I recently attended a workshop on healthcare cost and was astonished by the impact of healthcare costs on the net worth of senior home owners. The average cost of a nursing home averages $91,000 per year, in home care about one third of that. At that rate, someone who has been able to accumulate wealth, pay off their home, and enjoy retirement in that home are all at risk by a healthcare event.
If you have to go into a Medicaid facility, any home equity will be liened by the facility and will be not be available for the senior homeowner to use. Furthermore, in order to get into a Medicaid facility, you cannot have more than $2000 in assets. Many times, people end up spending assets in advance to qualify. In effect, they are “spending themselves poor” as I heard it called. Medicare also requires that any transfers of assets for a certain time are examined and could be taken back from family members if it was determined that it should have been used for healthcare expenses. This can be a very stressful and exhausting process for all at a time when the health of a loved one should be at the top of everyones’ concerns.
The Home Equity Conversion Loan, also called a Reverse Mortgage, can provide access to the homes equity to pay for: home modifications, medical expenses, and ideally, long term care insurance policies that take the burden off the individual and create a pool of money that can be drawn upon to pay for care, either at home or in a facility. The Home Equity Conversion Loan puts a “protective umbrella” over the home’s equity and make the filing of future liens untenable.
Long term care policies come in several forms from stand alone policies with monthly or single lump sum premiums and other hybrid type policies that combine long term care money and life insurance into one policy. By taking the procedes from a HECM and buying LTC insurance you can guard against a healthcare event that destroys net worth that might have taken decades to aquire.
One of the more interesting uses of a HECM is to have the home remodeled and adaptaed to current needs. Doorways can be widened for wheel chairs, showers and bathrooms made more accessable, and any other adaptations needed to age in place. At the end of our lives, I think we would all prefer to stay in our home.
Here is a useful booklet from the Council on Aging.
If in home care is an option, it will cost much less than a facility and can extend the time that insurance funds can cover care.
A Reverse Mortgage can be used to pay premiums on long term care policies. If a Reverse Mortgage is obtained early enough, the growth of the line of credit can offset the annual premium costs.
As our citizens grow older and our life spans increase, the problem of outliving our assets is very real. A lifespan of 100 years or more is becoming more common.
Personally, I will be obtaining my own reverse mortgage in a few years as soon as I can. I might not need the funds now, but who knows what my health care needs will be at age 90,100 or even 120. I might be a bit optimistic, but who knows?
Anyway, if you would like to see how the program can help you protect your assets and provide for the long term healthcare needs, just contact me and I would happy to help.