As the ‘Age Wave’ Approaches, Private Business Steps in with Eldercare Financial Products
With
Baby Boomers nearing retirement age and with many of their parents
already needing aging care, private businesses are creating a series of
new financial products to help families pay for care and aging related
products. Over the past ten years, the market has seen the emergence of a
variety of products serving the aging market that can be grouped into
three categories. First, there are products that help families to
convert assets to pay for care. Second are the loans specifically
designed to meet the needs of families facing a paying-for-care
challenge and the third is the financial products that help families to
meet Medicaid's ever-changing, eligibility requirements.
Asset Conversions
Many
families have significant financial resources tied up as assets that,
in this non-liquid state, cannot be used to pay for care. Usually, the
asset is their home. Reverse mortgages have been available since the
1960s. However, it was not until the late 80s when the government
stepped in with regulation and consumer protections, that reverse
mortgages gained in popularity. Today, there are what can best be
described as private reverse mortgages that allow homeowners to receive a
portion of their homes' value in cash without the same upfront costs as
a reverse mortgage.
EquityKey
and Rex Agreements are two examples that allow homeowners to receive
cash immediately by selling a percentage of their home's future
appreciation. This clever idea enables participants to both receive
cash, while continuing to hold 100% of their home's existing value.
These products are best suited for persons who wish to age in their
homes and might need to make home modifications to do so. Learn more from the EquityKey article and the Rex Agreements article on our website.
NestCare
is another option, while still in development, this product is a more
consumer friendly version of a reverse mortgage except the home is
actually being sold in one month, one percent increments. Even after
100 months, or over 8 years—a complete sale—the homeowner maintains the
right to live in their home indefinitely.
Like
homes, life insurance is another "asset" that can now be used for pay
for care while the policyholder is still alive. Life settlements
involve selling the death benefit of a life insurance policy for a
portion of the benefit amount. This concept, which is also referred to
as viatical settlements, began in the 1980s. However, the newer
financial products associated with life settlements are designed
specifically to pay for care and do so in a manner that allows the
policyholder to become eligible for Medicaid should the funds from their
life insurance settlement become exhausted. These Medicaid life
settlements are being pioneered by an organization called LifeCare Funding. The concept is looked on so favorably that the state of Texas
passed a law that requires Medicaid applicants with life insurance to be
informed of the option. Several other states are expected to follow
suit with their own versions of the law. Learn more about converting a life insurance policy to help pay for long term care on our website.
Eldercare Loans
Loans
intended specifically for eldercare became a reality several years
ago. However, the best model for them is still being fashioned given
the challenges associated with lending money to someone in failing
health. The current version of eldercare loans are made on a short term
basis when the borrower is expecting an alternative source of funding to
become available. It is quite common for the need for eldercare to
come unexpectedly and families may wish to borrow money for assisted
living, for example, while waiting for a home to sell. Another very
common scenario is when one is waiting for veterans' pension benefits.
Elderly veterans and their spouses can receive several thousand dollars
per month for care but the application process can take 6 - 18 months.
Once approved, the benefits are retroactive to the date of application,
resulting in a lump sum payment. Eldercare loans are given knowing a
lump sum payment is forthcoming and the loan can be repaid from that
lump sum. Lear more about eldercare loans on our website.
Annuities and Trusts
The
third category of financial product specifically intended to help
families afford eldercare involves annuities and trusts that enable
families to qualify for Medicaid or veteran's pensions. Both Medicaid
and veterans' pensions provide significant financial assistance for care
but both programs have strict financial eligibility requirements that
take into consideration both the applicant's (and their spouse's)
monthly income and their financial assets. Pooled income trusts, a
financial product sometimes managed by non-profit organizations, provide
a way to lower one's monthly income in order to meet Medicaid or the VA
monthly income requirements. Irrevocable funeral trusts enable a way to
pre-pay for one's funeral expenses while at the same time lowering
one's overall assets to meet Medicaid and VA asset limits. Medicaid and
VA planning annuities achieve this same purpose; they convert assets
that would otherwise disqualify the applicant into income that can be
used for ongoing care. Often a Medicaid planner can best advise families on how to best make use of these products. Learn more about how a Medicaid Planning works in this article on our site.
Given
the already high and ever increasing cost of eldercare and the massive
number of Americans expected to require care over the next 20 years, we
expect to see the amount of private financial products addressing this
market to continue to grow.
Comments
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