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7 better ways to pay for your parents' long-term care

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Paying out of pocket for your parents' long-term care can be difficult — and there are better ways to cover these costs. Getty Images

As your parents age, the likelihood increases that they will eventually need long-term care services like nursing homes, assisted living facilities or in-home health aides. And, while this type of care is often necessary as we age, it can also be incredibly expensive, with nursing home costs now averaging nearly $10,000 per month for a private room. 

With such a high price tag tied to long-term care, it's essential to plan for how to cover these potential costs for your aging parents. After all, it could be hard to cover tens or hundreds of thousands of dollars in long-term care costs each year out of your own pocket, no matter how financially secure you may be. And, the costs of long-term care insurance are expected to rise, so paying out of pocket for your parents' nursing home or home health aid expenses may become even more unsustainable in the future.

But what routes can you take to pay for your parents' long-term care costs as they age? Below, we'll break down what you should know about your options.

Learn about the best long-term care insurance options for your parents now.

7 better ways to pay for your parents' long-term care

Paying out of pocket for your parents' long-term care may not be sustainable, but these other options might be worth considering instead:

Purchase a long-term care insurance policy for your parents

One of the most straightforward options is a long-term care insurance policy. The main benefit of purchasing a long-term care insurance policy for your parents is that it can be used to cover a wide range of long-term care costs, from nursing home care to in-home care and adult day care services. This keeps the costs down for you and ensures that you'll be able to afford the care they need if they need it. 

They will have to qualify for coverage, though, so the earlier you can purchase the policy, the better, as the chances that an existing health issue will disqualify them are lower when they're younger. And, the younger your parents are, the more affordable the policy will typically be. There are typically waiting periods before coverage will kick in as well, so being proactive about securing coverage can benefit you, and them, in a few different ways. 

Compare long-term care insurance policy options and costs online now.

Tap into the right life insurance policy

Some forms of life insurance can be tapped for long-term care needs when they arise. For example, whole life insurance policies can build cash value over time, and you can take a loan against that cash value to help pay for care if your parents need it. Or, you may be able to purchase a life insurance rider that is specific to long-term care, which can then be utilized to cover nursing home costs when necessary. Another option is to sell the policy entirely in a life settlement to fund the long-term care your parents need.

Utilize the funds from a reverse mortgage or home sale

If your parents have a sizable amount of home equity, a reverse mortgage could be the solution you're looking for. With a reverse mortgage, your parents can pull cash out of their home's value to cover the costs of in-home care, assisted living or other types of long-term care. And, unlike other home equity loan options, a reverse mortgage loan doesn't have to be repaid until the home is sold after your parents move out or die.

Another option is to use the funds from the eventual sale of your parents' home to fund the cost of assisted living, memory care or nursing home care as the needs rise. This means giving up the family home, but if you have no other way to cover these costs, selling the home could be a solution worth considering.

Inquire about veteran benefits

If your parents served in the military, the U.S. Department of Veterans Affairs' Aid & Attendance benefit can be utilized by those who need help with daily activities or are housebound to help offset the costs related to assistance with basic daily living activities. Even veterans without a service-related disability may qualify, so it can be worth looking into this type of assistance if there's a chance your parents may qualify.

Consider certain types of fixed annuities

It may also be worth considering the fixed annuity products that are designed specifically for long-term care. These annuities provide a guaranteed income stream to help cover costs while also retaining some death benefits for heirs. That said, annuities can be a complex tool, so you may benefit from working with a qualified financial advisor if you want to take this route.

Use their health savings account funds

If your parents had eligible high-deductible health insurance plans, they may have contributed tax-free dollars to health savings accounts (HSAs) while they were still working. Those HSA funds can be used tax-free for both Medicare premiums and qualified long-term care costs, so be sure to inquire about whether they put money away in an HSA that can be tapped into for this purpose.

Ask for more family support

While never an easy conversation, you may need to discuss how the costs of your parents' care could be divided among siblings or other family members who can contribute financially. After all, family support is often a necessary part of the equation when long-term care needs arise.

The bottom line

If you're searching for ways to cover your parents' long-term care costs, the best plan may be to combine multiple sources of income and assets to create a pool of funds that can be tapped into as necessary. And, if you include a long-term care insurance policy in the mix, chances are your parents will be able to get the care they need without impacting your financial security. That said, the earlier you start planning, the better prepared you'll be when those care needs inevitably surface, so you may want to get started now to prepare for what may come.

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