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Mickey Mantle once remarked: “If I knew I was going to live this long, I would have taken better care of myself.” The elderly have a similar refrain: “I’m not sure I can afford to live this long.” While care options to assist with the needs of an elderly adult are plentiful, covering the costs for such services can quickly diminish one’s bank account. The average price for basic assisted living facilities in Orange County, for instance, range from $900-$1,500 per month for a shared room and $1,600-$2,700 a month for a private one. Assistance with daily living activities costs extra, averaging between $300 and $900 per month, according to figures supplied by Costa Mesa-based United States ElderCare Referral Agency. And 24-hour care in one’s home, nursing homes and facilities designed for elders with dementia costs even more. These high costs, along with a number of other factors, have put many seniors in a financial pinch. The challenge is a huge gap in health insurance coverage that seniors often need later in life, such as help with walking or bathing. Referred to as custodial care, this type of assistance is considered a non-medial expense and is not covered by Medicare. “That’s a huge gap in health insurance coverage in the United States and most people don’t realize that it isn’t a benefit,” said Wen Daniels of Health Insurance Counseling and Advocacy Program in a previous interview with OC Family Magazine. As a result, more and more adult children are called upon to fill this gap. It can be a daunting challenge, particularly for families caught in the Sandwich Generation whose budgets and time are already strained as they financially prepare for their children’s education as well as their own retirement. What can families do if they are already faced with such a scenario? If no funds exist, says Wen, families can take advantage of MediCal benefits in a long-term care facility, such as a nursing home. SSI can also provide financial relief if certain criteria are met. A person must be 65 or older, blinded or disabled, and have a limited monthly income of approximately $770 and no more than $2,000 in resources per individual or $3,000 per couple. Many people with assets consider downsizing. But as Bob Waltos Jr., managing partner at Northwestern Mutual Financial Network in Newport Beach, notes, they may not end up with the desired result. “One of the things people forget about with the real estate exemptions is when you relocate, even if you’re downsizing your home, you are now taking on the current cost basis of property for taxes,” he says. “A lot of people who have homes that migrated in costs from $200,000 to $600,000 think they are going to do what is a logical move and go from $600,000 down to $400,000 and put $200,000 in the bank. But they find out their monthly payments are actually going up because of the tax ramifications.” (Because of Prop. 13, California property taxes cannot be raised more than 2 percent per year. However, whenever a house is bought, the home is then taxed at its current assessed value.) Several other ideas also are outlined in a free, 32-page publication by Northwestern Mutual Financial Network entitled, “Caught in the Middle: How to Thrive in the Sandwich Generation.” Here are a few suggestions to consider. Reverse Mortgages Assuming your parents own a condo or home, for example, one way they can receive monthly income to pay for long-term care is through a reverse mortgage. Under this plan, the bank sends monthly loan payments over a long period of time. At the end of the period which should exceed your parent’s lifetimes the bank owns the home. If your parents pass away before the bank makes its last payment, some banks will let you or your siblings step in and keep the home by taking out a “forward mortgage.” Elder Care Tax Incentives If you and your spouse are helping care for a parent, and you can claim that parent as a dependent on your tax returns, you may be eligible for certain tax credits and deductions. Consult with a tax adviser to determine which of the following tax benefits you can use, including deduction for dependents, credit for dependent care and deduction for medical expenses. The Family and Medical Leave Act The federal Family and Medical Leave Act of 1993 requires companies with 50 or more employees to give full-time employees up to 12 weeks per year of unpaid leave to care for a family member with a serious health problem; continue providing health benefits during the leave of absence; and allows those employees to return to their jobs, or equivalent jobs, at the same pay level. For families not yet caught in this scenario, Waltos offers this advice: “The real answer is to start planning early and adjust your lifestyle early. Start saving more than you normally save, allocate on an appropriate basis and protect yourself in the areas that you can protect yourself, i.e., pre-funding with 529s for college education.” “A must today,” he adds, “is long-term care insurance.” To receive a copy of Northwestern Mutual Financial Network’s “Caught in the Middle: How to Thrive in the Sandwich Generation,” call 949.863.5851 or send an e-mail to bob.waltos@nmfn.com. Sandy Bennett is OC Family Magazine’s associate editor. |
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