Reverse Mortgage Line of Credit Could Fund Long-Term Care

There’s a 70% chance that people over 65 will need some kind of long-term care, including services such as home care, assisted living and skilled nursing, according to government statistics.

There are lots of ways to pay for long-term care services, including Medicare, Medicaid, traditional health insurance, long-term care insurance, life insurance and annuities. Some people may have access to funding via the Older Americans Act and the Department of Veterans Affairs.

There’s an additional option worth exploring: a reverse mortgage line of credit, in which you can withdraw cash from the equity you have built up in your home.

Access to your home’s equity

Most reverse mortgages involve a lump sum for an immediate need or a string of payments over time to use a certain percentage of home equity to fund a need. Because reverse mortgages are generally used by older people whose homes are paid off or nearly paid off, long-term care is one natural use of the funds.

Since 1989, the U.S. Department of Housing and Urban Development has worked with private lenders to administer what are officially called home equity conversion mortgages, commonly called reverse mortgages. Several modifications over the years have added more features and programs to help homeowners 62 or older access a portion of their home equity.

One of the options under this program is a reverse mortgage line of credit that increases in value each year as long as the owner doesn’t use it. Here’s an example:

Let’s say you’re 65. You don’t need long-term care now, but you want the security of knowing it will be there when and if you need it. You could, for example, get a $160,000 reverse mortgage line of credit that increases in value around 4% per year no matter what the value of your $300,000 home does.

When you reach your mid-80s and your need to pay for long-term care could be reaching a high point, the line of credit amount would be about $350,000. As you use this available money, you don’t have to pay a monthly bill as you would with traditional home equity loans; the money is just subtracted from the equity in the home. The line of credit comes due either when you move out of your home or die, in which case your heirs or your estate could pay the loan back either through sale of the home or other means. Depending on how much of the line of credit has been tapped, this could result in significant debt left to heirs. If you never used the line of credit, the equity would still be in place and would pass to heirs along with the home.

Advantages over a HELOC

A reverse mortgage line of credit holds some advantages over a home equity line of credit, a similar concept in which a homeowner can borrow against the equity in the home. With a HELOC, the borrower must begin making monthly payments immediately. With a reverse mortgage line of credit, the borrower doesn’t have to make monthly payments at all.

And, as indicated above, the available funds in this type of line of credit grow over time, while HELOCs typically provide a fixed amount that the borrower can draw against and that the lender could freeze at any time to preclude further borrowing.

You can think of this type of reverse mortgage as an old-age insurance vehicle. Of course, it’s not insurance, but it’s an opportunity to have another source for funding long-term care services if Social Security, pensions and savings can’t cover the cost of care.

Several vendors are offering this program for as little as $125 in total out-of-pocket cost, which is dramatically cheaper than previous versions that included thousands of dollars in costs and fees. That means lenders are being competitive for placing this product, just like credit card companies offering 0% balance transfers.

You can find lenders in your state using the HUD website.

Having as many resources as possible to cover long-term care needs is an important part of a holistic financial plan. A reverse mortgage line of credit can ensure you’ll have funds readily available at the time of need.

Visit Robin Loomis on Facebook @  http://www.facebook.com/reversemortgageaz or visit us online at our website www.NovaReverse.com

Caring Senior Service "The Women Vs. Men: Who Needs Long-Term Care Most Often?"

There's a reason you see many more older women than men at the bingo parlor - - women live longer than men. For most of us, that's really no secret, but the related numbers may be surprising:

Profile of Nursing Home Residents

• 14% of the U.S. population is made up of older (65+) Americans.
• Of this group, women outnumber men greater than 4:3.
• Persons reaching age 65 have an average life expectancy of an additional 19.2 years (20.4 years for females and 17.8 years for males).
• In Texas, the population of older Americans has increased over 30% from 2000 to 2011 (2.7 million).

Why do Women Live Longer than Men?

• Stress -- women, as a group, tend not to internalize stress as much as men.  Also important is the fact that women have stronger social connections than men, which help them vent and share their stress.
• Delay of the onset of cardiovascular disease. Women tend to develop cardiovascular problems in their 70's and 80's, while the male trend is in the 40 - 50 age bracket. Estrogen is credited as keeping the arteries strong.
• Men often take bigger risks with their well-being than women. Unfortunately this biological marker leads to more men dying earlier.
• Women take better care of their health. It's estimated that 28% of men don't have a regular doctor.

The fact that women live longer means that many of them will need long-term care - and need it for a longer period of time than men. The insurance industry has taken note of this fact as well. Long-term care insurance rates rose between 20-30% for a female policy from 2013-2014, while a male policy actually dropped about 15%.

Many of the issues of aging can be solved by providing parents with the support they need to continue to maintain their independence. The resources provided by Caring Senior Service can help. ​Get in touch with us today!  Visit us @ http://tucson.caringseniorservice.com 

How to Prepare for Long-term Care

1 July 2015 by JacksonWhite Elder Law  |  Category: ALTCS, Arizona Republic Column Articles, Estate Planning

Question: I am 55 years old and I have spent the past year helping my father transition into an assisted living community. The process has been difficult, not to mention expensive. Along the way, I learned about the Arizona Long Term Care System program, and I wish I would have known about it from the outset. What can I do now to help me prepare for ALTCS in case I need long-term care myself?

Answer: One of the difficult things about ALTCS is that it has strict medical and financial requirements that must be met concurrently in order to qualify.

This being the case, even if you engaged in planning to meet the financial requirements now, you would not be eligible unless you also met the medical requirements.

The fact that you are only 55 does not disqualify you from the program, but the fact that you are presumably healthy will prevent you from qualifying.

As a rule of thumb, it makes sense to start planning for ALTCS if and when you have a medical need that might necessitate long-term care.

Despite being strict, the financial requirements typically do not present an insurmountable barrier to those with a real medical need. Accordingly, waiting until the need for long-term care is actually foreseeable is most often the best approach.

If you want to be more proactive than this, there are long-term care insurance products that might be able to help.

It is worth pointing out that even where it makes sense to delay ALTCS planning, speaking with an attorney who is familiar with the ALTCS process could help you in the long-term.

Everybody should have their affairs in order, and given that the expenses associated with long-term care are so burdensome, it helps to have an understanding of what you will need to do when the time is right.

Richard White is an elder law attorney at JacksonWhite Attorneys at Law. For more information on Elder Law at JacksonWhite, please visit www.ArizonaSeniorLaw.com.

Jackson White Law ~ Staying In-Network for Long-Term Care

Staying In-network for Long-term Care

3 June 2015 by JacksonWhite Elder Law  |  Category: Senior News

Question: I filed an Arizona Long Term Care System application for my wife nearly a year ago, and I have had a horrible time trying to manage and understand the process on my own. After many months of working on this process, I am now being told that my wife has to move to a different facility in order to qualify for the benefit. Can ALTCS really tell me where my wife has to live?

Answer: ALTCS will never decide where your wife will live — this is your decision to make. Before ALTCS will approve your wife’s case, however, she must reside in an approved setting.

To clarify, ALTCS is just like any other insurance provider insofar as it will only provide coverage to its members who seek care from an in-network provider. Just like with any other insurer, ALTCS has a network of providers with which it is contracted to provide care.

As long as the setting in which you place your wife has an ALTCS contract, she will be eligible for coverage if she is otherwise eligible for the benefit.

It is worth mentioning that ALTCS contracts with care providers all along the healthcare continuum. There are approved in-home care providers, group homes, day care centers, assisted living facilities and skilled nursing facilities. Further, it is not as if there is a clear demarcation between ALTCS and non-ALTCS facilities — all ALTCS facilities also have non-ALTCS residents; and ALTCS members are given the same level of treatment and care as others.

If the only thing preventing your wife from qualifying for ALTCS is this setting requirement, it would certainly be worth considering moving to an approved setting to help facilitate eligibility. You have many good options available to you, and this benefit is too valuable to forgo.

Richard White is an elder law attorney at JacksonWhite Attorneys at Law. For more information on Elder Law at JacksonWhite, please visit www.ArizonaSeniorLaw.com.

Assets Key to Long-Term Care System

Question: I have been caring for my father for about a year, and I cannot provide him with the assistance he needs. We looked into applying for ALTCS, but my dad has too many assets to qualify. The ALTCS representative warned us against transferring dad’s assets. Is it possible for him to instead pay me for the services I have provided him as a means to help him meet the resource requirement?

Answer: There are two primary rules at play here. First, your father must meet a resource requirement to qualify for ALTCS long-term care coverage. Second, ALTCS penalizes applicants who attempt to satisfy the resource requirement by transferring assets without compensation. The answer to your question, then, centers on whether the services you provided to your father would justly compensate him for any payment that he might give you.

To begin, ALTCS does allow for compensation in the form of personal care services. For this approach to work, however, there are certain requirements that have to be met. Most importantly, there has to be a valid personalcare contract that outlines the terms of the agreement. To be valid, a personalcare contract must specify the type, frequency and time to be spent providing services. Further, the contract must specify the amount and frequency of payment, and such frequency should be no less than monthly while services are being provided. Finally, the personalcare contract needs to be executed before the provision of services.

If a personal-care contract was not executed before you provided your father with services, I would probably advise you to pursue other strategies for helping your father spend down.

Richard White is an elder law attorney at JacksonWhite Attorneys at Law. For more information on Elder Law at JacksonWhite, please visit www.ArizonaSeniorLaw.com.

This article is provided for informational purposes only and is not intended to replace individual legal advice.

Aging and the Law is authored by the attorneys at JacksonWhite and addresses legal issues that arise for the elderly and their families. Questions can be sent to firm@jacksonwhitelaw.com.