Tapping assets like your house is an option, but proceed with care.
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 $247 a day for a shared room, according to insurance company Genworth's 2019 survey on the cost of long-term care.
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.
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 relatively low: The average home equity rate in November 2019 was 7.20 percent, and HELOC's averaged about 6.40 percent, according to Bankrate.
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.
