A few years ago, a friend of mine had to enter a nursing home. Medicare won’t cover her care, which costs her more than $45,000 a year! I have watched her lose her entire life saving just to pay nursing home bills. My husband and I have worked very hard for our money, and I’m afraid that our retirement plans could be spoiled quite easily.

Your question is an excellent one that many should be asking. It deals with planning for long-term care, which a lot of people fail to do. Many simply don’t “plan” on ever living in a nursing home. This isn’t a plan; this is a lack of a plan. Forty-three percent of Americans above the age of 65 will spend at least some part of their life in a nursing home. The average stay in a nursing home, is about 2 1/2 years, and the cost can range from $30,000 to $70,000 per year. So how does one plan for long-term care? As you mention, Medicare does not cover long-term care (beyond 100 days), which leaves two main routes: Long-term care insurance and Medicaid. Long-term care insurance is the single easiest precaution most can take. This newer form of insurance has developed into a great tool for long-term financial planning and asset protection. The downside is the cost. For those who can afford it, long-term care insurance is a great option to consider. At the age of 66, if you have not yet purchased it, you might find premiums to be a bit high. The best way to obtain affordable premiums for long-term care insurance is to buy it earlier in life. Ten years ago, your premiums would have likely been much lower. Note that this is not any cheaper, you are just spreading out your payments.

Also, check into the possible tax benefits of long-term care insurance. The IRS allows a deduction for premiums as a Section 213 medical expense. It is pretty narrowly drafted but worth exploring  especially for those over 60.

Those who cannot afford long-term care insurance, or are uninsurable because of pre-existing conditions, need to explore the options provided by Medicaid. Medicaid is essentially a program for the low income that can cover the cost of long-term care for some elders. Because it is a low income program, you must meet minimal asset and income requirements to qualify.

Enter Medicaid planning. Medicaid planning involves transferring assets and/or planning your finances, within the laws and guidelines, in order to gain Medicaid eligibility. While extremely complex, Medicaid planning can be effective and valuable. Many lose this value, and their life’s savings, because they fail to plan at least five years in advance (as some laws require).

You should seek the counsel of an attorney specializing in this area promptly.