One of the biggest struggles that families face when making the decision to seek professional care for a loved one in need is determining how much they can afford. In fact, more than 76 percent of adults want to stay in their home as long as they can, yet only 13 percent are financially prepared to do so. Helping families determine long-term care affordability can be a major challenge for care managers and other family advisors—especially if uncovering hidden sources of funds is a must.
Thankfully, there’s a simple way for care managers to think about and discover funds that can go a long way toward long-term care affordability. The Care Value model makes it easy to factor in property and other assets that may not immediately come to mind when thinking about immediately usable assets like a checking account or liquidation of a retirement investment account.
By using Care Value calculations, you can help guide families toward financial resources they might otherwise miss. Here’s what you need to know about Care Value and how it impacts long-term care affordability.
Care Value may sound like a new term, but it's actually derived from very basic financial concepts that should be familiar to most care managers and individuals. In essence, Care Value is the financial amount that both liquid and illiquid assets, like life insurance plans, can contribute to long-term care and aging expenses.
This idea is similar to equity, but with a few key differences. Equity calculates the total value of an asset. For example, a home worth $500,000 with a fully paid off mortgage is roughly equivalent to $500,000 worth of equity for the owner. If an owner (or family of a person in need or care) wants to sell the home, they could get somewhere near this total to put toward care, depending on the selling price of the home and associated fees.
But what if the owner wants to say in their home while still extracting some of its equity to pay for care? For that, you’ll want to calculate the home’s Care Value. In this example, Worthright could determine the home has a Care Value of between $150,000 and $180,000. This means that the family member could continue to own and live in their home while still receiving between $150,000 and $180,000 in cash to contribute towards long-term care expenses. These could include home care, skilled nursing, or other private-pay services.
Care Value goes beyond the black-and-white of evaluating cash (checking or savings), investments, and other immediately recognizable sources of funding for care. Rather, a Care Value determination offers a more inclusive way of looking at a person’s finances—one that evaluates their needs, wishes, and opportunities with equal weight. Plus, Care Value allows for a broader variety of assets to be considered, which can be essential for families that may not have enough conventional savings to afford the care their family member deserves.
Here’s another example. Let’s say that a parent has a life insurance policy with a benefit of $500,000 that is to be paid out to their beneficiaries, but only after their death. Upon evaluation, Worthright determines this policy has a Care Value of $80,000 to $120,000. That means a family could extract between $80,000 and $120,000 in cash from the policy to put towards long-term care costs today. This benefits the elderly parent and their beneficiaries immediately, and can improve the situation for both parties.
By assessing the plan’s Care Value, you can end up with three to five times what the cash value of the plan is, as the latter only accounts for the premiums paid. Without assessing the plan’s Care Value, statistics show that it’s likely a family may either cash out the policy for a fraction of what they could get by selling the policy, for example. Knowing the Care Value total, as well as how to get what a policy is worth by selling, can yield much better outcomes for families.
Care Managers are often asked to wear many hats with their clients: you’re not just a care coordinator, you’re often a source for legal and financial tips as well. In most cases, that’s a lot to ask of one person—especially if you don’t have a background in elder law or personal finance. Having an easy framework at your disposal, such as Care Value, can help you offer answers for families that can yield important insights more quickly and precisely.
Care Value is one of several tools Worthright offers care managers. Our Financial Assessment tool provides care managers with an all-in-one method of obtaining financial information about a current or prospective client family. This includes existing, conventional sources of funds for care as well as those that may have Care Value associated with them. With this tool, families can get a better and more comprehensive assessment of their care options.
We’re able to calculate Care Value by way of internal pricing and evaluation methods. This calculation looks at multiple data sources, government records, real-time market data, and any existing liens for debts on a family’s assets.
Worthright offers its Affordability Assessment tool free of charge to care managers as part of its broader suite of tools to help you advance your practice. You can sign up for our limited beta or learn more about the Worthright platform on our homepage.
Your responsibilities as a care manager exceed the number of hours in the day, let alone your job description. If finding funds for families to go towards care is a large part of your workload, there are options out there to help make this easier for you. With Worthright’s Care Value calculation and affordability assessment tool, you can work with families to compile a thorough breakdown of available finances. Better still, you can even unlock the value of existing assets without having to recommend that families make difficult choices just to afford the care they deserve for their loved ones.