A recently released study by the American Association of Retired Persons (AARP) gives a never-before-seen glimpse into the hardships faced by countless unpaid caregivers across the country. Perhaps the most telling aspect is the huge financial commitment that people take on when they agree to provide care for an ailing or aging loved one.

Unpaid full-time or part-time caregivers, usually family members or close friends, spend an average of almost $7,000 per year out of their own pocket in pursuit of caretaking. The costs are even greater if the caregiver is handling things from a distance and has to rely upon paid assistance; then the average expenditures go up to nearly $12,000 annually.

This could include such costs as:

  • Supplies and medications
  • Transportation costs
  • Part-time assistance from trained staff like home health aides or nurses (if needed)
  • Lost work productivity
  • Medical co-pays for the person in need of care

The AARP reveals that family caregivers alone provide an estimated $470 billion worth of unpaid care each year, often at the expense of their own financial needs, their health and, in some cases, their emotional well-being.

Caregiving is an extremely stressful and emotionally charged pursuit, particularly when the person you provide care for is a loved one who you are watching decline right in front of you. This added stress proves to be too much for many, and they have to eventually make the difficult decision to seek residential care options for their loved ones. Nursing homes, assisted living centers and other residential facilities are very expensive, however, and unless provisions have been made in advance, they can quickly drain an elderly person’s life savings.

How can estate planning help?

This is where estate planning makes a huge difference. In addition to incorporating health care directives and medical powers of attorney that allow family members to make medical decisions on your behalf, there are ways to structure estate plans to prepare for the possibility that long-term care will be required for an illness, injury, period of incapacity or disability. One such way is to set aside funds in a trust. This is a relatively simple method of funding care while still keeping assets out to pass along to loved ones.

Long-term care insurance can also be part of a comprehensive estate plan. The policy premiums can be paid out of estate funds, and the policy itself will then be used if long-term assisted care (either in-home or at a residential facility) becomes necessary. These policies have grown in popularity over the past few decades as the American average life span increases.

Another way in which estate planning can address future caregiving needs is through what is known as Medicaid (or Medicare) eligibility. This is done by either making lifetime bequests of estate assets to heirs or setting aside assets in trust for the benefit of the person who will need care but not titling those assets in the name of that person. In essence, it removes ownership and control of the assets in order to ensure that the person doesn’t exceed property thresholds used to determine eligibility for government benefit assistance. The funds are usually controlled by an outside trustee or a family member, and they can be used for the benefit of the person needing care, but won’t jeopardize potential aid.

These estate planning concepts may seem relatively easy to understand, but they must be done carefully and meticulously in order to be effective. To learn more about how to incorporate long-term care provisions into your estate plan, contact an experienced estate planning attorney in your area today.