Estate Planning and Long-Term Care: Why Both Are Essential

If you live past the age of 65, you will likely need to receive some form of long-term care during your lifetime. According to the U.S. Department of Health and Human Services, 70 percent of adults will need long-term services and supports, including home care, assisted living, nursing home care, and more.

The cost of these services continues to increase, which can cause significant financial stress on an individual, their estate, and their loved ones. Proper estate planning can help mitigate these financial stresses before they become significant issues.

Planning for long-term care should be part of your estate plans, and below, we’ll discuss why both are essential to help you better control your future.

Why Planning Matters

In a recent study, only about 24 percent of Americans have a will. This number has steadily decreased as fewer people make estate planning a priority.

However, this can lead to significant issues down the line, especially as Americans live longer. According to the National Center for Health Statistics, Americans are living to about 78.4 years old, which is increasing year over year. With advanced age comes changing care needs, the cost of which can quickly add up without a plan.

You can take control of your financial future by combining long-term care and estate planning. It helps protect your financial security, ensuring your money and resources go where you intend them to, without compromising the quality of care. You will be able to balance immediate healthcare needs with long-term wealth preservation, ensuring your loved ones are well cared for.

Early preparation can reduce costs, stress, and uncertainty for families. Often, you will pay lower premiums when you get a long-term care policy earlier, allowing you to secure more favorable terms. With clear plans, your family doesn’t have to guess at what type of care you want, making it easier for your wishes to be met.

The Link Between Estate Planning and Long-Term Care

While actual costs vary by the type of care you receive and your date, on average, a shared room in a nursing home costs $111,325 annually. That cost will rise with inflation, making long-term care inaccessible for many without draining their life savings.

Thankfully, there is another way.

If you combine your estate planning with long-term care, you could protect your assets from being depleted by the high cost of care. Additionally, securing a long-term care insurance policy and outlining your wishes as part of your estate planning can act as an additional safeguard, so that you will be able to afford the care you want to receive.

Living wills, trusts, and other legal documents can ensure your care preferences are honored. Powers of attorney and healthcare directives reduce confusion, making it clear how you want your assets to be distributed to cover the cost of your care.

As a result, it will reduce the financial and emotional burden placed on loved ones. They don’t have to worry if they are making the right call when it comes to your care during illness or times you are incapacitated. Instead, they can focus on supporting you during your time of need instead of worrying about how they will afford care.

Key Components of an Estate Plan

As you consider your estate plan, several key components should be on your mind.

Wills: Living wills are documents that outline how you wish to be cared for in case of an emergency. Should you become incapacitated, it will cover the type of care you want, any preferences for life-sustaining treatment, and more.

Trusts: Trusts can be used to help you distribute your assets efficiently, directing where you want your money, property, etc. to go. If you put protections in place, it will prevent your estate from being drained to fund the cost of care.

Power of Attorney: This is the person in charge of executing your wishes. They are responsible for making all financial and healthcare decisions on your behalf if needed.

Advance healthcare directives: These explicitly outline your care wishes and who can make decisions on your behalf.

By making these decisions ahead of time, you can rest easy knowing you have a plan in place in case the unexpected occurs. This reduces stress for both you and your loved ones because no one has to wonder what your wishes are.

How Long-Term Care Insurance Complements Estate Planning

Long-term care insurance can be an essential part of your estate planning process.

Protection: Long-term care insurance protects your savings and inheritance from the costs of long-term care. Once you meet the terms of your policy (i.e., exclusion period) then the coverage will kick in to relieve the financial burden.

Flexibility: Long-term care insurance provides flexibility in choosing where and how you receive care. You may have to qualify for the type of care, including performing or needing help with select activities of daily living. Once you do, you can pick the type of care you receive, including home care, assisted living, and nursing home care.

Independence: You can maintain your financial independence while reducing the burden on your family and loved ones. This protects your sense of dignity throughout your long-term care needs.

You can build long-term care insurance into your estate planning, ensuring the provisions are in place to protect your wishes.

Common Oversights and Risks of Not Planning Early

It’s never too early to start estate planning and caring for your long-term needs. In fact, if you wait too long, it may actually be too late, making the care you desire inaccessible.

You may face limited coverage or higher premiums the longer you wait. Coverage is more expensive the older you are when you secure the policy, or pre-existing health conditions could develop that could exclude you from full coverage.
Lack of coordination can lead to significant issues, including coverage gaps, family disputes over care, and more. The more precise you are about your plans and the more intentional you are in your planning, the better the outcome.
Relying solely on Medicaid or personal savings can drain assets. The cost of long-term care can be expensive, and most traditional insurance policies do not cover it.
Failing to coordinate estate documents and insurance plans can cause unnecessary legal or financial complications. This will cause additional strain on your financial resources and drain money that could have otherwise been used for your care.

You can avoid these risks and common oversights by planning early.

Steps to Create a Coordinated Strategy

Estate and long-term care planning can be overwhelming. Below are easy steps you can follow to create a coordinated strategy that takes the guesswork out for you and your loved ones.

1. Meet with a financial advisor and an estate planning attorney. They can help you assess what types of plans you should have in place based on your assets.
2. Assess your long-term care needs. This should be based on your age, health, and family history. You can get a good idea of the type of care you may need.
3. Integrate long-term care coverage details into your estate plan documents. A long-term care insurance provider can help you understand what policies may work best for you, and you can integrate specific information into your estate planning.

Engage with professionals to help guide you through the process and answer any questions you may have along the way.

Working With Professionals to Protect Your Future

As you consider integrating long-term care into your estate plan, you should work with several professionals.

Estate planning attorneys can draft essential documents and structure trusts for your long-term protection.
Financial advisors and insurance specialists can help align the funding of your long-term care with your overall estate goals.

In general, coordinating with legal, financial, and insurance professionals will ensure that all aspects of your plan — legal, medical, and economic — work together seamlessly. You’ll have a comprehensive team of experts in place to support you through the process.

Conclusion

Estate planning and long-term care planning should work hand in hand. Together, they provide a comprehensive protection strategy that will protect your estate’s financial future while allowing you to secure the care you need.

When you take early action, you can safeguard your assets, ensure the quality of your care, and provide your family with peace of mind, knowing there is a plan in place for your care and how to fund it. Professional guidance from legal, financial, and insurance professionals can ensure your plans meet your unique needs while adhering to state and federal requirements.

Start your long-term care planning today and reach out to Lavine LTC Benefits for a free consultation. Our team of experienced professionals can help you reach your care goals without sacrificing your financial future.

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