How to Pay for Assisted Living

9 Smart Ways to Cover Assisted Living Costs
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As you're weighing senior care options for your loved one, cost is likely a top factor. The good news? Depending on what care your loved one needs, assisted living can be much more affordable than nursing home care or long-term in-home care. Assisted living rents vary, but you can generally expect to pay $2,000 to $5,000 per month (compared to $5,000 to $10,000 and up for nursing homes). If your loved one doesn't need close medical supervision, assisted living might be your best bet, financially speaking.

But how will you pay for assisted living? Explore eight creative ways to afford assisted living that you haven't thought of yet.

Important note: Medicare won't pay for assisted living beyond short-term rehabilitation.

1. Pay for Assisted Living with Veterans Benefits.

If your loved one (or your loved one's spouse) was a veteran, you're in luck when it comes to residential care. Veterans benefits can be used to pay for residential care in a variety of situations. One set of benefits is available to those with service-related injuries or disabilities; another set of benefits, known as Aid and Attendance, is available to any veteran or surviving spouse who's disabled and whose income is below a certain limit. To qualify for and access these benefits, you'll need to go through the Veterans Administration, which can be a tricky and time-consuming process. It's extremely helpful to work with a geriatric planner who knows the ins and outs of the system. Many senior living communities offer a financial concierge service that can include guiding you through the process of qualifying for benefits.

Another option is to work directly with services such as Elderlife Financial, which works with assisted living and continuous care retirement communities (CCRCs) to provide this concierge service. Elderlife Financial connects you with its network of veterans benefits experts, who can help obtain the maximum benefits your loved one is entitled to.

2. How to Use a Life Insurance Policy to Pay for Assisted Living

If your loved one has a life insurance policy, he probably purchased it long ago, thinking to provide support to his family after his death. But a life insurance policy can also provide financial support now, if that's when the money would be most helpful. To cash out a policy, ask your life insurance company about "accelerated" or "living" benefits. Commonly, the company that originally issued the policy buys it back for 50 to 75 percent of its face value. The amount is decided based on the policy amount and monthly premiums as well as the policyholder's age and health. Different rules may apply depending on the company and type of policy. For example, some policies can only be cashed in if the policyholder is terminally ill; others are much more flexible.

If the company that issued the policy won't cash it in, don't worry. Your loved one can also sell the policy to a third-party company in return for a "life settlement" or "senior settlement," which is usually a lump sum of 50 to 75 percent of the policy's face value. After buying the policy, the settlement company pays the premiums until the policyholder dies, at which point the company, rather than the policy's original beneficiaries, receives the benefits. Another option, known as a "life assurance" benefit or life insurance conversion program, allows seniors to convert the benefit of a life insurance policy directly into long-term care payments. Life insurance conversion typically pays between 15 and 50 percent of the value of the policy -- less than a life settlement -- but is available for lesser-value policies that might not qualify for life settlement.

3. How to Use Long-Term Care Insurance to Pay for Assisted Living

If you or your loved one bought care insurance, you're one of the lucky ones. Long-term care insurance policies apply to assisted living care; all you need to know is how to collect on it. Some long-term care policies have a specific designated benefit for nursing home care, based on a mental or physical diagnosis, which can be used to pay for assisted living. Or the policy may set a designated payment for home care, which can be paid directly to the assisted living facility or to the beneficiary, who then uses it to pay for assisted living.

One more thing: If your loved one didn't buy long-term care insurance, it's probably too late now to consider this option. But there is time to sign up for a long-term care policy yourself, so you don't put your own family in the same pickle in the future.

4. How to Use an Annuity to Pay for Assisted Living

If you have a nest egg but you're concerned about outliving your resources, an annuity may be a good option. When you purchase an annuity, you pay a lump sum up front -- and receive regular payments back over a promised period of time, usually the rest of your life. An annuity can help you stretch your budget and be sure that you'll always have at least some money coming in even if you live longer than you expect.

The big benefit of annuities is that you continue to receive money regularly, even if your purchase premium runs out. If you live a really long time, you get more back than you put in. The underwriter takes the risk that you might live longer than the money lasts -- and makes an extra profit if you die early. Underwriters don't go into the annuity business expecting to lose money, but annuities can still be a better deal for you than just consuming your money year by year.

Another benefit is that annuities aren't fully counted as assets by Medicaid when you apply for government assistance. The income from the annuity is counted as a "resource," but the much larger sum originally used to purchase the annuity is not.

Annuities are complex financial tools. There are many variations. Some you buy now to get future payments, others deliver immediate payments; some are based on a fixed interest rate, others work off variable rates. You'll want to do some homework and talk to a trusted financial adviser about what annuity options might be appropriate for your situation.

Be very cautious when investing in annuities. There are unscrupulous marketing schemes pushing phony annuity deals that target vulnerable seniors through community centers, adult education seminars, telemarketing, and slanted advertising. And outright annuity fraud is more common than most people realize. Always use your common sense filter: If it sounds too good to be true, it might be a scam. You'll want to choose a reputable company when you buy an annuity, and work with a representative who comes highly recommended. And make sure your representative helps you think through some of the trickier details, like inflation.

5. How to Use a Reverse Mortgage to Pay for Assisted Living

If your loved ones own their home outright or have only a small mortgage on it, a reverse mortgage might be just the solution you're looking for.

A reverse mortgage allows you to cash out the value of your home equity, either in a lump sum or in a series of monthly payments. The bank decides on a value based on what the home is worth, interest rates, the applicant's age, and other factors, and the loan balance gradually increases over time. (If a bank holds a mortgage on the house, it has to be paid back before you can begin receiving payments.) The borrower can stay in the home until death, even if the loan balance exceeds the home's worth. Upon death, the loan balance must be repaid, which usually means selling the home.

Reverse mortgages were originally developed to help widows remain in their homes after the breadwinner passed away. Today they work best when one parent needs assisted living but the other can remain in the home. To apply for a reverse mortgage, one homeowner must be over the age of 62, and one person must continue to live in the home.

Be sure to do your homework about the pros and cons of reverse mortgages -- they aren't for everyone. For example, it's probably not a great choice for a beloved property that you want to keep in the family.

Finally, a reverse mortgage is a big commitment, so it's important to work with a reputable company. Make sure you understand the terms and read the fine print, as there are many rules about homeowners' insurance and mortgage insurance and keeping the property well maintained. There may also be high fees involved, or clauses that make it easy to lose the home. The Consumer Financial Protection Bureau recently reported that reverse mortgage scams and foreclosures are on the rise.

6. Rent out Your Home to Make Assisted Living More Affordable

If only one parent is still living, or if both parents need assistance with daily living, the family home can be an important resource. Selling is an option, of course. But in many families, Mom and Dad's house is cherished and family members aren't ready to make this decision. In this case, consider renting out the house and using the rental income to pay for assisted living. The idea of being a landlord might seem scary, but for a percentage fee you can hire a service to manage the property for you.


7. How to Use Medicaid or SSI to Pay for Assisted Living

If you don't have much in the way of savings or other financial assets and your income is low, you may qualify for government assistance to pay for assisted living.

Start with Medicaid, which is run as a partnership between the states and the federal government. In many states the programs go by another name, so look up the name of your state's program online or in the government pages of your phone book (example: Arizona Long-Term Care System). Medicaid eligibility is different from state to state, but typically you must have less than $2,000 in assets, in addition to your home and your car, in order to qualify.

Only some assisted living communities will accept Medicaid, and Medicaid beds are usually limited. To find long-term residential care options near you, check with your local Area Agency on Aging. To help you navigate the maze of signing up for public benefits, you can also call for a free consultation from a Government Health Insurance Counselor.

Important note: Beware of trying to qualify for Medicaid by "gifting" money and other assets to adult children or other family members, also known as "Medicaid spend-down." This once-popular strategy isn't as easy as it sounds and can backfire badly. The government has become increasingly strict about Medicaid qualification and has the right to do a "look-back," going over your financial transactions for the past five years. Any gifts of money or assets made during this time are counted as resources, including assets put into an irrevocable trust. If you're caught trying to spend down your resources to qualify for Medicaid, the penalties are steep -- including disqualification from receiving Medicaid for a lengthy period of time.

If you have a disability, another option is supplemental Social Security income (SSI). Also administered by the state, SSI is part of the governmental safety net for those who are impoverished and partially or totally disabled by illness or injury. SSI comes in the form of monthly payments, which you could use to pay for nursing home care or assisted living. To qualify for SSI, contact your state disability department. You'll need to document your financial status and you'll also need a doctor to certify that you can't work because of a medical disability.

8. How to Pool Family Resources to Pay for Assisted Living

If you're worried about Mom or Dad living alone, other family members may be worried, too. Getting everyone together to talk about it sometimes makes it possible to find a solution, such as pooling assets and trading money for time. For example, if one or two siblings or family members handle the brunt of daily care, such as driving to medical appointments, others with less flexible work schedules might contribute money instead. Or if there's a family home that no one wants to sell yet, siblings with available funds might pay for assisted living with the promise of repayment when the house is sold.

The research and paperwork associated with finding and choosing among assisted living facilities and qualifying for financial support is a big job. Sometimes families get stuck because no one feels qualified to take on the task. It can be a huge relief to work with a geriatric care manager or senior move manager who knows the resources in your area. A care manager can work with the entire family to present options, resolve roadblocks, and help you find the perfect situation for your loved one.

Money matters can also bring up family tensions. If you're having trouble communicating about this challenging topic, learn more about how to handle family conflicts. You might also enlist the help of a mediator.


9. Pay for Assisted Living With a Bridge Loan

If your loved one doesn't have a lot of free cash or financial assets that are easily liquidated, the answer might be a bridge loan, an option developed by Elderlife Financial. Bridge loans are short-term loans of up to $50,000 designed specifically to provide the funds for a move to assisted living or a continuing care retirement community (CCRC). They come in two types. The first type is an unsecured (no collateral required) line of credit intended to finance the first months of living expenses while seniors sell their home, obtain veterans benefits, or take other actions to free up funds.

Interest rates for these lines of credit range from 8.25 to 12.5 percent, so this option is best used when the time to payback is relatively short. (Borrowers have up to five years to repay, but most repay the loans within a year, according to the company.)

The second type, called the Capital Access Program, is a lower-interest, lump-sum loan secured by real estate or another asset that the company recently introduced. It's designed to help seniors come up with the large up-front entrance fee typically required for a CCRC.

Seniors (or other family members) qualify for both types of loans based on the usual criteria, such as credit score, credit history, and debt-to-income ratio. The senior or an adult child can be the borrower, and up to six family members can cosign the loan application. Of course, as with any loan, cosigners are liable if the borrower runs into trouble with repayment. In many cases, payments can be made directly to the CCRC for convenience.

Melanie Haiken

Melanie Haiken discovered how important it is to provide accurate, targeted, usable health information to people facing difficult decisions when she was health editor of Parenting magazine. See full bio

3 months, said...

We have nothing. My husband gets 1600 a month . he is diabled with lewey body dementia. He just turned 60. Cognatively he is at the ladt stage. Psycially he is nit. I need help

4 months, said...

I have MS and am in need of steroids and physical therapy. I will be hospitalized for 3 days and then transferred to a short term care facility to receive much needed physical therapy. My primary insurance is BCBS state health benefit plan of Georgia. I currently receive medicare as a result of being considered by Social Security to be disabled. I have applied for Medicaid but expect approval in the next 20 days.

9 months, said...

If you want a caring place DO NOT come to this home.

about 1 year, said...

My brother is up at UW Hospital in Madison WI he needs rehab from illnesses. excessive water weight,, high blood pressure, Obesity, diabetes, asthma........ he need rehab for a month or so. He is on a forward card I need help. They want to send him to Waukesha which is an hour drive from my home. I am in a power chair and can not drive, Please help.

about 1 year, said...

My youngest sister has deliemia she is 55 year old cant do any for her self. she never been married has one son 30 years old .a few grandchildren. My mom is 87 years she has at all been taking care of her at least 4 to 5 days a week .S he has a boy friend that said he would take care of her but thatis not working out so it is a full time job she doesn't remember wht to do like take a shower,brush her teeth ,going to the bathroom she doesn't rember any thing to take care of her self she cant be left my her self

over 1 year, said...

I like to apply forCCRC low income on Medicaid

over 1 year, said...

I need help and to be around people who care.

almost 2 years, said...

I have had cirrhosis of the liver for 4 years, just recently diagnosed with leukemia. I have no money and receive substandard health care from my state. I am almost homeless. What do I do now? I have no living relatives. No friends with any money. I don't know what to do or where to go.

almost 2 years, said...

what are the prices, no insurance, no annunity no nothing just medicare

almost 2 years, said...

My sister is on disability and has no chance at ever living a normal life again. She has chronic DVT's..yes MULTIPLE, numerous stomach issues, heart issues, a carotid artery problem and now to top it off, she was diagnosed with Epilepsy! She is only 45 years old and is on Medicare not Medicaid. I feel her best bet is to get into an assisted living facility BUT, we can't afford it! Does anyone have any suggestions as to what we can do to make her life any better? Please help! I'm so scared for her at this point.

about 2 years, said...

Hi there I'm here in a nursing home. Been here for 15 mo!! All is being paid thru medicaid issuance. I am getting stronger, better am in a long term unit. I have been looking into assist living facility. I have found one that requires me to pay out of pocket. I do receive ssi benefits $733 dollars, my out of pocket pay will be $167 dollors. other then say family are their any options for which I should be looking into?

about 2 years, said...

I'm 60 and I've asked around here in Cincinnati at the cost of Assisted Living apartments and it's really expensive. I only draw $733.00 a month on disability. But my daughter found me a wonderful little apartment that only costs $240 a month, then my electric was just $135 and cable was $125. It's an efficienc, but it's a nice size closet, remodeled bathroom, new carpet, I love it here. They do offer a one and two bedroom too. $350 for the 1 bedroom & $450 for the 2. You really need to call a hospital that has social workers, if you don't have anyone to help you like a family member, and the social workers will help you find a low cost apartment. That's what they're paid to do. Laundry here costs $1.00 to wash and $1.25 to dry. And I don't have that much laundry. I wash my gowns and undies and dry them on hangers on the shower bar. They have a couple snack machines, so if I run out of pop or want a snack they have that here too. But to the commenter who said she/he was nervous, gets confused, etc. Don't feel bad. I do too. But since my daughter found me this place I'm a lot happier. I believe the confusion is from my Fibromyalgia, which causes me to get something they call brain fog. I quit driving 20 yrs ago because of this brain fog & I get dizzy spells. I had a really bad car accident and I just felt the best thing to do was to depend on others to drive me, till I get well. And I'm a strong believer in Jesus Christ. I'm seeking him daily to heal me. Don't give up hope. Pray in the morning, afternoon and evening. Seek God and he will answer you. He promises to deliver(RESCUE) us in our time of need. Read the book of Psalms and believe it. King David had problems and he always turned to the Lord for help. Psalms 25:20  O keep my soul, and deliver me: let me not be ashamed; for I put my trust in thee. My late fiancé who would write a prophecy newsletter every day told me to read Psalms 31 & 91. That helped me so much when I was all alone. The Jews will read a shortened version of Psalms 91 every day, before leaving their houses. God is real and he loves & cares about you. Read these verses over and over, till you memorize them. Then speak them out loud and believe me, God will begin to work in your life. His word will not return unto him void. The Bible is a living book, inspired by the Holy Ghost. Psalms 31:22  For I said in my haste, I am cut off from before thine eyes: nevertheless thou heardest the voice of my supplications when I cried unto thee. 23  O love the LORD, all ye his saints: for the LORD preserveth the faithful, and plentifully rewardeth the proud doer. 24  Be of good courage, and he shall strengthen your heart, all ye that hope in the LORD. If you need a Bible online, this is the one I use... God bless you all. In Jesus name. Amen.

about 2 years, said...

Its interesting :)

about 2 years, said...

Really good

about 2 years, said...

I have recently become very concerned about my ability to handle my disabilities by myself. Have had type 1 diabetes for 36 years, had multiple debilitating accidents, and am on ssdi, since 2005. This is my only income, and I've run out of ways to pay rent and necessary bills. I've looked for work, somewhat haphazardly, and would admit;if I were the hiring officer, looking at mymedical concerns and problems, I wouldn't hire me.. I am 56 years old and am afraid I'm gonna fall in the cracks soon. Any suggestions?

about 2 years, said...

Do I have to sign a lease for a specific period of time? I'm waiting to get into a place where some of my family are, so I don't want to sign a long term lease & loose the appartment I'm waiting for.

about 2 years, said...

I don't know how to find resources to help me pay for this senior home living. I'm forgetful at times and have depression and am a private person and scared to drive or answer phones I'm insecure of many things and have panic attacks and anxiety too... I am a Christin.. I'm very quite , noise makes me jump ,and I have a problem with my right knee it locks up some times on me. ..I use to fall some in past but I was told it was stress.Was in hospital last year 5 times for out control blood pressure stroke level)... I'm confused about my lease when to renew it or how to move or when to get out my lease to move. I'm not clear on many things , Ive had brain scan Doctor say I'm aging ok in my head , I don't have alzhimers . I do some times write backwards misspell lots and write numbers backwards..I have not went to doctors fro my blood pressure meds in a year and I believe Jesus has healed me.Im very nervous and scared to drive I get lost finding my way home or to a location at times .

about 2 years, said...

These answers do not help my situation. My husband is young not elderly. We still have young children at home. We have no savings. He is a vet but not service related. does one pay for assisted living now? No annuity, no other family members, no Medicaid, cannot sell our house and leave us and children homeless besides not a lot of equity there. Life insurance is provided by previous employer from where he worked when becoming disabled so no sell value or selling privilege. No pension, no retirement, no Ira's or 401ks. He needs assisted living. Now what?

about 2 years, said...

I'm just a poor "OLD" woman that has problems keeping a single home running. Only need a decent place to eat, sleep and stay warm. Do occasionally take jobs to make ends meet. Do not have money, just a small, small retirement check from Social Security. Don't know where to turn to now!!!