6 strategies to deal with long-term care costs

COLUMBUS, Ohio — When it comes to planning for long-term health care, every farmer faces a unique situation.

Planning should be tailored to each situation, said Robert Moore, agricultural and resource law specialist with Ohio State University Extension’s Agricultural and Resource Law program.

He shared six strategies farmers can use to deal with long-term care costs.

1. Long-term care insurance — Purchase an insurance policy that will pay for long-term care costs.

Advantages: Provides protection to assets without giving up control of assets.

Disadvantages: Premiums can be expensive. Must purchase long before needed.

2. Do nothing. For some people, assuming adequate resources are available to pay all long-term care costs, there’s no need to do anything. For other people, they must keep every asset to live and cannot afford to transfer assets away.

Advantages: No cost. Keep full control of assets.

Disadvantages: No assets are protected.

3. Gift assets that are to be protected — Gift assets that are to be protected from long-term care costs and incur the improper transfer penalty, or wait the five-year look-back period.

Advantages: Relatively inexpensive to execute.

Disadvantages: Loss of ownership, control and income from the assets. Giftees may develop their own financial issues and jeopardize the assets. Loss of stepped-up tax basis at death.

4. Irrevocable trust — Transfer assets to an irrevocable trust.

Advantages: Trust can include an estate planning component. Trust can be set up to retain the income and stepped-up basis at death. Can protect against giftee’s financial problems and poor management.

Disadvantages: Can be expensive to establish and maintain trust. Transfer to the trusts are improper transfers, subject to five-year look-back. Loss of ownership and control of the assets. Loss of stepped-up tax basis if income is not provided. Trust cannot be changed except for beneficiaries.

5. Self-insure — Intentionally reserve assets for long-term care costs. Usually, savings or investment accounts, but can be land or other farm assets.

Advantages: No fees or expenses required. Keep full control of assets.

Disadvantages: Deciding how much is needed. All assets at risk if long-term care costs exceed reserves.

6. Wait and see — Wait to see if long-term care will be needed. Have enough resources to pay for five years of care. Gift assets that you wish to protect at the beginning of the five-year look-back period. After five years, gifted assets are protected.

Advantages: Provides flexibility. Reduces unknown aspect of long-term care planning.

Disadvantage: Does not protect assets for five years.