Talking to Your Parents About Long-Term Care

Talking to Your Parents About Long-Term Care

Talking to your parents about long-term care might be one of the most difficult conversations you can have. Let’s face it: None of us likes to think about the possibility that we will have to rely on someone else to take care of us someday. It’s even harder to stomach the idea of ending up in a nursing home. In fact, a 2018 survey by Nationwide Retirement Institute found that 56 percent of respondents would rather die than live in a nursing home.1

Yet, here I am saying that you should talk to your parents about something they might find even worse than death. Why? Because I’ve learned from experience that the sooner you start talking about long-term care, the more time you’ll have to plan for it and the easier it will be to keep emotions out of the conversation.

By having conversations with your parents about long-term care well before there is a need for it, you’re talking in hypothetical terms. “If something happens, do you have a plan…” When Mom is already losing her memory or Dad has had a stroke and needs round-the-clock care, the conversation shifts from “If this happens” to “How are we going to handle this?” The chance to have a rational discussion is most likely gone now that everyone is in crisis mode.

I know what you’re thinking, though. Why even bother talking about something that might never happen? Let me throw out a few facts and figures for you to consider:

About 70 percent of adults 65 and older will need long-term care at some point.2

The average length of long-term care for those who need it is s.9 years.s

Women are more likely to need a high level of care – 4.4 years versus

s.2 years for men.4

More than a quarter of Americans turning 65 will have long-term care costs of at least $100,000; 15 percent will have costs that exceed

$250,000.5

Medicare does not pay for most long-term care services – typically just short-term care in a nursing facility after hospitalization.6

As you can see, the odds that your parents will need long-term care are pretty high. If they need care, the cost can be extremely high. Professional care can range from about $4,000 a month for a home health aide or assisted living to more than $8,000 a month for a private room in a skilled nursing facility, according to figures from the 2018 Genworth €ost of €are Survey.7 The problem is, most Americans – perhaps even your parents – aren’t prepared to pay for this cost. As I pointed out, Medicare typically does not cover long-term care. The same goes for health insurance.8 Long- term care insurance is available, but only 11 percent of adults have it, according to the Bipartisan Policy €enter.9 As a result, most people who need long-term care end up relying on family or friends to help. That means you could be your parents long-term care plan.

Before you say, “Of course I’ll help care for my parents,” you need to understand what it entails. For starters, caregiving can be a full-time job. I know this from my own experience with my mom, who has Alzheimer’s disease. An Associated Press-NOR€ €enter for Public Affairs Research study10 also found that the amount of time about a quarter of caregivers spend each week providing care is equivalent to a full-time job. Here are some more statistics from that study, which show what an undertaking being a caregiver really is.

Eight in 10 caregivers pay for costs out of their own pockets, with 1s percent spending $500 or more a month.

4s percent of caregivers have dipped into their savings, and 2s percent have reduced how much they saved for retirement.

s9 percent of caregivers have a health problem, and 40 percent say it’s harder to manage their own health as a result of caregiving.

In short, being a caregiver can take a serious toll on your finances and your health. If you have children of your own, you need to consider what the ripple effects of caring for a parent will have on them. I’m not sharing all of these statistics to scare you; well okay, maybe a little. But I want you to be armed with facts that you can share with your parents as you discuss the need to plan for long-term care. These facts also can inform your decision about how much help you’re willing and able to provide your parents.

WHAT LONC-TERM CARE IS

The standard definition of long-term care11 is a range of services to help people with the basic activities of daily living, including bathing, dressing, eating, using the toilet, taking medication, shopping for groceries, and managing money. People who need long-term care typically have a disability or chronic health condition that requires them to get help with one or more of the activities of daily living. This care can be provided at home by family, friends, or home health aides, through community-based services, in an assisted living facility, or in a skilled nursing home.

In the very early stages of Alzheimer’s, my mom didn’t really need any help. Her memory loss wasn’t affecting her ability to care for herself or stay on top of her finances. By the time it became quite obvious that she was having trouble remembering things, I had to take away the car keys and hire someone to drive her on errands. I started keeping closer tabs on her finances by monitoring her mail for sweepstakes entry forms and donation solicitations from groups to which she had no ties. And I monitored her bank account online.

Within a couple of years, as it became more difficult for her to prepare her own meals and take care of her house, I moved her in with me. I gave her the medication she was taking daily and took her to her doctor’s appointments. I made sure she ate breakfast and provided her with dinner every night. And I hired a home health aide – who was paid by the hour – to help her during the day while I worked. If my family traveled, we took my mom with us or lined up full-time care for her.

But it became increasingly difficult to care for her in my home. I had three young children who needed my constant care and attention. But what they

got was an exhausted, stressed-out mom who was stretched to the limit by juggling work, household duties, and caring for her mom. The bigger problem, though, was that I didn’t think my mom was safe. I was afraid that she would wander off because she lived in a separate apartment in my house that had its own entrance. Of course, I couldn’t lock the door to her apartment from the outside. So she could come and go, which meant she could decide to take a walk on her own and end up getting lost. Plus, the apartment was on the second floor – which meant there was a risk of her falling down the stairs.

I talked to her about living someplace where she could get round-the-clock care in a safe environment. But she would forget we had those conversations within five minutes. So I visited memory-care facilities (assisted living facilities that provide specialized care for people with dementia) and chose one for her. I hated that I had to make this decision for her and that we hadn’t talked before she developed Alzheimer’s disease about the possibility that she might need this sort of care. However, the good news is that moving her into an assisted living facility was actually much easier – and less emotional – than moving her out of her house and into my home (which I describe in the next chapter). She simply said, “So I’m living here now.” I answered, “Yes,” and she settled right in and started making friends.

My mom is a social person, so living in a place where she is surrounded with others actually is great for her. It’s been six years since she moved into assisted living, and she still participates in daily activities with other residents to the extent that she can. When I’m with her, I can enjoy being her daughter rather than feel stressed about being in a role of caregiver.

There are aides who help her bathe, dress, eat, and use the toilet. If you become a caregiver for your parent, these are all things you might have to do. (Yes, men, you might have to bathe your mom.)

This care has come with a high cost – more than $s00,000 over six years. Her monthly Social Security benefit covers about half of the cost. Because my mom does not have long-term care insurance, I’ve used her retirement savings, proceeds from the sale of her house, and an inheritance from her parents to pay for the rest. It’s taken some very careful planning to make sure the money she has lasts long enough to cover her care.

OPTIONS FOR CARE

If your parent needs care, there are several options. Understanding and exploring these options before care is needed is important because it will help you and your parent figure out what is affordable and what will meet his or her needs over time. Keep in mind that care doesn’t have to be provided in just one setting. Your parent might be able to receive care at home, then move to a facility as he or she needs a higher level of care.

When weighing options for care, it’s also important to consider your family’s values. Many cultures expect that the family will care for its elder members. That might mean that you need to take steps sooner rather than later to bolster your finances or make adjustments (such as moving to a house that can accommodate your parent) so you can be a caregiver.

You might also want to consider hiring a geriatric care manager – also called an aging life care professional – who can help evaluate housing options for your parent, coordinate care, and assist with the financial issues, such as filing insurance claims. The biggest benefit of working with an aging life care professional is that you get a third party who can facilitate difficult conversations about long-term care with your parent. You can find one near you through the Aging Life €are Association’s website at www.aginglifecare.org.

At home: As I mentioned, most people prefer to stay in their homes. It can work if there is someone – either a friend, family member, or professional – who can provide care and if the house meets your parent’s needs. Professional in-home care services range from companion care providers who help people who need a low-level of assistance to personal care assistants who help with the activities of daily living such as dressing, bathing, and preparing meals, to nursing assistants who can provide some medical care. The median hourly cost of a home health aide is $22, according to Genworth’s 2018 €ost of

€are Survey. 12

You can find in-home care services near you at €aring.com. You also can contact the local Area Agency on Aging to learn about home health agencies. To get the contact information for your local AAA, call the Eldercare Locator at 800-677-1116 or visit

https://eldercare.acl.gov. If your parent lives in a rural area, there might not be any home care service agencies. In that case, you might need to reach out to your parents’ friends, neighbors, or place of worship to get recommendations for caregivers in the area. If you will be your parent’s caregiver and your parent can afford to pay for care, consider talking to your parent about getting paid for the services you provide – especially if you’re giving up a full-time job to be a caregiver. If your parent agrees, work with an elder law attorney to draw up a contract that spells out your scope of work and the payment you’ll receive.

Home care isn’t always the best option, though, if the house isn’t set up to accommodate a parent experiencing physical or cognitive decline. For example, Debra Newman,1s founder and €EO of Newman Long Term €are, which is one of the largest long-term care insurance brokerage firms in the U.S., had clients who lived in a house with a spiral staircase. Each morning, the wife helped her husband get up and dressed then held his belt to prevent him from falling as he walked down the stairs. At night, he would hold onto her as she walked up the stairs. It wasn’t a safe situation for either of them, and the couple really needed to be in assisted living, Newman said.

Adult day care: This community-based service is an affordable alternative to home health care. Linda Fodrini-Johnson,14 founder of Eldercare Services and a care manager with more than s0 years of experience, said she often turns to adult day care when she has clients who can’t afford to quit a job to care for a parent and the parent can’t afford full-time home care. Adult day care services provide transportation, social activities, meals, and support services in stand- alone centers or in connection with senior centers, churches, or hospitals. You can find adult day care services by searching the National Adult Day Services Association’s database at www.nadsa.org, by contacting your local Area Agency on Aging, by or contacting your state’s adult day services association. The median monthly cost of adult day care services is $1,560, according to Genworth’s €ost of €are Survey.

Assisted living: Assisted living facilities have staff who can provide round-the-clock help with the daily activities of living, such as bathing, dressing, and meal preparation. They do not provide skilled nursing care, but they might have a nurse on staff. Residents typically have the option of a private or semi-private room (a shared room, which will cost less). They tend to provide daily activities – and even outings – to keep residents engaged. €aring.com and APlaceforMom.com offer guides about choosing assisted living and searchable databases to find facilities. The median monthly cost of assisted living is $4,000, according to Genworth’s €ost of €are Survey.

Memory care: There are assisted living facilities that provide specialized care for people with memory loss. Like traditional assisted living facilities, memory care facilities provide help with daily activities of living. However, they are secure facilities that are locked to prevent residents from wandering outside, and they provide specialized care tailored to the needs of people with dementia or other cognitive impairments. Sometimes assisted living facilities have memory care units within them. If your parent needs this sort of care, look for a facility that has nurses on staff or contracts with a medical care provider to come to the facility because makes it so much easier to get medical care for a parent with dementia. It allows your parent to be treated for minor issues in familiar surroundings rather than having to leave the facility to see a doctor, which can be incredibly confusing

– even traumatic – for someone with dementia.

Genworth’s €ost of €are Survey doesn’t provide the median cost of memory care, but it tends to be higher than assisted living yet lower than skilled nursing.15 You can find guides for choosing memory care facilities and search for facilities in your area at €aring.com and APlaceforMom.com.

Skilled nursing: These licensed health care facilities provide 24-hour medical care, which your parent might need in the late stages of Alzheimer’s or if a medical condition has left your parent unable to function independently. The care in these facilities is typically provided by registered nurses, certified nurse assistants, and physical, speech and occupational therapists.16 And it’s a higher level of care than what is provided in assisted living facilities. Medicare.gov has a

guide to choosing a nursing home and detailed information about every Medicare- and Medicaid-certified facility at www.medicare.gov/nursinghomecompare/search.html. As I said, Medicaid does cover nursing home care, but Medicare will cover only short stays after hospitalization. The median monthly cost of nursing home care is $7,441 in a semi-private room and $8,s65 in a private room, according to Genworth’s 2018 €ost of €are Survey.17

Masonic homes: The fraternal organization of Freemasons has senior living homes in communities across the U.S. that provide varying levels of care, including at-home care.18 Many are open to the public, not just to Masons. Some offer care regardless of ability to pay if certain requirements are met.19 And some offer a life care plan (typically for Masons) that allows residents to give a majority of their assets to the Masonic home in return for a lifetime of care, even if the assets don’t cover the entire cost of care.20 To find a Masonic home, search “masonic home” and the city or state where your parent lives.

WAYS TO PAY FOR LONC-TERM CARE AT HOME OR IN A FACILITY

Although long-term care can be expensive, there are ways to soften the blow. But that takes planning – which is why I’m advocating that you talk to your parents sooner rather than later to find out whether they have a plan and to formulate one if they don’t. Here’s what you need to know about the various ways to pay for long-term care.

Long-term care insurance: One of the first money conversations I had with my mom was about long-term care insurance. Well, before she was diagnosed with Alzheimer’s, I suggested that she look into getting a policy. I simply said she should consider getting this type of insurance because it would help pay for care if she ever needed it. She took my advice and met with an insurance agent, but unfortunately was denied coverage because of another medical condition. If I had been smart, I would’ve used that opportunity to discuss her finances and create a plan of action in case she ever needed care – but I dropped that ball.

If my mom had been able to buy long-term care insurance, it would’ve paid for care in a nursing home, an assisted living facility, or in her home – which is where most people prefer to get care. There’s a myth that long- term care insurance is unaffordable for most people, Newman said. To be clear, it’s not cheap. But the younger you are when you get a policy, the more affordable it usually is. For example, Newman said a 55-year-old couple buying a policy together could get coverage for $125 a month each. “I would call that affordable,” she said – especially when you consider that the median monthly cost of a home health aide is about $4,000 and skilled nursing care is more than $8,000. If your parents are in their 60s and still in good health, they can get a policy with a decent premium, Newman said. If they’re already in their 70s or have health issues, keep reading for other options that might work better for them because they might not qualify for long-term care insurance.

When getting a long-term care insurance policy, there are four key things to consider:

How much of a monthly benefit does your parent want in today’s dollars? To figure out how much coverage is needed, Newman recommends researching how much home health care costs where you live. Because most people get long-term care in their homes, your parent will want a benefit that can cover the cost of this sort of care (or a large percentage of it). You can use Genworth’s €ost of €are calculator at https://www.genworth.com/aging-and-you/finances/cost- of-care.html to find out the median costs of various types of care in your area.

How long does your parent want the benefit to last? Policies with unlimited benefits used to be more common, but now more companies tend to issue policies with benefits limited to a certain number of years. Newman said the average long-term care insurance claim is three years. The maximum benefit will then be calculated based on the monthly benefit you want and the number of years you want the benefit to last. So a $5,000 monthly benefit with a four-year benefit period would provide a maximum benefit of $240,000 that could be used to cover long-term care costs.

How long of an elimination period does your parent want? The deductible for long-term care insurance is called the elimination or waiting period. It’s the number of days the policy holder is willing to pay for long-term care costs out of pocket before insurance coverage kicks in. Elimination periods are usually s0, 60, or 90 days. Opting for a longer elimination period can help keep down the cost of insurance.

Does your parent want inflation protection? Just like the cost of pretty much any other good or service, the cost of long-term care rises each year. That’s why long-term care policies offer inflation protection so benefits keep pace with the rising cost of care. Inflation protection is important, but it also makes coverage more expensive. Most people opt for s percent inflation protection, but opting for 1 percent will cost s0 percent less, Newman said.

There are several other ways to save money on a long-term care insurance policy. For example, a shared care rider that connects the policies of a couple – including people who are domestic partners – reduces the costs. Instead of having, say, two separate four-year benefits, the couple would have eight years between them – which also is a plus in case one partner needs more care than the other. Insurers also offer discounts of 10 percent or more to people who are in great health.21 And most states have some sort of tax incentive for people to own long-term care insurance, Newman said. Premiums also qualify as a medical expense that can be deducted on federal tax returns if they exceed a certain percentage of the taxpayer’s adjusted gross income.22

And self-employed workers may be able to deduct the cost of long-term care insurance as an expense.

Some employers offer employees long-term care insurance. Otherwise, one of the best ways to find the right policy at the right price is to connect with an insurance broker, such as Newman, who works with several companies and can help compare plans for you. You can find a broker through the American Association for Long-Term €are website, www.aaltci.org, or by calling 818-597-s227.

Life insurance with a long-term care benefit: If your parent doesn’t like the idea of getting a long-term care insurance policy that he or she

might never use, there’s another option: a hybrid life insurance policy. These policies include a long-term care benefit that can be accessed if long-term care is needed. If that benefit is never used, the policy will pay out on your parent’s death. With a hybrid life insurance policy, there’s an option to make a single, lump-sum premium payment or monthly premium payments. These policies tend to be more expensive than traditional long-term care insurance because they also provide a death benefit, Newman said. Also, the premiums aren’t tax deductible. So if your parents don’t need life insurance, they will be better off sticking with a traditional long-term care insurance policy.

Annuities: If your parent doesn’t qualify for long-term care insurance because of age or health reasons, an annuity might be an option – that is, if your parent has a large stash of cash to invest in an annuity. A lump-sum payment is made in exchange for a guaranteed stream of income over a specified period of time. Or if your parent already has an annuity, it can be transferred to a long-term care annuity, Newman said.

With an annuity that has a long-term care benefit, the payout will be more than the amount invested. For example, if you have a $100,000 annuity, you might get $200,000 in long-term care coverage, Newman said. Your parent still can tap the annuity even if he or she doesn’t need the money for long-term care.

Another type of annuity that offers long-term care benefits is a medically underwritten immediate annuity. A typical annuity would provide monthly payouts based on a person’s life expectancy.

Medically underwritten annuities are ideal for people with Alzheimer’s or a similar disease because they take into account that the annuity owner will have a shorter lifespan and will pay out more each month, Newman said.

Medicaid: This government program actually is the top payer in the nation for long-term care services.2s It pays for care in skilled nursing facilities and at home24 – but it typically does not cover care in an assisted living facility. In some states, Medicaid will even pay for family caregivers.25 However, to be eligible for Medicaid, your parent must have limited income and assets. The income amount varies from

state to state,26 but typically countable assets must be $2,000 or less for individuals or $s,000 or less for couples.27 €ountable assets do not include a primary residence (your parent’s home), household belongings, one vehicle, life insurance up to a certain amount, funds for burial up to a certain amount, and assets in specific kinds of trusts. It is possible to spend down assets – or even transfer assets – to qualify for Medicaid. But to do that, it’s best to work with an elder law attorney who specializes in helping people qualify for Medicaid. You can find one through the National Academy of Elder Law Attorneys’ website, www.naela.org.

To find out whether your parent qualifies for Medicaid coverage for long-term care, contact the local community-based services office. That office will help with the Medicaid application and, if your parent wants in-home care, will do an evaluation to determine how many hours of care your parent qualifies for, Fodrini-Johnson said. “That’s either going to open the door or shut the door right away,” she said.

Even if you think your parent’s income is too high to qualify, apply anyway because he or she might get a portion of care costs covered by Medicaid, Fodrini-Johnson said.

Veterans Affairs benefits: If your parent has a service-related disability, he or she can get nursing home care through the Department of Veterans Affairs.28 However, if your parent has a long-term care need that isn’t service-related, he or she might qualify for the VA’s aid and attendance program,29 which provides an increased monthly pension to cover the cost of care at home for veterans and their spouses,s0 or for veteran-directed care,s1 which provides a flexible budget for home or community-based care. To find a VA benefit office near your parent, visit www.va.gov/find-locations/ or call 844-698- 2s11.

Reverse mortgage: Your parents might be able to tap the equity in their home with a reverse mortgage to pay for long-term care. Adults 62 and older who own their home outright or have paid off most of their mortgage can apply for a reverse mortgage (also known as a Home Equity €onversion Mortgage) to access the equity that has built up in their home.s2 The money from a reverse mortgage can be

received as a lump sum, in monthly payments, or as a line of credit.ss To be clear, a reverse mortgage is a loan that has to be paid back. It doesn’t have to be paid back while the homeowner still is living in the home – only when the house is sold or the homeowner moves out or dies. However, the loan balance does rise over time because interest is added to the balance each month.s4 Borrowers don’t have to pay back more than the home is worth.s5 But there might not be any equity left in the home by the time it’s sold if the reverse loan balance is a much as the value of the house – which means there will be no profits from the home sale.

Also, be aware that there are several fees associated with reverse mortgages – an origination fee, mortgage insurance premiums, and closing costs. And a study by the €onsumer Financial Protection Bureau found that reverse mortgages are complex products that are difficult to understand and deceptive marketing is common.s6 So your parents should consider this option carefully. Even better, they should discuss with a financial planner whether it would make financial sense for them to use a reverse mortgage to pay for long-term care.

Self-pay: The majority of people who need long-term care receive help from unpaid caregivers, according to the Bipartisan Policy

€enter.s7 That means friends and family are taking care of them. If your parents don’t have long-term care insurance (or a hybrid life insurance policy) and don’t qualify for government benefits, there’s a good chance they will have to rely on you for care – that is, unless they have enough in savings or other financial resources.

You parents could very well have factored in the cost of long-term care into their retirement planning. If that is the case, you need to discuss with them what resources they have and how you can access those resources if you are their power of attorney and will have to oversee the payment of their care. Depending on what type of accounts your parents have, withdrawals from those accounts could be taxed differently. That’s important to keep in mind because taxes will reduce the funds that are available to pay for your parents’ care.

For example, withdrawals from retirement plans such as a 401(k), 40s(b), IRA, and SEP IRA are subject to income tax. However, if

funds are withdrawn before the account owner turns 59½, there’s an additional 10 percent early withdrawal penalty.There’s another catch to these retirement accounts. Account owners are required to take minimum distributions starting at age 70½. If they don’t, the amount not withdrawn is taxed at 50 percent.s9 So you don’t want to tap one of these retirement accounts too soon to pay for care, nor do you want to wait until your parents are well into their 70s to use this source of funds because of the steep penalty for failing to take required minimum distributions. It would be a good idea for you and your parents to work with an accountant or financial planner to develop a plan for withdrawing funds to pay for your parents’ care.

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