How to Pay for Memory Care: 6 Options for Families

Many families cover the cost of memory care with personal assets. A senior may have saved for retirement throughout their career, or they may have a pension. Adult children also frequently contribute to a parent’s cost of care.

“Sometimes, children will take the remaining cost not covered by their parent’s funds and divide it equally,” says Jenni Barnett, a national account manager at A Place for Mom.

Some personal income sources and assets typically used to pay for memory care include:

• Social Security retirement income
• Retirement plans like 401(k)s, IRAs, and employer pensions
• Stocks
• Bonds
• Personal property
• Savings accounts

“Families most often combine payment sources like the senior’s income, savings, sale of a home, and any stocks or retirement portfolios,” says Beth Wilkison, a learning and development manager at A Place for Mom, who previously worked for a senior living brand.

A home is often a senior’s largest asset or investment and can be used as a source of funds to pay for a memory care community. Here are a few ways you can leverage your loved one’s home equity to pay for memory care:

• Proceeds from selling a home can directly cover memory care costs.
• Renting a home to others can cover the mortgage and free up other funds for memory care costs. If the home is paid off, regular rental income can help pay for memory care.
• Reverse mortgages allow homeowners age 62 and older to convert equity in their home into tax-free income by either receiving a lump-sum amount, a line of credit, or a monthly payment. However, the loan becomes due after the borrower dies, sells their home, or no longer lives there, unless another borrower or their spouse continues to live there.^[01]
• Bridge loans are short-term loans that can help homeowners gain cash flow quickly if moving into a memory care community becomes urgent. A bridge loan may help a senior pay for the care they need while waiting for their home to sell or for public benefits to kick in. However, it may result in more financial difficulties due to high interest rates, transaction costs, and the uncertainty of whether the house would sell within the term of the loan.^[02]

Can you afford memory care?

Long-term care insurance policies can be used to pay for long-term care needs, which include paying for a memory care community. However, policies vary on what they cover. It’s crucial to reach out to your loved one’s insurer to see whether memory care is covered.

It’s also important to understand that an individual must purchase a long-term care insurance policy before long-term care needs arise. That’s why mid-50s, when one is in relatively good health, is generally the best time to buy a policy.^[03]

Life insurance plans may be used to cover memory care costs in a few ways. For example, a policyholder can sell their policy to a third party and use the proceeds to fund memory care. Or, a life insurance policy may be “surrendered” to the insurance company for its cash value.

However, using life insurance to fund memory care can involve relinquishing policy ownership and not receiving benefits upon the insured’s death.

Expert advice for affordable memory care

Jointly funded by the federal and state governments, Medicaid is a health insurance program for people with limited income and financial resources. Medicaid may cover memory care services in a memory care community, but the type and extent of coverage varies greatly between state Medicaid programs. (Medicaid is often confused with Medicare, which doesn’t cover the cost of memory care.)

Medicaid doesn’t cover the cost of room or board in memory care facilities. However, if your loved one qualifies for their state’s home and community based services (HCBS) waiver, Medicaid may cover some memory care services in facilities that accept it. HCBS programs are designed to help individuals stay in community settings, rather than moving into an institutional setting or a nursing home.^[04]

To qualify for Medicaid’s HCBS waiver, an individual diagnosed with Alzheimer’s or another type of dementia must meet state requirements, which often include:^[05]

• Having income or assets that fall below a certain level
• Being a certain age
• Requiring an institutional level of care

The Department of Veterans Affairs (VA) offers a variety of benefits that can help qualifying senior veterans cover the cost of care. VA programs that can help pay for memory care in a facility, include the following:

• VA Pension and VA Survivors Pension. Veterans and surviving spouses may qualify for monthly payments from the VA if they meet certain age or disability requirements. Recipients may use these funds however they’d like, including to pay for a private-pay memory care community.
• Aid and Attendance. If a veteran qualifies for the basic VA pension, they may also qualify for Aid and Attendance. This benefit provides financial assistance to low-income veterans or surviving spouses who meet one of many specific qualifications, one of which includes requiring assistance with activities of daily living (ADLs). It can be added to any existing VA pension to cover any costs that improve the recipient’s quality of life — including memory care.

Read more:VA Memory Care Resources for Veterans

As your loved one’s condition progresses, the cost of required care services typically increases. That’s why it’s instrumental to understand the payment options available to you and your loved one. Identifying a senior’s payment options can help you see what type of care options they can afford.

If you’re unsure of what payment options are available to your loved one, you can talk to your family’s financial advisor. A trusted financial expert who knows your loved one’s finances can look into their savings and assets to identify options. You can also reach out to a senior living expert who has helped families navigate payment options for care.

A Place for Mom’s Senior Living Advisors can help you and your loved one identify suitable payment options for memory care. They can also answer any questions you have about memory care in general — all at no cost to your family.