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If You Can't Afford Assisted Living
What to do If You Can't Pay for Assisted Living

All Financial Options

Paying for assisted living

Don't be caught without options. If you're among the thousands of seniors who cannot afford to retire because of the 2008 real estate debacle and lost a job or life savings, then you need to learn about other ways to pay for assisted living.

Or if a parent or relative does not have the financial means but requires personal care assistance, you're in the same predicament; in search of assisted living funds. Some of the financial resources and options you need come from private funds and others from the government. These options deal with sources originally paid for through private funds, government assistance, and personal loans:

Your Options to Pay for Assisted Living

Reverse Mortgages

A loan is accessible to people over 62 years of age. It allows the homeowner to borrow or convert part of the equity in the home for cash. Reverse mortgages help seniors with limited income to apply monies for assisted living expenses, to pay off debts, to cover other essential living expenses or to pay for health care. No restrictions apply to using the proceeds from a reverse mortgage.

The advantage is that the borrower's credit is not relevant because there are no payments. The home serves as collateral. When the borrower dies, the heirs can repay the mortgage without selling the home. Be prepared to pay a hefty origination fee and costs. The fees and costs become part of the initial loan and accrue interest.

How it works: It's called a reverse mortgage because it works the opposite (in reverse) of a traditional mortgage payback stream. Instead of making monthly payments to a lender (as with a traditional mortgage), the lender makes payments to the borrower

Equity Key Agreement

The homeowner shares the long-term appreciation of their home with a real estate investment company. The investment company pays the homeowner cash in exchange for the entitlement to participate in the home's future appreciation.

How Equity Key Agreements differ from a reverse mortgage:

Takes existing equity out of a home and focuses on future growth, leaving your current investment intact. The investment firm invests in the home's growth - becomes a partner in appreciation. (Equity Key Agreements has limits to certain geographic areas)

Equity Lines of Credit

A form of revolving credit using your home as collateral. An equity credit line pays for major items like assisted living expenses, education, home improvements, or medical bills. It offers lower associated costs and is a good option for couples of mixed ages who are not be eligible for a reverse mortgage. The homeowner uses a loan against the home to help pay for assisted living.

The homeowner must qualify for the equity line of credit and be able to make monthly payments on the loan. Before you decide, weigh the options carefully. The costs of home equity lines differ, so shop for the credit terms that best meet your borrowing needs without causing undue risks. Failure to repay the borrowed

Life Insurance Conversion

Pays for assisted living using your life insurance policy as a source of income. It's complex, so before changing your coverage, talk to your life insurance provider, a tax planning professional or a financial planning expert.

Look at the certificate document to find the type of policy you have. The document describes the options for converting your life insurance into income.

When the company loans you money against a life insurance policy, the lender expects repayment at the time of death. The insurance company may give you a tax-free loan. The amount you can borrow and the interest rate specified in the life insurance policy. You must continue to pay premiums.

Selling a life insurance policy to a purchaser to obtain income is another option. There are two types of settlements:

Viatical settlements

When a person has a shortened life expectancy, he sells the life insurance policy at a lower price than the policy's death benefit but greater than the cash surrender value. The purchaser takes over paying the premiums and becomes the owner of the policy.

Life settlements

The person selling the policy does not have a limited life expectancy. Life settlements are common for older individuals who have some life-shortening health condition. An excellent source of information on this option is the Life Insurance Settlement Association.

Long-term Care Insurance

LTC insurance pays for services received in facilities like nursing homes and assisted living. The policy also pays for activities of daily living (ADLs) services received at home.

If you don't have a long-term care insurance policy, an individual can make a lump-sum payment to buy one. The payment depends on the age and amount of the deposit before calculating a monthly benefit. It requires an initial life insurance benefit that decreases over time. After five years, if you haven't filed a claim for a monthly benefit, you can get the investment back.

Assisted Living Loans

An equity line of credit or home equity line of credit. If you have equity in your home, you can use that cash to pay for the retirement community entrance fees and senior housing costs.

Veteran Benefits

If you or your spouse is a veteran (active at least 90 days where just 1 of those days was during a period of war) you are potentially eligible for a benefit to help them pay for assisted living.

It's called the Aid and Attendance Benefit and it's offered by the Veterans Administration which allows for Veterans and surviving spouses who need the help of another person for regular attendance to assist in eating, bathing, dressing, undressing, taking medication, or needing help with toileting to obtain financial benefits. The Aid and Attendance include care received in assisted living facilities, nursing home, or at home, and it applies to persons who are blind.

Paying for Assisted living with Medicaid

Thanks to recent federal and state government programs, a senior can qualify for financial help for Medicaid. It offers programs to help pay for assisted living. Each state has individual rules, regulations, and eligibility requirements.

In most cases, assisted living communities receive payment through private funds for housing, care and services. But know that some assisted living communities reserve a few number of beds for people receiving Medicaid funds.

Not all assisted living facilities accept Medicaid payments. An assisted living facility can tell you whether they take Medicaid patients. The care center that facility that receives Medicaid has a state license and is subject to inspections to meet federal standards.

All the states set income and asset guidelines for Medicaid entitlement. While most use the similar guidelines established by the federal SSI (Supplemental Security Income) program and an income limit tied to the SSI program, other states have their income and asset guidelines.

There are other non-financial eligibility criteria that used in determining Medicaid eligibility. In order to qualify for Medicaid, individuals need to satisfy federal and state requirements regarding residency, immigration status, and documentation of U.S. citizenship.

State Medicaid Waivers for 2014

According to, all state's Medicaid Waivers program changes and improves each year. Some states expand coverage for low-income adults while others enhance their enrollment and renewal processes.

Waivers are vehicles states can use to test new or existing ways to deliver and pay for healthcare services in Medicaid. The State Medicaid waivers that allow for coverage of Long Term Care Services through several vehicles and over a continuum of settings: includes Institutional Care and Home and Community Based Long Term Services and Supports.

For more information on additional information on community-based state waivers.

Seniors who lost their savings or saw their 401K dwindle due to economic near-collapse; are not able to retire. This puts them in a bind when it comes to choosing what to do in their later years. How can they afford assisted living?

A good option is continuing to work. If health permits, some seniors work well into their seventies and reserve retirement for their eighties and beyond. In today's job market, finding employment for older workers is tough. There are jobs that hire them. Even seniors that have years of education and work experience are hard pressed to find a job with the low number of jobs and high amount of applicants. Read the article, Private Funds - Part Time Work.

Carol Marak
Carol Marak

After seven years of helping her aging parents, Carol Marak has become a dedicated senior care writer. Since 2007, she has been doing the research to find answers to common concerns: housing, aging and health, staying safe and independent, and planning long-term.