Not many people understand the importance of an estate plan. An estate plan enables an individual to determine what happens at the end of their life. An estate plan includes a will, insurance policies and long-term health care plans.
According to the U.S. Department of Health and Human Services (HHS), 70% of people over age 65 will need long-term health care. Without a plan that accounts for the health complications of old age, a person might put their entire estate at risk.
Long-term care is not cheap
A 2016 cost-of-care survey identified the average rate for a room in a nursing home at around $8,000 every month. In-home care was cheaper by half, but few people can afford even $4,000 a month for an in-home aide. Accounting for these likely costs requires comprehensive planning to cover these likely costs.
Seniors can pay for health care in a few different ways:
- Medicare: A federal government aid program, Medicare offers emergency care, even in a nursing home, but with limited terms. Continuing Medicare treatments will come out of pocket.
- Medicaid: This aid program serves low-income populations that meet specific requirements. Medicaid will cover all expenses but would require a person to liquidate almost their entire estate. Liquidation could compromise a family home and a child’s inheritance.
- Long-term health insurance: Few states offer long-term health insurance policies any longer. Increases in insurance rates have made these policies notoriously expensive. If a policyholder does not need the coverage, the insurance company will keep the money.
- Living benefits insurance: Living benefits policies are more popular these days, as they combine life and health insurance into one policy. These policies cover care as needed and even pay out to one’s heirs as a life insurance benefit upon death.
- Asset-based insurance: These policies require a cash investment from the policyholder. Depending on the amount and one’s age when they made the deposit, the insurance carrier will pay out benefits as needed. Policyholders can even cancel their policy and get their money back.
Bring questions to a lawyer
The earlier one starts planning for end-of-life health care, the more money they will have when they need it. Individuals with questions can find answers with a local attorney familiar with estate planning.