In Home Care During a RecessionFinancing Options for Care Beyond InsuranceMary Alexander: Hi! I am Mary Alexander from Home Instead Senior Care, and I am discussing how to provide in-home care during a recession.
Now, I am going to provide some ideas for financing care beyond insurance. A relatively new source of income that a senior over the age of 62, can take advantage of is a reverse mortgage. Here is how it works.
Let's assume your parents have paid off the mortgage on their home and it has a market value of about $500,000. They might enter into an agreement by which the bank would in effect pay them an income tax free mortgage of $2,000 per month.
Typically, your parents would be allowed to remain in the home as long as they lived or chose to stay. They would have to continue to pay the real-estate taxes and up keep including major repairs. If one of your parents dies, the survivor would be able to continue living in the home until he or she dies or moves in with family or a long-term care facility.
At that point, the estate would generally be required to sell the house and pay the bank the cash, the owners have received plus interest and fees.
Reverse mortgages are complex and have considerable consequences for the estate. Your parents should seek the advice of their attorney and financial planner before entering into such agreements.
Another reason senior care funding innovation is the life settlement, in which the senior's life insurance is treated as an asset in much the same way as a house or mutual fund.
With the life settlement, the senior's life insurance policy is sold to an investor, while the policyholder is still alive for considerably more than the cash surrender value of the policy, but far less than its face value.
At the time of the sale, your parent will receive a lump some payment. Most likely less than half of the face value of the policy, depending on the age, health and other factors.
The investor will continue to make premium payments and will collect its full face value when your parent passes on. This financing option may provide quick access to much needed monitory resources for your senior, but in the end it's the investor who profits.
Like Reverse Mortgages, the Life Settlement financing option has many complexities. It is best to get the advice of a financial advisor before proceeding with any agreement.
Many families ask what they can pay toward their senior loved ones care? One place you might be able to contribute is for in-home care that is not covered by medical insurance.
Let's talk a bit about the cost of professional in-home care. As long as your senior loved one remains relatively self-sufficient and there are family caregivers near by to help, the cost of professional caregivers to supplement that care is probably manageable for most middle class families on their usual incomes.
Eight hours of care a week, which is what the average client purchases is likely an amount many families can afford if they cut some expendable purchases elsewhere. But when the number of weekly hours of care climbs substantially, ordinary family budgets can be overwhelmed.
For example, 10 hours a day, seven days a week of homecare which someone with late stage Alzheimer's or other advanced dementia might require, would be about the same cost as a nursing home, which is approximately $70,000 a year.
How can families possibly pay for such enormous cost? Should you, the family caregiver and your siblings be responsible not only for the hands on care for your parents but pay for their professional care as well? Only you can answer that question.
Every family faces the different set of financial circumstances. Before trying to take on these costs, determine how great your resources or the combined family resources are. Then think about what other responsibilities and obligations each of you might have. Such as your children's education or your own future care.
Families working together to help their senior loved ones is a great idea, especially during a recession or other financially difficult times.
In the next video, we'll talk about creating a team approach.