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Using Home Equity to Fund Long-Term Care

Using Home Equity to Fund Long-Term CareYou can use your home to stay at home, or to pay for care so you can go to the facility YOU prefer.

But first, why might you not be allowed to go to the facility you prefer?  Long-term care (LTC) facilities need to charge for the care they provide.  Their staff costs are significant and many areas of the country are doubling minimum wage, which doubles their staff costs.

The problem is, many people run out of money paying for their care and need to apply for Medicaid.  Medicaid is a government welfare program that will pay for LTC once your money is completely gone.  Well, not completely, you can keep just under $2000 but you have to cash in your life insurance (over $1,500) and you can only keep $45/month from your income, so you are pretty much broke.  Even that $2000 goes back to Medicaid at your death meaning your children may be passing the hat to pay for final expenses.

Medicaid pays less than what it costs for your care.  LTC facilities cannot lose money on every customer and make it up in volume.  Thus they must limit the number of Medicaid recipients they allow in, so they can keep their doors open.

That is where you home comes in.  Most people sell the home and spend the money paying for care until they are poor enough to qualify for Medicaid, not a good scenario.  Most people want to stay home and get care there, so let’s look at that first.

If you are among the many who cannot afford $1200 to $5000 a month for home care, rather than sell the house, why not use the home equity to pay for care there?  How, you ask? By using a reverse mortgage to withdraw money from the home.

Many people are dead set against a mortgage and would rather sell the home and lose the money to LTC bills.  Does that really make sense when by using the money you withdraw from the home, you can pay for care in your home?

No sign is placed in your front yard stating that you have a reverse mortgage.  You cannot borrow all the equity in the home, so there may be a remainder left for your heirs at the end.  There are no payments to make on a reverse mortgage and you can do what you want with the money you withdraw.

You might spend this money down, staying at home for a year or two longer, and perhaps that is all the care you may need.  Even if you later do move to a LTC facility, wouldn’t you rather stay at home longer if the home pays for it?

There is one more way to stretch that home money, or any money, longer paying for care.  This only works when LTC is needed and your health indicates that you have less years left to live than a healthy person of your chronological age.  You can convert some of this money into an income for life.

Most companies that do this (annuity companies) do not inquire about your health, and simply assume you will have the “average” life expectancy of someone your age.  But two annuity companies take your (poor) health and thus shortened life expectancy into account.  By doing so they can give you a significantly large monthly check every month  for life from the amount of money you have to work with.  You might even have money left over at the end for heirs, which is a lot better than leaving your funeral bills to them!

We can also protect some of your money for those funeral bills through the one remaining Medicaid allowed strategy.  Call us at (920) 884-3030 and let’s schedule a family meeting to investigate your options.

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1 Comment

  1. Ben Smith on November 8, 2017 at 3:24 pm

    Excellent Article, Keep up the great work Romeo!!

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The Long Term Care Guy