Tapping assets like your house is an option, but proceed with
care
by John Waggoner, AARP,
October 21, 2019
En español | Being a caregiver is a hard job.
It gets a lot harder if the person you're caring for is running out of money.
And if that person doesn't qualify for
Medicaid or Social Security Disability Insurance — and neither of you are
multimillionaires — then you and your loved one are going to have to make some
difficult choices about how to get more money.
Caregiving costs outside the family are
daunting. Nursing homes run an average of $240 a day for
a shared room, when you adjust the government's 2016 average to account for
inflation.
Medicare generally doesn't cover nursing homes, although it can cover some home health care if the
recipient is homebound. If the person you're caring for doesn't have long-term care insurance, you'll have to find
ways to get more money.
Homeownership
is one path to help
For most people, the biggest source of
untapped funds is their home. The average homeowner between the ages of 55 and
64 had home equity of $120,000, according to the U.S. Census Bureau.
Those 65 and older had average home equity of
$140,000. Profit from the sale of a home is tax-free for a single homeowner, up
to $250,000; for a married couple who file a joint return, it's $500,000.
If the only real option for a loved one who's
receiving care is an assisted living residence or nursing home, then selling
the home is an ideal way to raise money. Someone who needs extra money to pay
for home-based care could buy a smaller, less expensive house or condominium
and use the profit to pay the extra medical expenses.
Free hotlines
Nonprofit organizations such as AARP have
toll-free support lines to provide answers to questions, make referrals and
point to resources for caregivers.
• AARP. 877-333-5885, 7 a.m. to 11 p.m. ET
weekdays; Spanish language: 888-971-2013, also 7 a.m. to 11 p.m. weekdays.
• Alzheimer's Association. 800-272-3900,
advice on Alzheimer's and other dementias 24 hours a day every day.
• SeniorLiving.org.
866-901-4858, advice on dementia, finances and senior housing, 7 a.m. to 11
p.m. ET daily.
However, many people don't want to leave their
longtime homes, especially if that means leaving nearby family and friends.
Those people have three other options, none entirely satisfactory: a home equity loan, a home equity line of
credit and a reverse mortgage.
A home equity loan is a lump-sum loan secured by the paid-up
portion of a home, the amount left over once the mortgage balance is
subtracted.
A home equity line of credit (HELOC) is a preset amount of money that the home
equity secures. The borrower can tap it periodically, like a credit card.
In either case, the homeowner will need a
property appraisal to determine how much it's possible to borrow. The homeowner
also will need a good credit score, ideally above 700, as well as proof of the
ability to afford to make loan payments.
If the monthly payments aren't made, the
homeowner can lose the property.
Home equity and HELOC rates are low: The
average home equity rate as of Oct. 9 was 5.75 percent, according to Bankrate,
the consumer financial services company. Average HELOC rates are 6.30 percent.
A homeowner can lock into a fixed rate with a
home equity loan, which can be a smart move in the current low-interest-rate
environment, says financial planner Ray Ferrara of Clearwater, Florida. HELOCs
typically have higher, adjustable rates.
A reverse mortgage also can give a person the ability to get
payments based on the equity in the home. The federal government insures its
program, called a home equity conversion mortgage (HECM), for homeowners 62 or
older who own their houses outright or have very little mortgage left.
A borrower has to live in the house as his or
her primary residence.
The borrower can live in the home until he or
she moves or dies, and a younger co-borrower, such as a spouse, can stay in the
home until he or she dies or moves. If any equity remains after the loan is
paid off, the borrower or the borrower's heirs will get to keep it.
Fees and interest payments will raise the
costs, and the longer a homeowner has the reverse loan, the more those will eat
into the amount of home equity.
The homeowner has to visit a
government-approved HECM counselor to help decide if a reverse mortgage is the
best option, and a Federal Housing Administration-approved lender in the
program must be used. How much a homeowner can borrow depends on his or her
age, current interest rates and the value of the home.
Drug companies
may offer aid
Cutting medical expenses is another way to
help the person you're caring for.
Patient assistance programs (PAPs) from drug
companies can help a loved one get drugs and other medical care at low cost.
Those who qualify generally have to be a U.S. citizen with no prescription drug
coverage and also have to meet income guidelines.
RxAssist.org offers
a free database of PAPs, and Healthfinder.gov, from
the U.S. Department of Health and Human Services (HHS), also offers information
on the programs.
The department also oversees the Administration
for Community Living, where patients and caregivers can find
information about low-cost or free help in their area. For example, the
administration's website, which provides objective information and counseling
for people of all incomes, will help you find aging and disability resource
centers in your area.
It also can help caregivers and their loved
ones find adult day care, senior centers and
transportation services in the area.
Sometimes the best help is right at hand. It
may take a village to raise a child, but it takes one to care for the old and
sick, too.
"These are situations where people often
have to rely on family and kids to help” personally, says financial planner
Stephen Janachowski of Mill Valley, California.
John Waggoner has been a personal finance
writer since 1983. He was USA Today's mutual funds columnist from 1989 through 2015 and
has worked for InvestmentNews, Kiplinger's Personal
Finance, the Wall Street Journal and Morningstar.
Need cash now? 7 methods to avoid
You may have seen online and TV ads promising
to convert assets into fast money or driven by stores touting instant loans.
These can be tempting options as caregiving costs spiral, but be wary: They can
be expensive and have long-term financial implications for you and your family.
1. Charging too much — or getting a cash
advance — on credit cards. The average interest rate on cards is more than 17 percent if
the balance isn't paid in full each month.
2. Getting a car title loan. These loans, advertised as fast cash,
generally are repayable in full plus interest in 30 days, and interest rates
can be at least 300 percent annually. If the loans aren't repaid in full, the
lender can take away and sell the vehicle.
3. Seeking out a payday loan. Widely available online and in retail stores,
payday loans are easy to come by but hard to get out of, with sky-high annual
interest rates and snowballing late fees that can trap borrowers in a debt
cycle.
4. Taking out a pawnshop loan. Not only will you face high interest rates
often for a fraction of the real value of the item, but some shops charge
insurance and storage fees to hold the valuables. Over several months, that can
drive up what is owed to potentially more than the item's worth.
5. Using brokers who promise extremely high
returns. High returns mean high
risks, and any adviser who promises high guaranteed returns is a con
artist. Pro tip: Be wary of seminars that offer free lunches or dinners. Check
out any adviser's record through your state securities administrator and
the Financial Industry Regulatory Authority's BrokerCheck
program.
6. Surrendering whole life insurance. While whole life policies can be a good source
of emergency income, surrendering the policy means that heirs will get no
benefit when the insured dies. Ask your agent about making limited withdrawals
or borrowing against the policy instead.
7. Withdrawing from an annuity. Typically, fees and taxes make withdrawing
from an annuity a bad decision. The person entitled to regular payments from an
annuity can sell those payments to a factoring company, such as J.G. Wentworth,
which will take a percentage called the “effective discount rate” that can
total 9 percent to 15 percent or more.
https://www.aarp.org/caregiving/financial-legal/info-2019/financial-assistance.html
No comments:
Post a Comment