By Bernard A. Krooks, Certified Elder Law Attorney
Those of you who are in my generation and enjoy rock-n-roll music might remember the song written by Neil Young titled “Old Man.” Neil wrote the song when he was 24 years old and the song is about life’s similarities between Neil and the old man (someone who was about 70 years old). Well, how quickly time flies. Life expectancies today are much greater than they were even a few decades ago. While this may seem like good news to many of us, it may actually create some additional “headaches” if we don’t plan properly for our golden years.
In the current economic climate and the increased volatility on Wall Street, many are concerned that they will outlive their retirement nest egg. However, the greatest threat to the nest egg of seniors is not the estate tax, but rather the cost of long-term care. The federal estate tax will affect well less than 1% of all Americans. However, the possibility of losing our entire life savings to the cost of long-term care could affect each one of us. One consequence of our increased longevity is that we are more susceptible to chronic illnesses during our lifetimes.
In fact, over two-thirds of Americans 65 years of age and over will eventually require some form of long-term care. This care can be nursing home care, assisted living care, or in-home care. Whatever the setting, the care is extremely expensive and can deplete a family’s hard-earned savings. In the New York metropolitan area, long-term care costs in a nursing home can exceed $15,000-$20,000 a month. Care at home or in assisted living is also very expensive.
Medicare coverage of long-term care is extremely limited and subject to significant restrictions. Thus, if one of us or a loved one gets sick and requires long-term care we must either pay out-of-pocket or rely on Medicaid. Medicaid is a jointly-funded federal and state program that pays for nursing home care for seniors. However, unlike Medicare, there are strict income and asset guidelines which must be met in order to become eligible for benefits.
One way to minimize the burden of paying out-of-pocket is to purchase long-term care insurance. Here are a few thoughts to consider when reviewing long-term care insurance options:
Make sure you purchase a sufficient daily benefit. In Westchester County, the cost of a semi-private room in a nursing home can exceed $500 per day. A policy with inadequate benefits will require using personal funds to fill in the gaps.
Understand the "waiver of premium" feature. Typically, once the insured is receiving benefits from the insurance company, the premiums on the policy are "waived." If the insured's health improves and he or she is no longer eligible for benefits, then the premiums will resume.
Consider policies with an inflation rider. The cost of long-term care continues to increase faster than the overall rate of inflation. With the most recent studies showing the cost of care rising about 10% annually, insurance companies are offering policies with riders that provide inflation protection.
Consider purchasing a "paid up" policy. Because a policy's premiums may rise, consider purchasing a policy that no longer requires a premium once the insured reaches a certain age or after a given number of years
These are just some of the things to consider when reviewing long-term care insurance policies. There are many more policy options and riders which may or may not suit your needs. Given the complexity of long-term care insurance policies and frequent regulatory changes, it's best to work with an insurance professional experienced in the field. It also is helpful to have the policy reviewed by a certified elder law attorney
Bernard A. Krooks, Esq., is a founding partner of Littman Krooks LLP and has been honored as one of the “Best Lawyers” in America for each of the last seven years. He is past President of the National Academy of Elder Law Attorneys (NAELA) and past President of the New York Chapter of NAELA. Mr. Krooks has also served as chair of the Elder Law Section of the New York State Bar Association. He has been selected as a “New York Super Lawyer” since 2006. Mr. Krooks may be reached at (914-684-2100) or by visiting the firm’s website at www.elderlawnewyork.com.