If your parents have discovered the benefits of a senior living community and decided to make the move, it may be time to begin creating a financial budget.
While private funds are typically used to pay for expenses, families are often surprised to learn there are other options available.
5 financial resources to consider when paying for senior living
1. Start with personal savings
Make a list of all the cash, bank savings and investments that may be on hand for senior living expenses.
If the individual is still working or is receiving Social Security benefits, there may be income available. If your loved one has been diagnosed with a disability or a form of dementia, Social Security Disability Insurance benefits might be available.
Check personal savings accounts, retirement plans or pensions, as well as other investments. Does your parent have a pension plan, 401(k), and an individual retirement account (IRA)? There may also be stocks, bonds, annuities, real estate or personal property that can be sold.
2. Review life insurance policies
Life insurance can often be a source of funds to help pay for senior living expenses. Verify any restrictions but you may be able to sell a policy for its cash value. Although it’s important to understand that there will no longer be a death benefit available to heirs.
Converting a life insurance policy into a long-term care benefit is another option. This requires transferring ownership to an administrator who will make payments directly for the senior living care.
A loan may also be taken out against an insurance policy, allowing the individual to receive a percentage of the death benefit to pay toward care. This loan does accumulate interest and must be repaid before any eventual payouts to beneficiaries.
3. Confirm if there is a long-term care insurance policy
If a long-term care insurance policy was previously purchased and is still in effect, this may be another source of funds to pay for senior living. This type of insurance generally needs to be purchased before care is needed or prior to a certain age.
Depending on the terms of your policy, residential care and help with daily tasks may be covered. However, there may be restrictions that need to first be met, such as whether the individual is living with dementia or is unable to perform at least two activities of daily living, such as bathing, dressing, eating or transferring from a bed or a chair.
4. Verify eligibility for Veterans benefits
If your loved one was a Veteran or is the surviving spouse of a Veteran and meets certain restrictions including medical or personal care requirements, your parent may be eligible to receive financial benefits from the Veterans Aid and Attendance program.
When paying for senior living, one or more of the following requirements must be met to receive monthly payments in addition to the basic pension paid:
● Help is required to perform activities of daily living
● A disability requires the individual to remain mostly in bed
● The individual is living in a nursing home due to mental or physical incapacity
● Corrected visual acuity is 5/200 or less in both eyes
● The individual has concentric contraction of the visual field to 5 degrees or less
There are also financial restrictions which include not exceeding the set limit for net worth, excluding the person’s car, personal effects and primary residence. There is a three-year lookback period that can result in benefits being denied if it’s found that assets were gifted or sold below market value to reduce the net worth.
5. Consider accumulated home equity
For most people, their home is their largest asset and selling it can become the primary means to pay for senior living, if equity has accumulated.
Other options that involve the home might include renting the property and using the monthly payments to contribute to care services. A reverse mortgage is another possibility if the individual is married and the spouse will remain in the home, as the property is required to be owner-occupied.
If money is needed between the time a move to senior living is set and the home is sold, a bridge loan may be available. These loans are paid off at the time the money from the sale is received.
Milestone Retirement Communities
If your family is considering retirement living, we hope you will consider Milestone Retirement Communities. We are a trusted resource and are here to answer any questions. Find out for yourself all that a Milestone community has to offer you or your loved one, contact a community near you today to schedule a tour.