In last week’s post I focused on an increasingly common family arrangement in which -for several different reasons – grandparents who expected to retire and live a more leisurely lifestyle instead find themselves caring for their grandchildren.
This often starts as a temporary solution but over time becomes a permanent one. Much has been written about the financial impact to seniors. Some are delaying retirement. Others are using savings meant for retirement to house, clothe, feed and education their grandchildren. This obviously will mean a change of lifestyle for many. But it will also impact the grandparents when their health starts to decline and they need long term care.
Not much has been written about that. Money spent on raising another household won’t be available when long term care is needed. As we know, 24/7 round the clock nursing home level care averages $13,000 to $14,000 per month – $150,000 a year or more. Government benefits to pay for care may become more of a necessity because the funds expected to pay for care may have already been spent and long term care insurance may not have been purchased.
Both the VA and Medicaid have a look back period and impose penalties for money transferred for less than fair value. If the grandparent spent money for which he/she did not receive something of equal value in product or service, that carries a penalty. Money spent raising grandchildren may be subject to a penalty since the product or service purchased was for the grandchild and not the grandparent.
It is critical in these cases that grandparents plan for their long term care needs. They should take another long look at long term care insurance. As I have written often on this site, there are asset based products that do not have the strict underwriting requirements that traditional “use or lose it” insurance has. That may be important for some who may not be healthy enough or young enough to get thru a full underwriting process.
For others long term care planning utilizing irrevocable trusts may be the best option. Setting aside assets in trusts can be the way to navigate around government benefit rules so as to preserve much needed benefits down the road while also providing the financial support to grandchildren that their children cannot provide.