Planning
For Your Long Term Care Costs
Where will the money come from?
Government
In an era of government cutbacks, Canadians can no longer assume that provincial health plans will take care of all their needs if they develop a long-term illness or a serious disability due to high deficits, escalating health care costs and an aging population.
Even if space is available in designated long-term care facilities, these are not necessarily the places you would want to spend months or years of your life – you go to the failicity that you are assigned, in whatever city it is in, with whoever they say will be your room mate. It can take several years to get your parent into a government subsidized facility near where you live. Not a very desirable situation.
Even when you enter a “public” care facility, they will look into your wealth to determine the contribution you will be required to make. This can put substantial strain on limited resources for retirement. How will it affect your spouses standard if living?
There is an income test to determine how much subsidy you will receive and this test is becoming more comprehensive. In some provinces, if you can not afford the minimum personal contribution of $115 per month, then it is set up as an amount owing to be collected whenever the family home is sold. In some states they do an audit that can go back five years to determine if assets have been distributed to children to avoid having to pay for long term care. These funds must be returned and used before the government will consider subsidizing.
What of the stress on family members who are forced to travel for hours to visit on a regular basis? Consider the stress on the healthy spouse.
Over one third of the Long Term Care Policies are sold for estate preservation reasons.
It can easily cost over $3,000 per month for long term care including special services that are not in the monthly fee and this is inflating at about 5% per annum as the demand increases. How long would your savings and other assets last when the care could be required for many years.
Home equity
In at least on province your home equity is at risk if you can not afford the government mimimum contribution. However, even a home equity loan or reverse mortgage would only cover a few years of care at best and what does that do the the spouses living standard and financial peace of mind.
Children or other family members
How many children can afford to add these payments to existing financial obligations?
I Will Live With my Children
Will you take in your ill parent and be able to provide the level of care required and still maintain your health?
It can be difficult to continue working and look after an ill parent?
What about taking family vacations, going out for an evening etc. when your parent can not be left alone? My 90 year old mother in law lives with us having had a stroke. While she is a lovely person it really does hamper our vacations and my wife can not work.
Over 30% of sales are for Estate Planning purposes!
Long Term Care Insurance makes sense as an integral part of your financial planning. The costs can not be planned for and providing sufficient capital to cover these costs are impossible to predict. I have found that most people can afford $100 to $150 a month which we take from their RRSP's or other savings on a monthly basis but could not afford $100 a day for Long Term Care Costs.
Having this type of insurance takes the pressure off the decisions about spending money to maintain the quality of life for you or your aging parents. Long Term Care Insurance will allow you to select a private care facility that meets your needs or to receive attention in the comfort of your own home if medical problems prevent you from performing certain basic activities of daily living. Equally important when the time comes to go into a long term care facility, the decision making is easier on the parent and the family when there is insurance in place as the decision to go into a home when required medically was made years before when the policy was purchased.
This type of insurance has been available in the United States for almost 20 years it has only been offered in Canada for about three years. While it does not apply to everyone, it is something that is worth serious consideration in financial and estate planning. It can provide resources to maintain quality of life issues for those with modest estates and it can protect larger estates from the significant costs of extended health care for years in a quality home care facility.
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