There are several common approaches for dealing with future long-term care expenses:
(1) do nothing;
(2) assume Medicare or Medicaid will pay for it; or
(3) Insurance or other benefits to offset the costs.
For risk of being the bearer of bad news, the first two options should not be your primary plan. If you do nothing, you are only prolonging the inevitable. About 70% of all individuals over age 70 will need some form of long-term care.
Medicare does not cover long-term care costs unless it is considered rehabilitation for a limited time post-hospital stay. Medicare does not pay for “custodial” nursing care. Medicaid, a separate federal program, may but you must qualify both medically and financially for benefits. That’s right, in order for Medicaid to pay, you and your spouse must prove you have limited resources and income. Additionally, if you gift property away in order to meet the limited allowances, your transfers are subject to penalties if made within 60 months of your Medicaid application.
Based on the restrictions with Medicaid, the sooner you evaluate how to pay for potential long-term care, the more options you will have. The most common is to use some form of insurance product such as traditional long-term care insurance or a long-term care rider for a life insurance policy. These options will give you a flow of income to offset the costs. If you do not qualify for insurance and you are a war-time veteran, you may qualify for some benefits through the VA (please note that receipt of these benefits may also be subject to restrictions on assets). If you don’t qualify for either insurance or benefits as a Veteran, there may be some additional estate planning vehicles that may be appropriate for your situation that should be discussed with an attorney.