4 ways to pay for your parents’ long-term care


You thought you had taken the most important financial steps in life, including paying your children’s school fees, financing your eldest daughter’s marriage, and building up a nest egg for yourself. But now, another challenge looms: figuring out how to pay for your parents’ long-term care.

A quick glance at the numbers shows just how big this challenge really is. A 2019 Genworth study sets the national median cost of a home health aide at $ 52,624 per year. And if one of your parents needs more advanced nursing home care, it could cost you over $ 102,000 a year. What is perhaps even more troubling is how quickly these costs are increasing. A private room in an infirmary residence today costs 57% more than in 2004. If this trend continues, it’s hard to know how much you’ll end up spend to give your parents the care they need.

Once you’ve exhausted the conventional Medicaid and Veteran Aid options, it’s time to get creative. To try peeking under these four stones to raise money to pay for your parents’ long-term care.

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1. Life insurance

Start with an exam of your parents life insurance Strategies. You are looking for an accumulated cash value or accelerated death benefits. If your loved ones have accumulated money in a whole life insurance policy, they can withdraw or borrow from these funds. Withdrawals up to the amount of premiums paid are tax exempt.

Accelerated death benefits allow policyholders to withdraw part of their death benefit during their lifetime. These cash advances do not need to be repaid, but they do will be deducted from the benefit paid upon the death of the policyholder. This option is usually reserved for specific situations, such as the diagnosis of a terminal illness.

Your parents could also raise money by selling a life insurance policy in a viaticum settlement or a life regulation. These terms are sometimes used interchangeably, but the Life Insurance Settlement Association distinguishes them this way: Viatic settlements occur when the life expectancy of the policyholder is less than 24 months, and lifetime settlements are used when life expectancy is longer. If your parents are 70 years of age or older and have a policy with a face value of $ 100,000 or more, they are good candidates for a viatic or life settlement.

2. Tax deductions

Your parents can deduct unreimbursed medical expenses if these expenses exceed 10% of their adjusted gross income. But if you cover those bills, you may be able to claim this deduction instead. You will need to declare one or both of your parents as dependents, and the rules are tricky. Try it IRS dependency quiz to see if your situation qualifies.

If you can claim your parents as dependents, you can deduct the cost of medically necessary long-term care. Since you are the one receiving the deduction, the expenses must be greater than 10% of your adjusted gross income. Nursing home expenses would be eligible if your parent has a chronic illness and requires full-time supervision and / or medical care.

3. Reverse mortgage

Any equity your parents have in their home can also be a source of money – and they won’t have to move. A reverse mortgage is a loan against the value of the home that is repaid when the owner dies. It can be structured to provide your parents with a one-time upfront cash payment, a regular monthly payment, or a line of credit of up to 70% of the value of the home.

Reverse mortgages are heavily regulated and rules are in place to protect seniors. For example, the bank cannot force a senior to leave the house, or try to collect more than the value of the house. If both of your parents sign the loan, repayment is delayed until they die or leave. This type of loan may be the right option if one parent needs assisted living and the other parent wants to stay at home.

4. Home equity line of credit

Your parents can also use a home equity line of credit to cash in their equity. This option may be simpler and less expensive in the short term since these facilities often have low or no closing costs and competitive interest rates. The downside is that regular repayments are required, at least to cover interest charges. But if you’re in a bind and need a quick cash, a home equity line can be a viable, albeit temporary, solution.

Face the challenge head-on

Your parents took care of you in your early years, and now it’s time for you to pay them back. While the financial challenge of long-term care may seem overwhelming, you probably have options hidden in your parents’ possessions. If you’ve been successful in financing multiple tuition bills for your kids, you may be okay too.

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