As you age, your potential need for long-term care is significant. In fact, studies show that 48% of those age 65 and older will need some type of long-term care, with 24% of people in that age group having to pay for long-term care for two years or more.
This is a significant risk, especially considering that long-term care can be extraordinarily expensive, sometimes costing $100,000 per year or more. If you’re not careful in how you plan for these long-term care needs, then your estate’s wealth can be quickly eaten away.
That might have you worried about the future of your hard-earned wealth and your ability to provide for your loved ones, but there are action steps that you can take to more fully protect your vision of the future. That’s why in the rest of this post, we want to look at some estate planning options that you can utilize to give yourself an advantage even if you need long-term care.
Tips for effectively engaging in long-term care planning
It may not seem like it now, but there are several ways to cover your potential long-term care needs. This includes each of the following:
- Long-term care insurance: Although the premiums on these policies can be somewhat expensive, utilizing long-term care insurance can help give you a buffer between your wealth and the exorbitantly high costs of long-term care. This cushion could protect enough assets to allow you to distribute them to your loved ones when the time comes.
- An annuity: With an annuity, you transfer a lump sum of your assets to an annuity company in exchange for regular payments. Paying the lump sum reduces your assets, which could help you qualify for Medicaid assistance. However, since the annuity will then provide you with regular payments, you don’t lose the bulk of those assets like you would if you were to spend down your estate in other ways. Therefore, using an annuity can help you protect against estate depletion while still helping you secure the long-term care you may need.
- An irrevocable trust: Once assets are put into an irrevocable trust, you transfer ownership of those assets to the trust. This removes those assets from your estate, which again helps you qualify for Medicaid. If you use this option, though, you’ll want to be cognizant of the five-year lookback period. If you transfer assets to an irrevocable trust too late, then you could face a penalty.
You might have other options for covering your long-term care needs, but most people will need to qualify for Medicaid if they want to afford long-term care. But engaging in Medicaid planning is nuanced and oftentimes challenging. And if you don’t competently navigate the process, then you could end up struggling to pay for the care you need while also losing many of your assets. That’s certainly something that you should try to avoid.
Are you ready to develop an effective plan for your long-term care needs?
If you are, then now is the time to get to work developing your plan. To do so, you need an understanding of your estate planning options as well as the risks and rewards of each. Only then will you be able to make the fully informed decisions that are right for you. If you’d like to learn more about those options and how best to pursue them, then please continue to read our blog and seek out any additional guidance you may need.