In Home Senior Care Payment Options

Since many families pay for home care from their savings, they are in a state of continuously diminishing their resources. Many assistance programs determine eligibility based on an individual’s resources. Therefore, the assistance available to an individual is constantly changing. In other words, the longer a person requires home care or is projected to require home care, the more assistance that becomes available to them in the long term.

For this reason, it is advantageous to develop a long term financial plan when considering home care. Doing so has the dual benefit of ensuring a comfortable and consistent aging process for your loved one while at the same time preserving your family’s assets and resources.

There are several ways families can self-pay for care by using their home as a financial resource, these include reverse mortgages, home equity lines of credit and Rex Agreements. However, depending on marital status, severity of need and the projected length of need not each of these options necessarily makes economic sense. For example, if the person in need of care is single and may need to move into residential care within a two year period, then a reverse mortgage is probably not the best option. The same applies to Rex Agreements. One can read more about when it is best to use each of these options and their pros & cons at the following link.

Individuals with long term care insurance can use the benefits to pay for home care. For persons without LTC insurance who have a need for care, they typically are not eligible to purchase insurance. Additionally, Consumer Reports recommends not purchasing coverage before the age of 60.

For this reason, LTC insurance is relevant only to persons doing very long term planning. If one does not already have long term care insurance but has an immediate need for care, this option WILL NOT help.

Life insurances holders have many options on how to converting their policy into cash or home care services prior to the policyholder's passing. There are three options that allow individuals to stop making premium payments and receive immediate payouts on their policies without passing. Viatical settlements are designed for individuals with less than 2-year life expectancy. Life settlements are intended for persons with longer life expectancies. Life insurance conversions give consumer the greatest value for their life insurance policy however the benefit comes in the form of care services instead of cash. Accelerated death benefits and death benefit loans are two other ways individuals can receive cash for the life insurance in advance of their death. However, with these two options, the policyholder must continue to make their monthly premium payments.

Home Care Loans are specifically designed for for elder care and are a new and interesting financial product. These loans are intended for short term needs while a family is waiting for other financing. For example, a veteran's pension claim approval can take 6-12 month, but once it is approved, it is paid in a retroactive lump sum back to their claim filing date. A loan is made to these individuals with the expectation that it will be re-paid for the lump sum. A similar situation exists for families selling a home and having the elderly relative move in with the adult children. Finances will become available it is just a matter of when the home will sell. For more information about Home Care Loans, follow the link.

A home equity line of credit or HELOC is a loan that is very much like a credit card, except with lower interest rates and usually with higher credit limits. Borrowers are told the maximum amount they can borrow and then given the flexibility to withdrawal money up to that limit on an as needed basis. The monthly payment will depend on how much is taken out and outstanding as a balance.

The loan is secured by the home. It can be, and very often is, in second position behind a primary mortgage. There is no need to payoff the a mortgage in first position. The loan, or line of credit, is given for a set period of time from 5 - 25 years, 10 years being very common. At the end of the loan period, a borrower pays back the outstanding loan balance in a lump sum, including interest (usually by selling the house or refinancing the loan). Keep in mind, interest is only paid on the amount that was actually borrowed during the withdrawal period and NOT on the credit limit. This is just like a credit card. You can read more about this option at the following link.