To sell the house or not to sell the house? A Long-Term Care question
When families help aging parents make caregiving decisions (as we addressed in the last blog entry), finances always come into play. Whether the decision is to age in place and try to stay in the home with home-care services or receive services in a different living environment and reside in a senior apartment, assisted living or skilled nursing facility (a.k.a. nursing home), finances are always a consideration.
Often one of the first considerations is to sell the home to access the equity for long-term care expenses. A number of factors should be considered before jumping to that conclusion.
Long-Term Care and Medical Assistance
If the person/s have few assets and are close to being eligible for Medical Assistance to help cover long-term care expenses, selling the home and increasing the assets may not be a wise idea. Some states do not include assets, such as savings, retirement accounts, investments, etc., in the Medical Assistance calculation. However, if the state does count assets, often they do not include the house as an asset. If you sell the house and then have resultant savings, that money is counted.
Elderly Waiver and Alternative Care
A specific type of government benefit funded between the federal and state governments is the waiver program. Waiver programs for the elderly help provide services that can keep people in their home vs. entering a residential facility. With the burgeoning number of Boomers getting older and the limited resources of the government to continue to pay for total institutional care, the government is seeking ways to help provide care more economically and efficiently. Most people express an interest in remaining in their homes. Therefore, if the government can spend less to keep people in their homes and out of nursing homes, it is a win-win situation. Most states have different programs and criteria for eligibility. Again, this may be an option to review before deciding that the home must be sold to afford care.
Extra Help with Medicare Part D
To be eligible for Extra Help paying for your Medicare Part D prescription drug coverage, you must meet asset guidelines. Currently in 2012, a single Medicare beneficiary can have a maximum of $12,640 in assets. A married couple can have only $25,260. The primary residence is not included in the total assets. Again, selling a house might push someone out of eligibility for this program.
Medicare Savings Program
One of the best kept secrets about Medicare is the Medicare Savings Program. This program for lower income Medicare beneficiaries either pays only the Medicare Part B premium ($99.90 in 2012) or also covers the deductibles and co-pays for Medicare Parts A and B. The asset levels are low. In 2012 for Single–$10,000; for Married–$18,000. Again, the equity in a house is not counted unless the house is sold and savings results.
Help with Sale of Home Decision
These financial programs are just some of the issues to consider when deciding to sell a house to help aging parents or other senior adults. How do you decide? I recently heard a homecare agency professional say that a trip to an elder law attorney usually pays for itself– in savings from financial decision-making mistakes when planning for long-term care. Another source of information for state or local asset requirements is often county social workers who help administer these programs (Browse the web for “county social workers” or “county case managers”). Care managers who help evaluate housing and service needs and locate service providers can direct you to an appropriate professional for information in your state and situation. Area Agencies on Aging may also be able help locate these professionals for you.
There are obviously many factors to consider when deciding how to best meet the needs of your loved one. The decision to sell the family home can be an emotional one. Sometimes even though it seems like the simplest way to raise funds to provide services, selling the home may actually interfere with receiving those very services that could make your loved one most happy.
Caregiving Decisions—Not in Crisis, Please!
Most caregiving decisions are made in crisis. No one wants their parent/spouse/friend to need caregiving. We want to believe that everything will stay the same, and our parent will be able to continue to stay in their home on their own as long as they choose.
Often a medical crisis changes things very quickly–a stroke, a fall, an accident. But even if a parent is aging and has a chronic diagnosis (diabetes, coronary disease, etc.), we seem surprised when independence and living situation finally require change. I just heard a social worker say that he gets calls from adult children saying they were not expecting this medical/housing crisis with their parent, even though the parent is over 90 years old. We do not like to think about or plan for difficult situations.
So what are we to do to prepare? Family discussion is a great beginning. This is also usually difficult. Unless everyone is comfortable with emotionally-charged discussions, this one is usually avoided. Trying to convey what kind of home-based help or housing you might be willing to accept may not be welcomed by your future caregivers. Everyone knows there will be an end to life, but no one looks forward to enduring physical or mental incapacity before that final event. Here are some helpful resources to begin the process.
Senior Housing
Local resources may be a great place to start the evaluation process. If you do not have any idea of what kind of living situations are available, try to find a local senior housing guide. There usually are a wide range of different housing options from independent living to skilled nursing facilities (nursing homes) and everything in-between. Services range from none to meals, cleaning, personal care and medical care. Exploring choices before the crisis gives you more options.
Senior in-home services
If you want to age in place and stay in your home as long as possible, investigate what in-home services are available in your area. A good beginning source might be http://www.eldercare.gov/ from the US Administration on Aging.
Evaluating what caregiving services are needed
This local Area Agency on Aging Long-Term Care Choices Navigator asks questions to help determine what services are needed and where you might find them. This specific example is from the Minnesota Area Agency on Aging, but is a helpful framework for looking at areas of need in general.
Professional help
Overwhelmed at the thought of evaluating what is needed, finding the services and discussing it with the family? A care manager may be the professional to contact. These former social workers, nurses, counselors and gerontologists work with families to complete all these tasks. These professionals can be paid by you, the client, or the service providers. for more info: http://www.eldercare.gov/ .
Do-It-Yourself Guide for Caregiving
This Caregiving Choices PDF looks at how to help yourself as a caregiver, how to assess what services are needed, how to organize the information you have or still need, how to evaluate legal and financial issues and much more. This example includes information on national and Minnesota-based services.
Out-of-State Caregiving
http://www.ecarediary.com/ provides a way for families to stay connected and organized even if some of the family members (including the loved one needing care) are out-of-state. So valuable!
This may not be a fun activity to pursue, but if you can force yourself to just do a little research, it will pay off if you ever need to make those quick crisis decisions. Winter is a great time for indoor research…
Prefunding your Funeral–Why would you do that?
A less-obvious item to include in your retirement planning is your funeral. We addressed preplanning your funeral in a previous blog entry. (see Preplanning Your Funeral—A Gift? )
Benefits of Prefunding your Funeral
Not only does it save your family from difficult decisions at a very stressful time when you gather and share your wishes for your funeral or cremation, but you might want to consider prepaying the service in advance also. Why?
- Prefunding can protect the family from inflation cost by locking in today’s prices.
- These funded plans are flexible, and any leftover funds are returned to the estate.
- Once funds are set aside for this purpose they can become an Irrevocable Funeral Trust which is a protected asset– protected from long-term care costs, not considered an asset for Medical Assistance determination.
Protections for Your Prefunded Funeral
Today there are laws which protect preneed funds in a safe, secure and efficient manner. Although there are various funding options, the most common and inclusive is the use of a Preneed Insurance policy that is held in the insured’s name until the time of need. Then the funds are paid to the funeral home of choice, even in another state. States may have different laws. Check a funeral home in your state for your options.
This may not be the first item on your list for retirement planning, but it impacts estate planning, financial planning, caregiving and long-term care planning.
Again, have a conversation with your family. Let them know what you want to do, and find out what is important to them. They will appreciate your concern now and even more at that future stressful time. Contact a Funeral Preneed Specialist to gather information and assist you in putting funds aside safely for this purpose. Next up, caregiving.
Information provided by Meg White Heintze, Funeral and Cremation Preneed Specialist 952-201-6504 Heintze5@integra.net
Simple Estate Planning—Is that possible?
When starting your retirement planning, estate planning is a basic element. Previously we pointed out estate planning it is not only for the wealthy. We covered Health Care directives and Powers of Attorney. (See August entry “Estate Planning: It’s not just for the wealthy”) But there are other ways to keep your estate planning simple.
Beneficiaries and other designations
Any financial account for which you can designate a beneficiary provides a way to pass on an inheritance without going through probate. Retirement accounts and life insurance policies have beneficiaries. There are payable on death, POD, designations for banking accounts. Transfer on Death, TOD, are for investment accounts. Some states (Minnesota included) even have Transfer on Death Deeds, TODD, for real estate.
However, you may want to consult an attorney to make sure you are not missing tax (estate, gift, etc.) or other consequences by trying to avoid a will or trust by using only these designations. Using joint ownership with children is an area where you always want to check on the consequences of such a move. You may be limited on what you can do with your assets without your children and their spouses’ consent, and your assets may be included in your children’s assets for the purpose of divorce or bankruptcy. So what seems simple may become more complicated if you do not know the potential difficulties.
Also, a big consideration is to keep your beneficiary and other designations up to date. Remember to update if there is a death, divorce, etc. No one wants to be unpleasantly surprised because a beneficiary was not changed.
Wills and Trusts
A will gives directions for disposition of your property, but it still requires the probate process. A trust avoids probate and, therefore, may save time, provides more privacy, but costs more than a simple will. If you have property in more than one state, you definitely need to check if you can have a “simple” estate plan.
There are ways to simplify your estate planning, but remember to consult an attorney before making decisions which can affect your or your heirs’ tax or ownership situation. Next stop, funeral planning.
Retirement Financial Planning—what is the difference in perspective?
The earlier you start to save and plan for retirement, the better. Your initial financial planning revolves around investing as much as possible into your retirement accounts—401 (k), traditional IRA, Roth IRA, SEP IRA, SIMPLE IRA, Keogh plan, etc.
Accumulation vs. Distribution Phase of Financial Planning
As you get closer to your actual retirement date, you change your perspective from just accumulation of savings and type of investment used to distribution of those assets. Now you must plan to invest your savings/investments in a way to make your assets provide an income for as long as possible, hopefully comfortably for the rest of your life. Financial advisors have differing philosophies on how to accomplish this, but a financial planner who specializes in retirement financial planning definitely looks at your potential expenses/budget in retirement and develops a plan to try to produce as adequate an income stream for as long as possible.
Younger Workers
The younger you are, with a lower starting income and the more time to accumulate savings, the better case for a Roth IRA or 401 (k). You must pay income taxes on the investment as you make it, but you can withdraw the investment and earnings later with no tax liability. If you are in a lower income bracket as a young employee, you have lots of time for the money to grow and take it out later without taxes even though you hopefully are in a higher income tax bracket at that time. The closer you are to retirement, the more you need to consult a financial advisor to decide if a traditional or Roth IRA makes more sense in your specific situation—income level, years to retirement, projected income in retirement.
Taxes on Retirement Assets
During the accumulation phase when you are working and saving for retirement, you can enjoy the tax advantages of retirement accounts. However, when you are retired and start to withdraw the money from those tax-deferred accounts (traditional IRA, non-Roth 401 (k), etc), you must start paying income taxes on the investment and all subsequent earnings. So entering retirement, it is always nice to have some savings /investments outside of those tax-deferred accounts. Then you can choose which type of account is most advantageous at the time according to your income, relative value of the investment and tax consequences.
Also remember that depending on your income, your Social Security benefits could be taxable up to 85%. So far we have been discussing federal income taxes. Remember that states tax retirement income differently. Some states do not tax retirement income at all—worth a look!
Required Minimum Distribution (RMD)
If you are in the enviable situation where you have not had to withdraw from your tax-deferred retirement accounts before you reach the age of 70 1/2, at that time you will have to start withdrawing an amount equal to the total of these accounts divided by your life expectancy. (For the life expectancy divisor table, see page 102 of IRS publication 590—IRAs Use this link: http://www.irs.gov/pub/irs-pdf/p590.pdf
This has just touched on areas of retirement financial planning, but it gives you a place to start your New Year’s review if you have not considered these issues previously. Good luck!
