Incapacity Planning for Your Spouse

1) Chances of becoming incapacitated. As Americans are living longer and longer, the chances of needing long term care continue to grow. According to [] we have a 60% chance of needing long term care incapacitated.

2) Planning for the needs of a spouse. While both of you are well, a $60,000 income may be adequate to lead the life and have the lifestyle you want. But if one of you needs long term care then all of that income and more will be required to just pay the expenses of the spouse in need of care. How will the well spouse live and off of what?

Call 847-674-0200 for a free consultation.

3) Planning for loss of mental capacity. Needing long term care does not necessarily mean loss of decisional capacity. For planning for mental incapacity click here.

4) Paying for long term care expenses. Another aspect of disability planning is the need to pay for long term care expenses. According to a Genworth study, in 2008 the average nursing home in Chicago costs $72,567 per year. The average assisted living facility costs $54,089 per year. Home care is between $46,721 and $74,703. For more details to to this link.

There are a number of ways to pay for long term care.

a) The least desirable option is Medicaid. Medicaid is a solution of last resort. Although the government pays the bills, there is a price to pay. Medicaid will not pay for in home care. It won’t even pay for assisted living. The only thing Medicaid will pay for is nursing home care. There are numerous disadvantages to the Medicaid option.

i) You have to be without resources to such an extent that you qualify for welfare. There are gifting strategies and there are “exempt assets” that can be used to qualify you for Medicaid, but it basically means you have to be broke, or nearly so to qualify.

ii) Not all nursing homes take Medicaid patients. Those that do only have a certain number of beds for Medicaid patients.

iii) There are many services that Medicaid will not pay for such as field trips to museums, or to see the Chicago Symphony or for manicures etc. All of the Medicaid applicant’s income from social security and pension go to reducing Medicaid reimbursement. They cannot be spent on yourself.

b) The second option is to self insure. This means that when you add up your social security, your pension, your passive income from investments, that you have an ample amount to pay for your care. Of course, if you are married then it is important to make sure there is enough for your care and still sustain the well spouse in a comfortable lifestyle. If you are certain you will be able to do this, then make sure you have a Trustee to pay the bills.

c) The third option is long term care insurance. Long term care insurance has become increasingly popular because it leaves you in control, it pays for in home care which most people prefer and it presents income from other sources from diverted from a spouse’s lifestyle.

i) Long term care insurance has its downsides. One, health problems may make you uninsurable. Secondly, the premiums may not be affordable. If health is not an issue we work together with our clients and their other advisers to find a way to pay for premium without diminishing your lifestyle. For example, reverse mortgages sometimes work in these situations because the money borrowed does not have to be paid back until death.

ii) Long term care as a rider to a life insurance policy. This is a relatively new option. It has a number of advantages. First, your premiums are not wasted if you don’t need it. If you die without ever having used the long term care insurance, your loved ones receive a death benefit. Second, you can get your money back during your life if you have an emergency. Lastly, if you currently own any relatively small life insurance policies, they can sometimes be exchanged for policies that have a long term care rider

Call 847-674-0200 for a free consultation.