He was fading. We were no longer able to deny it.
He was missing his Financial Zen Meetings after a decade of nearly perfect attendance.
His paperwork was going unsigned.
We could sense confusion in his voice when we did talk to him.
So we reached out to his family to rope them into the process.
They saw what we had seen and had been shopping for an assisted living facility because he could no longer live on his own.
And after they got him settled, they moved him out of his apartment and found medicine he forgot to take and bills he forgot to pay.
It was worse than we thought.
This is not an uncommon scenario. Taking care of aging parents rarely makes it into a financial plan until it’s undeniable.
So here are the 3 most important things you should know if your parents enter this phase of life and turn to you for help.
1. DON’T EXPECT A SAFETY NET
Medicare does NOT pay for long-term care.
Medicaid (or in California, Medi-Cal) is welfare medical care for those who qualify. (In most states less than ~$25,000 annual income and less than ~$200,000 in assets.)
HOWEVER, you don’t want your loved ones in a Medicaid facility if you can help it. What you envision a “welfare hospital” to be is just about right.
2. PRIVATE FACILITIES ARE EXPENSIVE
So if the government can’t help, what can you expect it to cost? It varies by state, but depending on their needs a facility can cost anywhere from $2,000 – $14,000 per month.
The average stay is about 2.5 years, so expect to need about $250k to cover the costs.
3. HOW TO PAY FOR CARE
LONG-TERM CARE INSURANCE: Track down any long-term care insurance policies they may have. This is insurance specifically used to pay for assisted living facilities.
LIFE INSURANCE: If they have an old life insurance policy, it’s possible to convert it into a different policy that allows them to use their death benefit for long-term care. (Called a 1035 exchange.)
PARENT’S SAVINGS: After insurance, comes your parent’s savings. Ask them to add your name to their accounts, so you can track their money for them. You’ll likely be the one paying their bills, anyways.
HOME EQUITY: Very few people go back home. A LTC facility is usually their last stop. So if they own their home, you can sell it outright, take out a HELOC or a reverse mortgage or rent it out. The goal is to get out the equity buried under their house.
FUND IT YOURSELF: If you’ve exhausted all other options, you may end up paying for their care yourself. Ideally you have siblings you can split the bills with (either 50/50 or pro rata based on income or assets).
This is a topic we can go pretty deep on. Every situation is different and there is no universal answer.
If you’re staring down this reality, please talk to a professional with expertise in this area. This is not something you want to DIY.
And most importantly, get in front of it. The sooner you start planning, the easier it will be if/when the time comes.
