The Dementia Journey: Overcoming Financial Roadblocks
Part Two – Finances
Adaptation is the key to turning a roadblock into a detour. In our last article, we identified the three areas that you will need to navigate in a new way, a detour if you will, in the face of a dementia diagnosis. In the next few articles, we will look at each area, one at a time: your finances, your home environment, and your support system.
It is our hope that with our suggestions and support your unexpected roadblock can be met with adaptations that can influence your ability to live well with a dementia detour.
Your finances – the looming potential for long-term care is one of the greatest concerns of those diagnosed with Alzheimer’s disease or some other form of dementia. The average cost of long-term care in New Jersey is approximately $14,000 a month, or $136,000 annually. So how do you pay? There are basically three options to pay for long-term care.
The first is private pay. By my calculation, $136,000 for four to five years (the average time spent in a long-term care facility per the US Department of Health and Human Services) equals one-half to almost three-quarters of a million dollars. The reality is that there are very few of us with the financial ability to shoulder that kind of expense, so other options need to be considered.
The second financing option is long-term care insurance. Traditional long-term care insurance was more readily available a decade ago. Many of these traditional policies have lifetime payout limits which are often insufficient to cover a four- to five-year stay in long-term care. Many private insurers have stopped offering these policies because they proved to be much more costly and far less profitable than projected. There are currently some hybrid long-term insurance options that can be purchased as a rider on your life insurance policy or as part of a retirement plan. These vary greatly and are worth exploring with your insurance broker if you have not already done so. It is also worth noting that any of these policies must be purchased in advance of any life-altering or dementia diagnosis.
The third, and most commonly used option is the federally funded Medicaid program. Unlike Medicare, which only covers short-term rehab-focused stays in a skilled nursing facility, Medicaid will cover the cost of medically necessary custodial care for those who meet the eligibility requirements. These requirements are four-fold,
- The applicant must be a U.S. citizen or have proper immigration status.
- The applicant must meet the clinical eligibility for Nursing Facility level of care, which means the individual requires assistance with three or more activities of daily living (eating, bathing, dressing, toileting, ambulating) due to physical or cognitive disabilities.
- The applicant must have a monthly income equal to less than the cost of care. (Income includes wages, Social Security benefits, pensions, veteran’s benefits, annuities, SSI payments, IRAs)
- The applicant’s assets must be limited to $2,000. With a spouse in the community, the primary home and one vehicle are exempt from this limitation. The state has a look-back period of 5 years with a penalty for people who sell assets below fair market price, transfer assets to others, or give money and property away.
Despite all these restrictions it is often possible to develop a long-term plan that helps avoid the depletion of your assets if your loved one needs long-term care. If your loved one needs nursing home care, there are special rules that allow a significant number of marital resources to be sheltered for you as a spousal resource allowance. Our attorneys can use their expert knowledge of Medicaid rules that can allow you to protect your assets from long-term care costs through a defined gifting plan. Often, this gifting is done through an irrevocable trust. Each instance is different and needs its own planning technique. If you are facing the roadblock of a dementia diagnosis, no matter how far ahead the actual detour may be, it is crucial that you get expert advice. The earlier you plan the more you can protect. The looming financial roadblock can be turned into a detour with careful planning. At Van Dyck Law Group our expert Elder Law and Estate Planning attorneys along with our compassionate and experienced Life Care Resources Team are here to help guide you and support you on this unexpected detour. In the upcoming weeks, we will address all three areas with information, advice, and resources to guide and support you on this new journey.
Linda Mundie, Director of Life Care Resources
Van Dyck Law Firm, 707 State Road, Princeton, NJ 08540