Financial Planning Tips for Senior Home Care
There’s no denying that home care makes life easier for both an aging senior and his or her family. But sometimes there’s a matter of financing. Fortunately, most people have options to finance the care of a loved one, whether the senior is eligible for help through Medicaid, Veteran’s Administration (VA) programs, insurance, local benefits or private financing. This guide to financing senior home care should offer some helpful advice.
Before you start phoning around looking for funding, there is a great deal of planning to be done. Having all the information available and a significant financial plan ready can make the process so much easier, which means you can get on with the more important job of ensuring your loved one has the very best care, both from you and the new professional caregiver.
Talk to the Family
Now that your loved one needs a little more help, it's even more critical that everyone in the family be on the same page. Navigating someone else's finances is tricky, mainly if your loved one has started to decline mentally, and the knowledge needed is very often spread amongst the immediate family. Maybe you know where the will is, but your sister is the only one who knows the details of the pension. Get together and share that knowledge.
It’s also important to talk about your loved one’s condition and what kind of commitment each of you can offer as a caregiver. If you know what you can cover between everyone, you can work out your senior’s needs and how much that might cost. When planning, you’ll want to be realistic about caring for your senior loved one: everyone needs a break from caregiving now and then.
It can also be good to talk in advance about what might happen should funding help not be available, who would be able to contribute what and how often.
Talk to Your Loved One as a Family
Once you talk to the family and establish a consensus on an action plan, you should talk to your parent or loved one together. It’s also never too early to ask your loved one’s wishes. Should a decline happen suddenly, your loved one may become unable to discuss these issues sooner than you think.
Along the way, you may need:
- Proof of identity – birth certificate, passport, driving license, Social Security number. You may have to prove your loved one’s age to show eligibility for benefits.
- A will – which will explain what happens to the estate should your loved one die and may state his or her wishes and provisions towards a funeral.
- Proof of power of attorney – where a family member or trusted loved one can manage a senior's assets on behalf of a senior who is unable.
- Insurance information – both life insurance and health insurance, plus information about Medicare or Medicaid eligibility. If your loved one has long-term care insurance, this will most likely cover any care needed. Forbes estimates that only around 10% of seniors do.
- Benefits information – Such as Veteran’s benefits, or other benefits gained through your loved one’s career.
- Deeds/proofs of ownership – Deeds to your senior’s home, if owned, a car, or any other items that might have significant financial significance.
- Bank accounts/investments/pensions – Proof of income and financial reserves will likely be necessary to prove eligibility for benefits. Tax returns might be needed to verify income.
- Proof of outgoings such as a mortgage, insurance payments or credit card payments. These may also be needed to show eligibility.
- A living will – what your loved one would like to happen if he or she becomes too ill to consent to medical procedures. This may state whether your loved one wants to be resuscitated if he or she stops breathing or whether he or she would accept blood transfusions.
Talk to a Lawyer
Many legal issues could arise during a loved one’s elder years. An Elder Law Attorney is specialized and possibly more equipped to help with problems that might arise. This attorney will likely understand issues around funding care and could be able to offer more advice. An Elder Law Attorney will be able to help:
- Make sure that your loved one has a valid will or estate plan
- Create a power of attorney
- Appoint a legal guardian if necessary
- Consult on a living will
Research All Funding Options
This guide to funding senior home care discusses the most common options such as Medicare and Medicaid, Veteran’s benefits and insurance. But not everybody is eligible for these benefits. If that includes your loved one, then you may have to look further into financing options. Having the above documents on hand at this stage can make this process much more manageable.
If Your Senior Owns Their Home
Home Equity Conversion Mortgage (HECM)
An HECM is a type of mortgage insured by the federal government through the Department of Housing and Urban Development. It’s a reverse mortgage that lets you borrow for care by withdrawing a portion of the equity from your loved one’s home. This essentially lets your loved one sell a part of the house, but still live in it until he or she is ready to sell. The amount withdrawn will depend on your senior’s age, the current interest rate and the value of the home. Because the government guarantees an HECM, any debt not covered by the value received by the sale of the home is written off.
Home Equity Loan
A home equity loan lets your senior borrow a lump sum against the value of your senior’s home. This differs from the reverse mortgage in that a senior must make payments against the debt as soon as the money is borrowed. Like any secured debt, if your loved one is unable to make payments the security attached to the debt would be at risk, in this case, the home.
If Your Senior Has Life Insurance
Your loved one may be able to cash in life insurance early, although will probably not receive its full value. The senior will likely no longer need to make insurance payments in the future. If your loved one is terminally ill, he or she may be able to claim a full settlement early.
If your loved one has a whole life policy, converting to term insurance or long-term care insurance may be possible. It will likely pay out less than the full value of the benefits, which can then be used to cover nursing care. Loan against life insurance – If your senior has a whole life policy with a fixed payout, he or she can most likely borrow against that amount. Your loved one may then have to make repayments against that amount, but in some cases, the amount borrowed plus interest will just be deducted when the insurance policy pays out.
If You Think Your Loved One Will Be Eligible for Benefits, But the Application is Taking Time
A bridge loan lets you borrow money for a short time. It is often used when there is a gap between closing on a new home before you finalize the sale of your old one. In this case, you would be borrowing money over a short period to pay for care until the benefits are realized. Bridge loans usually come with a higher interest rate. There may be bridge loans specific to paying for care, called Assisted Living Loans, available depending on where your loved one lives.
Preparation is Key
The better your planning, the smoother you’ll find the road to financing. The earlier in the process you can access financial information, organize it and keep it close, the easier it will be on your loved one and yourself if you need to arrange a loan or mortgage to pay for care. Keeping the family and your loved one involved in the process can avoid squabbles later. Most importantly, knowing the financial situation early can reduce significant stress on your family at what is likely to be a stressful time. If you’re looking for more information on paying for home care services, click here.