living expenses. First, you can sell the home and utilize the equity to cover costs. If they need access to the money now, before the home is sold, a bridge loan can help cover expenses during the interim. If your family or loved one would rather not sell their home, renting it out can still bring in additional income. This option has the added benefit of allowing you to transition your loved one to a senior living facility without the deadline pressure of a closing.

 

Can I use Medicare or Medicaid to pay for assisted living?

You can NOT use Medicare to pay for “traditional” long-term care or assisted living. However, since Medicare is a healthcare program, it will sometimes cover shorter stays that are deemed medically necessary, such as a stay in the hospital or rehab center. Be prepared for limits on the number of days it will cover in those situations, or whether it is partial coverage. For example, Medicare may cover up to 100 days of skilled nursing care at a Medicare-approved skilled nursing facility within 30 days of a hospital stay (of at least three days for the same condition.)

 

Medicaid can cover the cost assisted living and nursing home care, but only if you qualify. Also, Medicaid will first utilize all of the applicant’s income and assets to pay for the nursing home. There are ways to avoid this, which we will mention in the next section.

 

I don’t need assisted living yet, but how can I plan to finance it in the future?

There’s no doubt that there are complex legal issues surrounding long-term care and your senior loved one’s estate. Medicaid has income limits for qualification, so many families had avoided those limits by transferring assets to family members. However, the Deficit Reduction Act of 2005 allowed Medicaid to look back at any transfers from the previous five years, potentially imposing penalties or delaying Medicaid coverage. This increased the need for advance estate planning. If you can’t afford the roughly $120,000 annual cost for individual nursing home care, consult an elder law attorney. If you have sufficient funds for long-term care, an estate-planning attorney may be more appropriate.

 

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