Tuesday Tips for Caregivers ~ 10 Ways to Afford the Care You Need

Tuesday Tips for Caregivers ~ 10 Ways to Afford the Care You Need

How to Pay for Home Care

For most people, savings and social security income are not enough to pay for assisted living or around-the-clock home care services. Some folks will use those assets together with long-term care insurance, home sale proceeds, and contributions from family members.  Here are some additional ways to strategize the cost of home care and long-term care.

  1.  Leverage a life insurance policy – If you have been paying premiums on a whole or universal life policy for a decade or linger, and are comfortable leaving less to your heirs, you could tap the policy’s built-up cash value.  If you borrow from the policy or withdraw your cost basis, what you paid in premiums, you’ll owe no tax. If you cash int he policy entirely, you’ll pay ordinary income tax on everything but the cost basis.
  2.  Determine whether you’re eligible for veterans benefits – Veterans and veterans’ survivors who are eligible for a Veterans Affairs pension, and who have documented physical or mental restrictions, may be eligible for an increase in monthly pension benefits, called an enhanced or special monthly pension.  To qualify for pension benefits, the veteran must have served during a period of conflict, meet certain age or disability requirements, and meet certain income and net worth limits.  A surviving spouse must meet certain criteria as well.  A veteran or survivor also may qualify for an enhanced or special monthly pension if he of she is eligible for pensions benefits and needs assistance with daily activities or is housebound because of disability.
  3. Take out a home loan – Homeowners who want or need to keep a home in the family can take out home equity loans or home equity lines of credit.  Shop for the lowest setup costs, including fees for loan processing, origination, and underwriting; appraisals; and document preparation.  Some HELOC’s require only interest payments during the period which you take money out, which could be 10 years or longer. That arrangement might work well if the home will be sold within the decade. But HELOCs based on floating interest rates, pose more risk that fixed-rate home equity loans.
  4. Set up a reverse mortgage – Homeowners 62 and older who have exhausted all other options and are certain they can afford to stay in the home for the long haul may want to use this gambit when only one spouse is entering assisted living.  A reverse mortgage lets you tap your home equity for cash Depending on the loan type, you can get a lump sum or draw down the money as needed. The older you are, the more you can borrow; the maximum is about 74% of the home’s value. Reverse mortgages are freighted with significant costs: Borrowers typically pay several thousand dollars in closing costs and fees; a one-time government mortgage insurance premium can run from 0.5% to 2.5% of the loan amount.  These loans don’t have to be paid back until the homeowner moves our or dies, but borrowers still are on the hook for homeowner’s insurance, property taxes, and home maintenance expenses. If you fall behind on these costs, you could lose your home to the lender, which is why you should explore this route with caution.
  5. Choose an assisted living community with a flexible pricing structure – The most expensive, all-inclusive pricing models combine all services – for instance, three meals a day, 24 hour on-call aides, transportation, all rolled into one price.  A less costly “levels of care” or “tiered pricing” model places the senior in a price tier that entitles her to a given number of hours of care. If she can manage without more care, that options might suffice.  The potentially most affordable, fee-for-service model allows residents to pay only for services as needed. Most assisted living communities offer at least one type of pricing structure, but if you are given a choice, make your selection with care.
  6. Look for the open beds – When there’s a decline in occupancy or regional competition for residents, you might be able to negotiate the first months rent or even get it free.
  7. Choose a not-for-profit – These communities aren’t necessarily less expensive than for-profit assisted living residences, but they might cover residents who run out of funds. That protection can significantly reduce your out-of-pocket expenses if your parent stays longer than the average two years. Not-for-profit continuing care retirement communities are required to provide that guarantee to those who enter at the independent living level but might not make the same promise at the assisted living level.
  8. Opt for lower costs rooms – As with any real estate transaction, room rent corresponds to location and size. If you or your parent are able and willing to be farther from the dining room, she could save perhaps $50.00 per moth.  If she could handle a studio apartment, she could save several hundred dollars a month. Residents willing to share a one-bedroom apartment, making the living room into a bedroom, could save 40 to 50 percent of the rent, depending on the community.
  9. Discount the glitz – Consider a residence housed in an older building, or one with fewer beds. Big, new campuses operated by national or regional chains offer more amenities, at a cost, and must support expensive corporate staff.
  10. Mind the details – In any assisted living stay, you’ll need to factor in many costs aside from the rent. These might include a nonrefundable intake fee; a deposit for pets’ and fees for administering medications, home health aides to accompany your parents to medical appointments, phone and internet service, transportation, hair cuts, dry cleaning, and cultural events.

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