Private options

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Paying for long-term services and supports with your personal finances

It's hard to predict if you'll need long-term services and supports. It’s also hard to know how much you'll need, what it will cost, and whether family or friends will provide some of the care.

You will likely have to pay for some or all of your long-term services and supports. An increasing number of people are using private financing options to help pay for them.

Which financing option is best for you depends on many factors.
These include:

• Age
• Health status
• Your risk of needing long-term services and supports
• Your personal financial situation

Personal income and savings

It can be very hard to save enough money to pay for these expenses.

Will you have saved enough if you need long-term services and supports earlier than expected? Can you pay for your own long-term services and supports without taking funds from other vital needs such as your spouse’s living costs?

Long-term care (LTC) insurance

Long-term care insurance purchased from an insurance company can help you fund your long-term services and supports if needed. Long-term care insurance features and benefits may vary from company to company and by policy. Knowing the types of services you may want or need will help you find the best solution.

In Oregon, long-term care insurance must cover care in a private home, a nursing home, an assisted-living facility and an adult foster care setting. Private health insurance and Medicare usually do not cover the services covered by these plans.

To learn more about long-term care insurance, check out these resources from the Oregon Department of Consumer Business and Services Insurance Division website:

• Long-term care insurance Q and A section
• Long-term care insurance tip sheet
• Long-term Care Partnership program

Home equity

You may have greatly reduced or paid off your home mortgage by the time you need long-term services and supports. The value of your home may be more than its original purchase price. If so, there are several ways you can use that equity to pay for long-term services and supports.

Make sure you thoroughly understand the implications of each option and whether it is right for you.

Sale of your home

One of the hardest decisions you may face is whether to leave your home and move to a more supportive setting. For example, you may choose to move to an adult foster home, assisted living facility or other facility-based setting. Consider several factors as you decide whether staying in your own home makes sense:

• For many people, a house that was ideal 30 years ago may now be too hard to handle alone.
• Suburban and rural elders can feel isolated when driving becomes a problem.
• Older people may hesitate to go shopping or attend social activities if they are in a rundown area.
• It is critical to get good quality, reliable help from family caregivers or paid professionals.

Important considerations

• If you sell your home, you will not be able to pass it on to your heirs.
• The sale price may not be enough to pay for your long-term services and supports needs.
• Market conditions will affect the selling price of your home.
• You may have to pay taxes on the capital gains from the sale of the house. This depends on the sale price compared to your original purchase price and other considerations. Consult your tax advisor for details.

Reverse mortgage

A reverse mortgage is a special type of home equity loan for people aged 62 and older. The homeowners borrow part of the home’s equity. The loan principle and interest are not paid back until the last borrower dies or moves out. You may want to consider this if you plan to live in your own home a long time. Some features of a reverse mortgage are:

• You receive cash against the value of your home without selling it.
• You choose whether you want to receive a lump-sum payment, a monthly payment or a line of credit.
• How you use reverse mortgage funds is not limited.
• No credit history is required.
• No monthly payments are required.
• The funds you receive from a reverse mortgage are non-taxable. They do not count toward income or affect Social Security or Medicare benefits. They do not count as income for Medicaid benefits eligibility if you spend the reverse mortgage payments within the month you receive them.
• You continue to live in the home and you retain title and ownership of it. You are also still responsible for taxes, hazard insurance and home repairs. You do not have to repay the loan as long as you continue to live in the home.
• You can use the funds you receive from a reverse mortgage to pay for a wide array of in-home and community services and other expenses. Examples are home repairs and transportation. These services can make it safer and more comfortable for you to live at home. However, these expenses may be more than your reverse mortgage funds.
• You might also want to purchase long-term care insurance. Reverse mortgage funds may not be enough for a married couple to buy both of their long-term care insurance policies or pay for long-term services and supports.

For more information, visit the National Council on Aging website. Download the consumer booklet or review commonly asked reverse mortgage questions and answers.

Life insurance

You may be able to use your life insurance policy to help pay for long-term services and supports. Be sure to review your policy carefully and consult with your insurance agent about options.

Annuities and trusts

Another option may be annuities and trusts. Contact your financial advisor to assess this option. If you do not have a financial advisor you can contact the National Association of Personal Financial Advisors.