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or  “Just the Facts, Ma’am”

Joe Friday of Dragnet fame from the 1950’s has the misattributed catchphrase “Just the Facts, Ma’am” to his character on that long running show. So, let’s take this approach and consider the following key facts about Long Term Care:

  • 70% of people over 65 will need long-term care services and support at some point in their lives.
  • About 35% of people who reach age 65 are expected to enter a nursing home at least once in their lifetime.
  • The national median yearly rate in 2016 for a private room in a nursing home was $92,300, Maryland is running about $110,000.
  • The average length of claims in Long Term Care insurance policies if lasting more the one year; 3.9 years.
  • Long Term Care insurance policies are triggered when you cannot to do two of the following in your day to day living:
    • Bathing
    • Continence (maintain control of bowel and bladder functions)
    • Dressing
    • Eating
    • Toileting (getting back and forth to the toilet)
    • Transferring (getting in and out of bed or to a chair)

Scary numbers, consider the following:

  • 4 Years of Private Nursing Room Care in Maryland- $440,000
  • There are options to reduce this cost, but no matter how you “cut it”, the care will be expensive.

This is not a number the average American can work with or for a family with a net worth of $1mm to $2mm that wants to pass assets to their family or a high net worth family that is looking for asset protection against these costs. Another issue is with one spouse receiving care at $110k per year, how do you maintain the household and its expenses for the other spouse.  In Maryland, government assistance through Medicaid is available when your assets are at $2,000 or less. And with Medicaid’s look back of 5 years, forget about passing assets to family members before you apply. And if you do transfer assets 5 years before, will you be happy with the loss of control over those assets if you use that strategy.

This is a key planning issue for most Americans and contacting a financial professional to work the what if’s is well worth the effort.

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Peter B. Smith is a Family Wealth Advisor at the Planning Solutions Group in Fulton, MD and is an Annapolis resident. He can be reached at 301-543-6008 or by email at psmith@psgplanning.com.