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Consideration of Long Term Care Insurance

© Sharon Tabor Warren

Long term care insurance is a hot topic among us Golden Folks, and it needs to be a thoughtful concern of those who are approaching the golden years. The cost of any type of extended care rises every year and we know only too well that it will continue to do so. Some of us do not need to think about insuring ourselves against a prolonged need for daily assistance. The very wealthy, who in 2001 can afford to pay $30,000-60,000 per year for care, should read no farther. At the other end of the spectrum, those with few assets and limited incomes will qualify for Medicaid very quickly and don’t require insurance either.

But for those of us in the middle, with nominal assets, the shadow of long term care darkens our horizons. Let me relate a story from my tax client files to illustrate my point. Bob and Mary were both in their 80’s and their combined estate was in excess of a million dollars. Much of the estate was not liquid— a lot was real estate and not the kind that is easily marketed.

Bob, who was the younger of the two, suffered a stroke that left him unable to care for himself. Mary, a slight little lady, couldn’t care for him at home. The answer was a nursing home and the cost was in excess of $3,000 per month. (These are central Virginia amounts—that figure could be more than $6,000 in other areas.) Additionally, the monthly charge for the home care didn’t include prescriptions and supplies.

Because of the value of their assets, Bob and Mary could not qualify for Medicaid. The monthly income for the two was low—social security and a small pension. Mary sold the farm equipment, one rental house and some land. However, the house was mortgaged and the equipment went at fire sale prices. The rental properties operated at negative cash flow, and Mary had those expenses in addition to Bob’s care.

Fortunately, there was timber that sold and brought in needed cash—it provided money for the nursing home for less than three years. That was a true case of money growing on trees, but most of us don’t have that kind of a resource. Bob died last spring although his day-to-day health was such he could have lived much longer. Mary says, “Bob and his money ran out at the same time.”

Helping Mary through these past few years caused me to perform an in-depth analysis of our financial situation. We don’t have a million-dollar estate but what we own could easily be shrunk to nothing if either of us required long-term care for a year or more. Additionally, we both have children by prior marriages and this further complicates the situation, especially because the estate value is skewed to one of the partners. The next generation may resent the assets of one parent being depleted to care for the other.

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