Adult Day Care
Use Personal and Family Assets
Because so little outside help is available, most people pay for all or part of the costs of adult day care with their own money. For some people, the need for adult day care also signals a need to take a hard look at their complete financial situation and begin to consider managing, selling, or converting assets to meet the potential need for future medical care. For them and for those paying out-of-pocket for adult day care, some sources to consider are outlined below.
Reverse Mortgages
A reverse mortgage is a loan against the value of a home that does not need to be repaid until the owner leaves or sells it. The arrangement allows homeowners who are at least age 62 to convert equity in their homes into one-time or monthly cash payments or a line of credit. The loan advances are not taxable and generally do not affect Social Security or Medicare benefits.
Possible pitfalls. Some potential drawbacks of reverse mortgages include:
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Hidden costs. Reverse mortgages can be expensive to secure, usually involving high costs for processing, insurance, interest, and ongoing services that are added to the overall loan costs.
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Estate planning complications. If the borrower leaves the home to family members or other beneficiaries, it will be encumbered with the reverse mortgage debt if it’s not paid off before death.
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Benefit ineligibility. Equity borrowed as a lump sum or line of credit may be counted as an asset that affects eligibility for Medi-Cal, which may be needed to help pay for the costs of other types of care. Other low-income subsidies such as food stamps may also be jeopardized.
California law requires that before being given a reverse mortgage, potential borrowers must first receive advice on costs, implications, and alternatives from a housing counselor approved by the U.S. Department of Housing and Urban Development (HUD).
For more information or to report potential problems with reverse mortgages, contact HUD’s Homeownership Center.
Help from Family Members
Family members, particularly children, may also be able to help cover the costs of adult day care. But beware that if the financial support — cash or help with rent or other housing — is paid regularly, it may be considered as part of individual income limits when determining eligibility for Medi-Cal coverage.
If a person is not concerned about qualifying for Medi-Cal coverage and there are relatives or others who are willing and able to contribute to care costs, it may be wise to get those commitments in writing to help avoid misunderstandings and emphasize their importance.
