Strategies for Funding Long-Term Care

Planning for long-term care is critical in preparing your finances for later life. In some cases, long-term care may apply to younger people with a terminal diagnosis. Costs for the various long-term care financing options can be substantial. For this reason, you must explore the funding options and strategies, along with their nuances and complexities.

By understanding how to fund long-term care, you can plan to support your future needs proactively without compromising your or your family’s financial stability. Whether you have preexisting funding, you aim to receive the best possible financing for your care.

The Costs of Long-Term Care

By age 65, most people have a 70% chance of needing long-term care at some point during their life. By 2050, about 27 million people will need long-term care. The cost of this care depends on your location, the type of care you need, the duration, and the level of services you need. While these numbers highlight the importance of planning ahead, anyone who requires long-term care but needs support to access these services still has options.

Types of Long-Term Care

If you cannot count on free home care provided by a friend or family member, you must plan to outsource. Various types of long-term care are available depending on your preferences and needs. These costs tend to rise yearly, making it essential to start financial planning as early as possible. Three primary types of long-term care are:

Individuals who receive partial home care may also go to a facility for daytime care and supervision while their caretakers go to work. Adult day care services may include health services, meals, and activities.

Funding Options

You have many long-term care funding options. Long-term care is paid for by the individual, family members, or other financial resources. It is best to consult with a financial advisor specializing in long-term care planning to help you determine which option will best align with your needs. Out-of-pocket spending for older adults who need long-term care can amount to 40% of all paid care they receive. Long-term care financing options can include:

  • Government programs: Medicaid and veterans benefits may cover some long-term care costs if you earn below a specific income threshold or qualify for VA assistance.
  • Private financing: You can build a dedicated fund with consistent savings and investments in retirement accounts, 401(k)s, or IRAs to cover your long-term care expenses.
  • Reverse mortgages: After considering the implications and terms, you can use your home equity through a reverse mortgage to fund expenses.
  • Long-term care insurance: Depending on your age, you may be able to purchase long-term care insurance to cover costs like assisted living, in-home care, or moving into a nursing home.
  • Health savings accounts (HSAs): HSAs offer tax advantages when you use them for qualifying medical expenses — this may include costs for long-term care.
  • Pension Protection Act (PPA) annuity: The Pension Protection Act allows you to fund annuities for long-term care under a tax-free annuity option.
  • Senior bridge loans: You can access this loan by securing collateral like the home you have on the market.

Out-of-pocket spending for older adults who need long-term care can amount to 40% of all paid care they receive.

Using Your Life Settlement to Fund Long-Term Care

If you do not have any alternative funding options or need a financial boost, you can consider selling your life insurance policy. This sale is done through a Life Settlement or a Viatical Settlement. The process of selling your life insurance policy follows these steps:

  • Discussions: Your settlement professional will discuss your options and help you determine which suits your needs best.
  • Sourcing and selling: The professional evaluates your case and analyzes your medical records. Licensed institutional buyers will review your case. When they place an offer, your professional will negotiate the highest value on your behalf and share that with you.
  • Selling: Your professional collects the contracts facilitating the sale and ensures all parties sign. The buyer then owns the policy and becomes the new beneficiary. You receive the settlement value. Depending on your state laws, you may have a rescission period of 15 days to claim back your policy and refund the buyer if you change your mind.

Life Settlement

Selling your life insurance policy through a Life Settlement involves finding a third party willing to buy your policy for a lump sum. You will receive a cash payment, often more than your policy’s cash surrender value but less than the death benefit. For your insurance policy to qualify, you must be over the age of 65, your policy must be two years old, and the death benefit should be $100,000 or more.

When you sell your life insurance policy, you relinquish the death benefit. The buyer will take over the monthly premium payments and become the new beneficiary.

Viatical Settlement

You may opt for a Viatical Settlement if you are under the age of 65 and have a terminal illness. This process is similar to a Life Settlement, with a few exceptions. You must have a life expectancy of less than two years and a chronic or terminal illness.

Let Stop Financial Toxicity Sell Your Life Insurance Policy

Out of the various avenues at your disposal, selecting the one that suits your needs, preferences, and resources best is essential. Funding long-term care can combine different financial strategies like personal savings, selling your life insurance policy, or using government programs like Medicaid. You should explore all your options to ensure your peace of mind as you enter long-term care.

he helpful advocates at Stop Financial Toxicity can help you explore your options. Contact us today to learn more!

Let Stop Financial Toxicity Sell Your Life Insurance Policy