Recent nursing home cost reports from Genworth revealed that the median annual cost for nursing home care (in a private room) is now approximately $91,000. The median rate for assisted living facilities rose almost 3% to $3,600 per month. Many individuals and families purchase long-term care (LTC) insurance policies to help cover healthcare expenses later in life. However, earlier this year a separate report showed a significant jump in LTC insurance premiums—an increase of 8.6% on average in just one year.
Retirement is becoming more expensive. North Carolina experienced subtle changes in long-term care costs within the past year. Although the annual cost of a private room in a nursing home remains the same as in 2014, the cost of assisted living jumped $720, and the cost for a home health aide rose by $1,670. View the full 2015 annual care costs for North Carolina here.
Unpredictable expenses for healthcare later in life could deplete even the most prudent saver’s assets. Planning in advance can help address potential surprises and prevent asset loss:
Tax planning. If time allows, relocating before retirement might help minimize tax burdens and offer a lower cost of living. A relocation with this intention could translate into long-term growth, depending on when the move occurs during an individual’s working years.
Gifting. A gifting strategy might be implemented to ensure assets pass to loved ones. If timed properly, gifting could help the grantor qualify for public benefit programs as discussed below. Gifting comes with risks. If a creditor claim or judgment is placed against the recipient, the gifted assets are vulnerable. Funding trusts for the benefit of family members provides asset protection and additional tax benefits in most circumstances.
Exempt and non-exempt assets. To qualify for public benefit programs, the assets an individual owns must not exceed a certain value. The use of trusts—and specialized Medicaid trusts—as well as annuities offers protection of assets for beneficiaries and help the creator qualify for public benefits.
Making a plan for nursing home costs can help preserve assets. Asset protection plans with a heavy focus on retirement address unique concerns. What is the goal of the individual when protecting assets in retirement? If they wish to remain at home, how will home maintenance costs be satisfied in addition to a home health aide? Real property and other assets could be lost to healthcare expenses without a comprehensive plan. Discuss asset protection concerns during your next retirement plan review.