After years of living independently, the need for assistance may have become apparent. The challenge, however, lies in safeguarding essential assets such as your home, car, retirement plan, and savings—particularly when the cost of assisted living can be so high.
The overall median cost of assisted living has surged nearly 14% in the past two years, driven by heightened demand as an aging population enters their golden years in record numbers.
This rising cost underscores the importance of proactive planning to safeguard assets and ensure financial security during this inevitable life transition.
Many challenges in protecting your assets are rooted in legal considerations. If you’re unable to cover the costs of assisted living, there’s a risk that your assets could be seized or your income—including Social Security—could be garnished.
There are steps you can take to reduce these risks and manage expenses, protecting both your assets and the long-term financial security of you and your loved ones.
Transferring Some of Your Assets to Loved Ones
While creating a will can address many concerns about ensuring your heirs receive the assets you intend, gifting certain items to loved ones during your lifetime can be a more proactive strategy.
This approach is especially beneficial if you anticipate that someone could challenge your will after your passing. By transferring assets, you can help ensure that your loved ones receive what you want them to have, while also protecting those assets from being seized by an assisted living facility.
A Trust or Annuity
Transferring assets into an irrevocable trust, a pour-over trust, or an annuity can be effective strategies to protect wealth from being used for nursing home costs.
An irrevocable trust legally transfers ownership to another person, shielding assets within it from creditors (like care facilities.)
A pour-over trust automatically funnels remaining assets into a trust upon death, ensuring they are preserved for beneficiaries.
Annuities
Annuities can be tailored to provide a reliable income stream, either for a set number of years or for the rest of your life, ensuring you have the financial resources to cover long-term care expenses without having to dip into your net worth.
Through a predictable, long-term income, an annuity can be a powerful tool in protecting your wealth while providing financial peace of mind in the face of future healthcare needs.
Allocate Part of Your Income for Your Spouse
The Federal Spousal Impoverishment Act protects the financial security of one spouse if the other has to enter a nursing home. This includes making it possible for your spouse to receive part of your monthly income without the risk that it will be taken by nursing home-related expenses.
Related: How to Increase Your Social Security Payments
Ensure Your Last Wishes Are Honored
Keeping key legal documents updated is a crucial step in protecting both your financial interests and those of your loved ones.
This includes ensuring your will is current, as well as considering a living will, which details your preferences for medical treatment in the event you become incapacitated or face a decline in quality of life. These updates provide clarity and ensure that your wishes are honored.
Long-Term Care Insurance
When deciding if long-term care insurance is worth it, consider factors like rising premiums, your health history, and financial situation. It can offer peace of mind by protecting your net worth from the potentially high costs of assisted living or nursing home care—but may not be necessary for those with substantial assets or a solid retirement plan.
Careful evaluation of policy coverage and terms is essential to determine its true value for your future needs. If you have a health condition that requires ongoing medical care, it’s crucial to ensure that your plan covers the associated expenses.
Other Approaches to Consider
What else can you do before you might have to enter a nursing home?
Some ways to reduce risk to your assets could include:
- Check to see if your health insurance includes nursing home care. Your Medicare plan might cover some things like a medically necessary stay in a skilled nursing facility. However, it might not cover a long-term stay in a nursing home.
Medicaid might help pay for nursing home care if you meet the financial eligibility requirements outlined by your state. - Take stock of what you need. For those who wish to remain in their homes, hiring a professional aide or homemaker service can provide the necessary support.
In some cases, adult daycares offer a solution for individuals who need more intensive care during the day or a frequent but specific medical task or test (such as dialysis) but can manage at home otherwise. These options can help reduce the need for full-time nursing home care while still ensuring essential assistance and medical monitoring. - Prepare to tap retirement savings. According to data collected by A Place For Mom, the national median of monthly cost for an assisted living facility is just under $5,000 a month depending on options like whether you want a private or semi-private room or where you live. That monthly premium is highest is states like New Jersey ($7,000), whereas Wyoming has the most affordable assisted living, with a median cost of $3,642 per month.
That means making sure you have adequate retirement savings for a potential extended stay in a nursing home.
Securing Your Financial Future
While nursing home care can be costly, taking proactive steps such as transferring assets or setting up trusts can help protect your financial interests when considering assisted living options. These measures can ensure that you preserve your wealth while receiving the care you need.
As the cost of long-term care continues to rise, planning ahead and exploring options to safeguard your assets becomes not just a financial necessity, but a strategic move to maintain your legacy and quality of life. The choices you make today can protect your future and provide peace of mind when navigating life’s next chapter.
Related: 60% of States Mandate Adult Children to Support Aging Parents
This article is for informational purposes only and does not constitute financial advice. Neither Fiscal Report nor the author receive a commission through links in this content nor have any affiliation with any of the people or organizations mentioned in this article.
