Is there financial planning for senior living?

While providing care for your older parent or family member, you may their needs increasing over time – along with the cost of in-home care. Or, perhaps providing care is increasingly straining your mental and emotional well-being. No matter the circumstances, you’re considering senior living as a possible alternative. However, cost is an important factor.

Determining whether or not your family can afford senior living is a question you can’t avoid, but don’t let assumptions about cost make you to jump to conclusions. Thoughtful and careful planning may take a bit of time, energy and discussion, but it may be worth the investment.

Can you afford a senior living community?

Modifying your parent’s existing home for safety and paying for in-home assistance, utilities, mortgage, transportation and other necessities adds up quickly. You may find that senior living actually saves your family money because it covers many living expenses in a single monthly rate.

The average monthly cost of senior living can vary depending on factors such as location, what level of care is needed and what type of community is desired. For more information on the different types of senior living care services, watch the video below.

How do you pay for assisted living? Is there a list of resources?

Below, you will find ideas, resources and tools that can help you cover the cost of assisted living.

1. Traditional resources
2. Veterans benefits
3. Loans
4. Life insurance policies
5. Long-term care benefit plans
6. Real estate

Working with a financial professional can help you identify the best course of action for your situation, which may include a combination of options.

1. Traditional resources

The most common methods to pay for assisted living are to use private funds, such as savings and investments, and sell high-value items, such as antiques, automobiles and furniture. Pensions, Social Security and retirement accounts – such as a 401(k) and IRA – are also commonly used.

2. Veterans benefits

Is your parent a veteran? The Department of Veterans Affairs has established the Aid and Attendance pension for veterans and their surviving spouses, which can be used to fund senior living. To qualify, a veteran must have:

• At least 90 days of active military service with at least one day of service during a period of national conflict, with honorable discharge, or be their single surviving spouse
• A medical diagnosis requiring assistance with two or more activities of daily living
• Insufficient monthly income to purchase required care
• Limited liquid assets, such as savings and retirement funds

If this may be a viable option to help cover the expense of senior living, please contact your local Veterans Affairs office for more information.

3. Loans

Your parent may consider tapping into their home’s equity as a possible resource for additional income; it may also be tax-deductible. A home equity line of credit is similar to a home equity loan; however, the line of credit allows you to borrow from an available pool of money as needed and only pay interest on the money borrowed. A reverse mortgage works in some situations, though it requires at least one homeowner to continue living in the house.

Personal loans may be a good short-term option, although interest isn’t tax-deductible and rates can be high, so they generally aren’t suggested. Talk to a trusted financial advisor to explore if this option is potentially useful for your family.

4. Life insurance policies

There are several ways your parent can use their current life insurance policy to free up cash that can be used to help fund their living needs. Here are a few things to consider:

• Your parent can take a loan from their current life insurance policy, with the understanding that it will reduce their policy benefits accordingly
• A life insurance policy can be surrendered to receive a cash payout
• Learn if their policy features an accelerated death benefit rider, which may give your parent access to a portion of the death benefit if they become terminally ill
• Your parent can take a life settlement, where he or she can sell their existing life insurance policy to a third-party company that typically pays more than the surrender value
• Your parent may be able to convert their life insurance policy to a long-term care benefit plan
• Before making a decision, talk to your trusted health insurance professional or financial advisor.

Before making a decision, talk to your trusted health insurance professional or financial advisor.

5. Long-term care benefit plans

Long-term care insurance covers individuals who need care or assistance with several activities of daily living, such as bathing and dressing. Coverage of expenses begins after a designated waiting period.

If your parent needs assisted living, in-home care services or skilled nursing care and does not have long-term care insurance or the funds to cover associated costs – and they do not qualify for Medicaid – they may be able to convert their existing life insurance policy to a long-term care benefit plan.

This plan covers assisted living and long-term care expenses at the time services are needed, without requiring your parent to spend down their financial assets to qualify for Medicaid coverage.

For more information on converting a life insurance policy into a long-term senior care plan, contact your trusted insurance professional or financial advisor./p>

6. Real estate

While selling your parent’s home through a real estate agent is a good option, many families capitalize on real estate investments without giving up their homes. Your parent may consider selling their home to a family member to keep it in the family, or they may want to rent their home to a family member until everyone is ready to make a long-term decision.

It’s important to keep in mind that the sale of a property could also include a tax payment resulting from appreciating over time. Be sure to consult with a financial advisor or certified public accountant to fully understand the tax implications of selling a property.

Seek guidance from the experts

The options listed in this guide are intended to be a starting point for you and your family. To determine what works best for your family’s unique situation, consult with a trusted tax professional or financial advisor to explore all of your options. They may also be able to introduce you to government benefits and programs that are available for older adults and their caregivers.