Why is money returned to the estate?
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Because the person who made the deposit is dead. Many facilities require a $1M or similar large $$$ amount as a buy in deposit in addition to monthly fees. Usually, a certain percentage of that deposit is refunded upon death.
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Thanks for making that clear - I did not understand that the $$ was a buy in deposit (not spent on care).
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Yes—2nd to die for a couple or if they moved out, 90% returned to survivor or estate. If a lot was expended toward the end of life, this can help reimburse for such expenses. 24/7 care adds up quickly.
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That’s how I read that. Money spent on care is usually outside of that deposit.
Yes, there are various models for CCRCs. Some are month to month charges only, some are make huge deposit, a % of which is refunded to estate, plus monthly charges.
There are other models as well but we never investigated them because dad chose the ccrc for him and mom. In their case, the monthly fee paid for common expenses—the concierge/front desk, weekly washing of bedding and superficial cleaning of the unit, and a dining credit of $21/day/person, plus the activities and some van transportation offered by the ccrc. The monthly rate varied depending on the size of your unit and whether it covered 1 person or 2.
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CCRCs are very different though than basic long term care. The average long term care patient just needs assistance with activities of daily living to stay in their own home. You don’t buy insurance to get into a CCRC. That’s something saved for, or a pivot in living style after selling a home. LTC can be a facet of what a CCRC provides and you may or may not need/be able to use your LTCI.
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We started our LTC policies through an employer group plan years ago, but under today’s available plans/costs we would probably pass.
At our first retirement planning classes, the instructor/advisor (who did not sell LTC) encouraged students to consider it. For us a big factor was that it covered in-home care too, so perhaps allowing avoidance or delay of nursing home. I’ve since learned that would home coverage would only be $100/day instead of $200/day for nursing home. Still it could be a helpful thing someday.
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What is available can vary widely by wages and availability of workers in your area. In general, there is a significant shortage of caregiving workers.
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One more thing though: if you are self-employed then LTC premiums can be an above the line deduction, like health insurance and other healthcare reimbursements.
That can make it a lot more cost effective than if you are paying out of after tax income as an individual. I’m quite content with our policies, which increase the daily benefit by 5% pa (they were taken out nearly 20 years ago, the premium has only been adjusted once during that period).
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When we were contemplating LTCi in the 1980s, we talked to the MetLife rep to be sure we understood the terms of the policies so we could make an informed choice. At the time, we discussed the ADLs (activities of daily living), which are key features of the policy. The beneficiary has to be unable to perform 2 or 3 of these activities—depending on terms of policy ( bathing, dressing, toileting, transferring —getting in and out of bed or chair—, eating, and continence) in order to qualify for benefits.
Many people could benefit from help to make their lives better long before they can’t do 2-3 of those 6 items. We decided we couldn’t afford the steep premiums at that point in our lives, especially with the tough requirements before any benefits would be available.
We have been living below our means and saving so we can hire the help we want when we want it—delivered food, house cleaners, handyman, etc.
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@eyemgh, Our tax bracket is not likely to change in retirement. Income will go down, but will remain in the same bracket. Our net will be about the same, since we won’t be saving (401k and joint personal accounts), SS taxes disappear, and lots of H’s current payroll deductions also go away.
@Veryhappy, I suspect that some portion of our 401k RMDs will go into after-tax savings so that if we’re fortunate to be able to leave our sons something, they won’t have to pay taxes on it. (We are unlikely to hit the fed estate tax benchmark, even if it reverts back to lower levels.)
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Here’s a US govt website with some long term care facts.
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Here’s another article about long term care needs.
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We also decided to self insure for ltc.
It’s reassuring to see the averages. Thanks for posting the articles.
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Ditto on both points for us.
Obviously if everybody ended up needing long term the premiums would be even higher than they are. That’s how insurance works. If we don’t ever need extended care, that will be ok. It would be bad though if we need it but our LTC policy denies coverage. As pointed out above, it’s not as black/white as a life insurance claim - you are either dead or you’re not.
Helpful links… may need to think through things down the road. We started my Genworth LTC group plan policy a few years after my husband (older) started, so I researched it more closely. I decided to pay a few extra dollars a month for an opt-out clause. If the $98/monthly premium ever increases, I’d have option to cancel and get back sum of previous payments (but no interest).
QUESTION: What types of facilities qualify for “medical expense” write-off? Just wondering if IRA withdrawals for care end up not being taxed because they are written off at tax time.
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How and why was this sum returned to your Mom’s estate? Did she have long term care insurance?
It was always the agreement with residents that after 2nd to die in a couple 90% of the deposit would be returned to the estate.
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At this point, I believe I am uninsurable due to pre-existing health conditions but it’s OK as we prefer to self-insure and have saved enough assets that we should be comfortable and leave an estate for our kids.
People with my health condition generally CAN do activities of daily living ADLs—maybe much slower and more deliberately but still do them so would likely not qualify under LTCi for help. It’s people who are paralyzed or who get advanced dementia who can’t do ADLs.
Even my aunt who died of lung cancer could do ADLs until the last month of her life so didn’t get much financial benefit from the decades she had paid into LTCi, but she had peace of mind that she wouldn’t be a financial burden once her benefits became available.
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