Planning for Your Parent’s Retirement and Contemplating Long Term Care

The average age of a Reston adult is about 40, which means their parents are approaching retirement age.

While 40-somethings are focused on career and making sure their kids are getting prepared for college, are they also making sure their parents are prepared for retirement?

Our parents will inevitably need some form of long term care during their retirement years, so careful estate planning is important. Notably, the key word in estate planning is planning. Surprisingly, too many people do not have an adequate plan.

I have found in my practice that many people mistakenly think Medicare covers all long term care expenses.

However, Medicare (Part A) only pays for care in a long term care hospital, Medicare-certified skilled nursing facility under certain conditions for a limited time or through Medicare-certified home health services like intermitted skilled nursing care or hospice care. It will never pay for in-home custodial care, nursing home, continuing care retirement community, or assisted living facility.

Suppose your parent has dementia or Alzheimer’s and is fully mobile but cannot be left alone? Long term care for your parent can range from $2,000 to more than $6,000 a month. These costs are paid out of retirement funds and can easily exceed the average person’s retirement budget.

Although rare, there are organizations that provide affordable options like flat monthly fees for basic, mid-level and advance wellness packages to fit different budgets.

In some families, a family member becomes the caregiver, usually a spouse or a child. Even when family members step up to become the caregivers, respite or additional help is also frequently required. For those who plan ahead, purchasing long term care insurance is a great way to manage these costs while being able to remain in one’s home. Another option is designating a family member to be the care giver.

Consider what happens when your parent cannot afford the cost of care or does not have a family member to provide care. The only option is nursing home or home health care covered by Medicaid.

To qualify, your parent’s monthly income cannot exceed 300% of the SSI amount for an individual, or $2,205 per month for 2017 and Medicare will require any assets to be used to pay for care, unless the assets were transferred or liquidated 5 years prior to applying for Medicaid.

A popular strategy to deal with the 5-year “look back period” is to transfer the deed to the home to a child. This may solve the Medicare problem, but it has drawbacks. In most cases, the child will pay higher taxes if he or she later sells the property.

Be proactive in 2018. Contact us via email or call me at (703) 712-8000 set up a consultation and take the necessary steps to protect yourself and your family.