Does Your Family Have a Long-Term Care Strategy?
Nursing homes and long-term illness aren’t happy subjects, and that’s why people typically avoid thinking about them until a sudden emergency occurs or someone mentions long-term care insurance.
Very seldom do families actually sit down and discuss how prepared they are financially for a long-term illness or permanent disability or how each individual wants their care handled by various family members. If you have never had a family meeting on this subject, you might want to consider it for a variety of scenarios:
- Your elderly parents have never told you about their finances and their wishes on this subject.
- You have older or younger relatives with a chronic condition that may lead to permanent disability later on.
- You are a single person living alone or with others and you don’t have a plan for your own care later in life.
- You or other loved ones might need to consider long-term care insurance or other options if you are financially unprepared for long-term care.
A family meeting at the kitchen table is a good start, but it might also be a good idea to bring in a trusted financial adviser to put the family and the financial pieces of the puzzle together.
Some Topics for Discussion
Starting Questions: Families and friends need to know the basics: where important papers are; how household expenses are paid; who doctors and specialists are; what medicines are being taken; and whether there’s a will, an advanced directive, a funeral plan, and money or insurance proceeds to pay for it. There may be dozens more questions beyond these based on your family’s personal circumstances. In creating this list, ask yourself, “What do I need to know if this person suddenly becomes sick or dies?”
Funding: According to Genworth Financial, the average annual rate for a private room in a nursing home is $92,000 in 2016. Surprisingly, home-based care is about as expensive as nursing home care and requires considerable coordination based on the individual’s condition. With managed care today, the majority of care is at home and considered custodial (care provided on an ongoing maintenance basis). These are all out-of-pocket costs unless an individual is covered by adequate long-term care insurance. How prepared are you or your affected relatives to shoulder these costs? Does it make sense to allocate assets toward these potential expenses or buy long-term care insurance? If the discussion leans toward insurance, what type of policy should be bought?
Caregiving Preferences: There are very few people who would opt for nursing home care over home-based care if they had a choice. Long-term care insurance can certainly cover home-based care, but it’s very important to get the broadest quality of coverage you can afford so bases are covered if more expensive and intensive care services are needed. Also, which family and friends will participate in decision making and delivery of care? Who will help and when, and will there be an option for respite care for primary caregivers who get exhausted? Finally, all family members need to know and understand everyone’s “what if?” scenarios.
Legal and Estate Issues: Every adult should not only have a will, but they should designate a health care power of attorney – a particular individual or individuals to make their health care decisions for them if they are incapacitated. Depending on a person’s assets and estate, such documents can be written in accordance with other estate directives to designate how assets may be used in the payment of care as well as the ongoing operation of a household or support of children. A financial planner can be especially helpful in guiding such decisions based on an individual’s specific situation.
Putting the Plan in Writing: When a friend or family member becomes seriously ill, people can sometimes panic, forget things, or take action reflexively outside their role. It would be worthless to spend all this time conferring on a plan without writing it down with specific assignments and sources of money to pay for various needs. A financial planner can help you and your designated caregivers draft such a document and keep it on file for distribution in case of emergency. That way, everyone will know what they’re doing when it’s time.
