Ways of Managing Assisted Living Costs
Most people’s savings and Social Security income are insufficient to cover the cost of assisted living. Most juggle such assets with long-term-care insurance benefits, home-sale profits, and contributions from willing and able family members.
1. Use a life insurance policy to your advantage. You could utilize the policy’s built-up cash value if you or your loved one has paid on a universal or whole life policy for ten years or more—and feel peace about leaving less to heirs, you won’t owe any tax borrowing from the policy or withdrawing your cost basis (the amount you paid in premiums). The policyholder would, however, have to pay ordinary income tax on everything but the cost basis if they were to cash in the policy altogether.
2. Check to see if you qualify for veteran’s benefits. Veterans and survivors of veterans who are eligible for a Veterans Affairs pension and have verified physical or mental limitations may be eligible for an enhanced or special monthly pension. To be eligible for pension payments, a veteran must have served during a time of combat, be at least 65 years old or disabled, and have a particular amount of income and net worth. A surviving spouse must also meet certain requirements. If a veteran or survivor is eligible for pension benefits and requires assistance with daily activities or is housebound due to disability, he or she may be eligible for an enhanced or special monthly pension. The VA’s asset and net worth guidelines, according to Patrick Simasko, an elder-law attorney in Mount Clemens, Mich., aren’t set in stone. “At the end of the day, the asset test is a subjective determination made by the person who is processing the application,” he explains. For further information and application instructions, go to benefits.va.gov/pension or vets.gov/pension.
3. Take out a mortgage. According to Theodore “Ted” Sarenski, a CPA personal finance specialist and CEO of Blue Ocean Strategic Capital, homeowners who want or need to keep a house have the option of keeping the home and then taking out equity loans or home equity lines of credit. Look for the best deal on loan processing, origination, and underwriting fees, as well as appraisals and document preparation. Some HELOCs only need interest payments for the duration of the loan, which might be ten years or longer. If the house is going to be sold within a decade, such an arrangement might work nicely. HELOCs, on the other hand, are riskier than fixed-rate home equity loans because they are based on floating interest rates.
4. Get a reverse mortgage set up. You can get cash out of your home equity with a reverse mortgage. You can acquire a flat sum or draw down the money as needed, depending on the type of loan. The maximum loan amount is around 74 percent of the home’s worth. Reverse mortgages come with a slew of expenses: Closing costs and fees can reach well into thousands of dollars, and a one-time government mortgage insurance payment can range from 0.5 percent to 2.5 percent of the loan amount. Although these loans do not have to be repaid until the homeowner moves out or passes away, borrowers are still responsible for home insurance, property taxes, and upkeep costs. If you go behind on these payments, the lender may foreclose on your house, which is why you should proceed with caution. For further information, go to hud.gov and type “reverse mortgage” into the search box.
5. Look for an assisted living facility that offers a flexible payment plan. The most expensive, all-inclusive pricing plan bundles all services into one payment, such as three meals per day, 24-hour on-call aides on your floor, and transportation. In a less expensive “levels of care” or “tiered pricing” approach, the senior is assigned to a package that would offer a specific amount of hours of care. If she can cope without additional assistance, that choice may be sufficient. The fee-for-service model, which has the potential to be the most cost-effective, allows residents to pay only for the services they require. Most facilities have at least one pricing system, but if you have a choice, make your decision carefully.
6. Keep an eye out for any open beds. You might be able to bargain the first month’s rent or perhaps obtain it for free if there’s a drop in occupancy or regional competition for occupants.
7. Pick a non-profit organization. These homes aren’t always less expensive than for-profit assisted living facilities. They may, however, cover residents who run out of money. If your parent remains longer than the typical two years, this protection can dramatically minimize out-of-pocket costs. Not-for-profit continuing-care retirement facilities are required to provide such guarantees to people who enroll in independent living, but they may not do so in assisted living. However, some people are more charitable than others: Regardless of their level of care when they enroll, Masonic Villages retirement communities in Dallas, Elizabethtown, Lafayette Hill, Sewickley, and Warminster, all in Pennsylvania, guarantee continuing care and services to residents who run out of finances. Masonic membership is not required for admission or the guarantee.
8. Choose a room that is less expensive. Room rent is determined by location and size, just like any other real estate transaction. If you or your loved one is able and willing to live further from the dining room, she may save $50 per month on rent. If the resident can manage a studio, she may save several hundred dollars each month. Depending on the facility, residents who share a one-bedroom apartment and convert the living room to a bedroom could save 40 to 50 percent on rent. If you wind up sharing a two-bedroom apartment, the facility may furnish the common area, so you just need to supply furniture for your own room.
Aside from rent, there is a slew of other expenses to consider when living in an assisted living facility. Expenditures for giving medications, assistants accompanying your parent to medical appointments, phone and internet access, transportation, haircuts, dry cleaning, and cultural events are examples of nonrefundable fees. Other factors to consider include:
9. Be prepared for coverage gaps. It could be several months before a long-term-care insurer begins making payments to you or your parent. If you need to cash a CD early for a pressing need, such as moving into assisted care, your bank may waive the early withdrawal penalty. If your bank refuses to budge, Sarenski advises not to worry about the penalty. He continues, “The bank will simply modify the interest rate back to that of a savings account.” “You’re not missing anything in this low-interest environment.”
10. You can deduct the expense of your care. Once total medical expenses surpass 10% of adjusted gross income, the remaining can be deducted from the resident’s federal income taxes. Long-term-care insurance premiums and medical services are given within the institution are examples of deductible medical expenses. When someone can pay more than 50% of their loved one’s assisted living expenses, they can deduct them from their own taxes if they exceed 10% of your adjusted gross income.
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Transitioning into eldercare is complicated and often a difficult process. If you or a loved one is considering assisted living in the Fletcher NC area, we’d love to CONNECT with you. At Silverbell Homestead you would find a Safe, Loving Home.
765 Cane Creek Rd
Fletcher, NC 28732