How to Pay for Assisted Living

Three Methods:Using Your Insurance and Private FundingUsing Your Personal AssetsUsing Government Subsidies

If you or a family member are getting up in age and require help with getting around, you may consider moving into an assisted living facility. These facilities offer assistance with daily living in a safe, supervised environment. The costs of assisted living can range from $2,000-$5,000 a month, and many of the costs of assisted living may not be covered by Medicaid or standard health insurance.[1] However, there are several ways you can pay for assisted living for yourself or for an ailing loved one.

Method 1
Using Your Insurance and Private Funding

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    Pay with your long-term care insurance. Long-term health care insurance will cover assisted living costs. Talk to your insurance company about your policy options. Some policies are specifically for home care, a portion of which can be used for assisted living, or for facility-only, which covers care in a licensed assisted living facility.[2]
    • You may need to talk to your insurance provider in person and advocate for your need for long-term health care. Many insurance companies will require you to have at least two areas of Activities of Daily Living (ADL’s) that you need help with, including bathing, eating, dressing, walking, and going to the bathroom.
    • If your ailing loved one has not already applied for long-term health care insurance before falling ill or becoming dependant, there may not be time to do so now. Talk to the insurance company about whether or not your loved one can qualify for this option.
    • Long-term care insurance benefits depend on the policy you sign up for with your insurance company. They can range from $1,500 to up to $9,000 a month.
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    Access your life insurance benefits. If you have a life insurance policy, you can use it to help you pay for assisted living costs. Talk to your Life Insurance Agent about cashing out the policy. The company will likely buy the policy back for 50 to 75 percent of its value, depending on the company and the type of policy.[3][4]
    • You can also ask your insurance company if they have a life insurance conversion program. This program allows you to put the life insurance policy into long-term care payments.
    • Keep in mind some policies can only be cashed in if the policyholder is terminally ill. If your insurance company will not cash out the plan for you, you can try to sell the policy to a third-party company. The third-party company will give you a “life settlement” or a “senior settlement”, which is about 50 to 75 percent of the policy’s value. You will then receive premium payments until you pass away, at which point the third-party company will receive the benefits.
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    Take out a bridge loan. A bridge loan is ideal if you do not have a lot of available cash or financial assets that are easy to liquidate. Bridge loans are short-term loans of up to $50,000 made specifically to provide funding for a move into an assisted living facility. There are two types of bridge loans:[5]
    • The first type is an unsecured bridge loan, where you do not need to put collateral down for the loan. This acts as a line of credit that you can use to pay for your first few months of expenses while you sell your home, apply for government benefits, or take other actions to free up funding for assisted living. These loans come with interest rates of 8.25 to 12.5 percent, so use this option if you have a short payback time, within a year.
    • The second type is a lower-interest, lump-sum loan called the Capital Access Program. You can secure this type by putting up real estate or another asset as collateral. This type is good if you are trying to come up with the costly up-front entry free often required to get into an assisted living program. You will need a good credit score, good credit history and a good debt-to-income ratio to qualify for this loan. Up to six family members or an adult child can cosign the loan application.
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    Ask family members to pool their assets. Talk to your family members about helping you pay for assisted living. This could be through pooling their assets or trading money for time spent taking care of you. One or two of your family members could take responsibility for daily care, from driving to medical appointments to checking in once a day, and other family members could contribute money for your care.[6]
    • Consider working with a geriatric care manager or a senior move manager who can help you and your family organize the financial paperwork and present options for care.[7] You can also work with a mediator to resolve any conflicts that come up between family members as you all try to sort out financial issues.[8]

Method 2
Using Your Personal Assets

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    Reverse mortgage your home. If you own your own home, and your spouse plans to still live there while you are in assisted living, you may want to consider doing a reverse mortgage. A reverse mortgage will allow you to borrow money on the equity you have built up in your home, in a lump sum or a series of monthly payments. The bank will determine a value based on the home’s worth, interest rates, your age, and other factors. Once your spouse or another family member is gone from the home, you will need to repay the bank. Often, this means selling the home.[9]
    • This option is good if you are not planning to keep the home in the family or pass it down to other family. You must be over the age of 62 to apply for a reverse mortgage and have one person still living in the home.
    • Work with a reputable insurance company to complete the reverse mortgage as it is a big financial commitment. Discuss the fine print attached to the reverse mortgage and be wary of high fees or clauses that may make it easy for you to lose your home.
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    Rent out your home. If spare room in your home or if you and your spouse are planning to both move into an assisted living facility, consider renting out your home. You can also sell the home if you are not planning to keep it in the family or use it as an asset.[10]
    • You can then use the rental income to pay for assisted living. Hire a property manager to take care of the home for you or have a family member maintain the home for the renters.
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    Cash in your existing investments. If you have an personal investments, such as 401k plans or IRAs, consider cashing in on them to pay for your assisted living costs. Talk to your accountant about any mutual funds you can access to pay for your expenses.[11]
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    Put your savings in an annuity. An annuity is done by paying a lump sum to underwriters up front. You will then receive regular payments back over a set period of time, often the rest of your life. This option is good if you have a nest egg set aside but you do not want to outlive your resources. An annuity allows you to stretch your budget and ensure you have money coming in to pay for your expenses. Talk to a financial advisor about setting up an annuity as they can be complex.[12]
    • In an annuity agreement, you can receive money on a regular basis, even if your purchase premium runs out. The underwriters will take a risk that you will live longer than the money lasts and will make a profit if you die early.
    • Annuities are also not fully counted as assets by Medicaid and are considered a resource. This may allow you to apply for government assistance, even if you have an annuity.
    • Be cautious when investing in an annuity as there are marketing schemes and fake annuities that will target vulnerable seniors. Use a reputable company when you purchase an annuity to prevent annuity fraud.

Method 3
Using Government Subsidies

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    Apply for veterans aid if you are a veteran or the spouse of a veteran. If you have served at least 90 days on active duty or at least one day during wartime, you qualify for funding from the Veteran’s Administration through benefits known as the “Non-Service Connected Improved Pension Benefit with Aide and Attendance” (Aid and Attendance for short). You must meet the medical qualifications required by the VA and have an income that is below a certain limit. If you have service-related injuries or a disability, you can also qualify for benefits.
    • Apply for these benefits through the VA. You will need to provide a copy of your military discharge papers, proof of a valid medical condition and a completed formal application form. The application form, “Veteran’s Application for Compensation and/or Pension”, can be found here.
    • The average maximum benefit is $1,949 a month for married veterans, $1644 for single veterans and $1056 for a surviving spouse.
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    Consider using Medicaid if you have a low income and no savings. If you are struggling to come up with financial assets you can leverage or you have no savings, and your income is low, you may be able to apply for government assistance through Medicaid. Medicaid is organized as a partnership between your state government and the federal government, but your state program may go under another name. Look up the name of your state’s healthcare program online or in the government pages of your phone book.[13]
    • Medicaid requirements vary from state to state. Often, you must have less than $2,000 in assets, including your home and your car, to qualify for assistance for long term care through Medicaid.
    • Not all assisted living communities will take Medicaid and Medicaid beds are often limited. You can get help with applying for government benefits by setting up a free consultation with a Government Health Insurance Counselor.[14]
    • If the Medicaid office suggests that you try to qualify by gifting your assets and money to your children or other family members, do not do this. This is known as “Medicaid spend-down” and is being regulated by the government. If you are caught doing this, you will incur steep penalties and be disqualified from receiving Medicaid for a period of time.
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    Use supplemental Social Security income if you have a medical disability and a low income. SSI is administered on a state basis. It acts as a government safety net for individuals who are partially or totally disabled and require financial assistance for daily living. You will receive SSI in the form of monthly payments that you can then use to pay for nursing home care or assisted living.[15]
    • Contact your state’s disability department to qualify for SSI. You will need proof of your financial status and confirmation from a doctor that you cannot work due to a medical disability.

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Categories: Budgeting