Long Term Care: What’s it all About?

Long term care costs have a heavy impact and most people don’t know how to pay them. Long term care insurance and a well crafted estate plan can help.

Many people are scared about the prospect of needing help in a long term care setting, and they are right to be worried. For many people, a spouse or adult children will become the go-to caregivers, but not everyone will have that option, says Market Watch’s article “This is how much long-term care could cost you, and don’t expect Medicare to help.”

If that’s not worrisome enough, here are facts to consider:

  • More than a third of people will spend some time in a nursing home, where the median annual cost of a private room is well over $100,000, says Genworth’s 2018 Cost of Care Survey. Don’t expect those numbers to go down.
  • Four of ten people will opt for paid care at home, and the median annual cost of a home health aide is more than $50,000.
  • Half of people over 65 will eventually need some kind of long term care costs, and about 15% of those will incur more than $250,000 in costs, according to a joint study conducted by Vanguard Research and Mercer Health and Benefits.

Medicare and even private health insurance don’t cover what are considered “custodial” expenses. That’s going to quickly wipe out the median retirement savings of most people: $126,000. With savings completely exhausted, people will find themselves qualifying for Medicaid, a government health program for the indigent that pays for about half of all nursing home and custodial care.  See our website for more information https://www.galliganmanning.com/practice-areas/elder-law/.

Those who live alone, have a chronic condition or are in poor health have a greater chance of needing long term care. Women in particular are at risk, as they tend to outlive their husbands, may not have anyone available to provide them with unpaid care and the burden of caring for their spouses affects their own health. If a husband’s illness wipes out the couple’s savings, the surviving spouse is at even greater risk with fewer options.

The best hedge against long term care costs is to purchase a long term care insurance policy, if you are eligible to purchase one and it is cost effective. Wait too long, and you may not be able. One woman persuaded her parents to purchase a long term insurance policy when her father was 68 and her mother was 54. Five years into the policy, her father was diagnosed with Parkinson’s disease. The policy covered almost the entire cost of his 24-hour care in the final months of his life. Her mother lived to 94, so the investment in the policy was well worth it.

Everyone approaching retirement needs a plan for long term care costs. That may be purchasing long term care insurance or purchasing a hybrid life insurance product with long term care benefits.  If such products aren’t available, we can craft an estate plan which facilitates using government benefits in the future, like Medicaid, so that you and your loved ones get appropriate care while preserving as much of your legacy as possible.

Reference: Market Watch (July 19, 2019) “This is how much long-term care could cost you, and don’t expect Medicare to help.”

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Social Security Benefits – What Happens When a Spouse Dies?

Social Security benefits can change after the death of a spouse.
What happens to Social Security on the death of a spouse?

Imagine both spouses are receiving Social Security when one spouse dies. What will happen with their Social Security checks?  How does the survivor obtain death certificates? How complicated will it be to obtain survivor benefits?

First, what happens to the Social Security monthly benefits? Social Security benefits are always one month behind. The check you receive in May, for example, is the benefit payment for April.

Second, Social Security benefits are not prorated. If you took benefits at age 66, and then turned 66 on September 28, you would get a check for the whole month of September, even though you were only 66 for three days of the month.

If your spouse dies on January 28, you would not be due the proceeds of that January Social Security check, even though he or she was alive for 28 days of the month.

So, when a spouse dies, the monies for that month may have to be returned. The computer-matching systems linking the government agencies and banks may make this unnecessary, if the benefits are not issued. Or, if the benefits were issued, the Treasury Department may simply interrupt the payment and return it to the government, before it reaches a bank account.

There may be a twist, depending upon the date of the decedent’s passing. Let’s say that a spouse dies on April 3. Because he or she lived throughout the entire month of March, that means the benefits for March are due, even though they are paid in April. If a check was not issued or sent back because of the date, it should eventually be reissued.

Obtaining death certificates is usually handled by the funeral director, or the city, county or state bureaus of vital statistics. You will need more than one original death certificate for use with banks, investments, etc. The Social Security office may or may not need one, as they may receive proof of death from other sources, including the funeral home.

If you were already receiving spousal benefits on the deceased spouse’s work record, Social Security will in most cases switch you automatically to survivor benefits when the death is reported.  Otherwise, you will need to apply for survivor benefits by phone at the 800 number for Social Security or in person at your local Social Security office.

If you had only received a spousal benefit as a non-working spouse and you are over full retirement age, then you receive whatever your spouse was receiving at the time of his or her death. If you were getting your own retirement benefits, keep in mind that you will not receive a survivor benefit in addition to your own retirement benefits. Social Security will pay the higher of the two amounts.

Survivor benefits will begin effective on the month of your spouse’s death. If your spouse dies on June 28, then you will be due survivor benefits for the entire month of June, even if you were only a widow or widower for three days of the month. No matter what type of claim you file, you will also receive a one-time $255 death benefit.

Reference: Tuscon.com (March 13, 2019) “Social Security and You: What to do when a loved one dies”

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