EHDH Estate Planning

Long-Term Care Insurance and Your Retirement

The U.S. Health and Human Services Department estimates that more than half of Americans turning 65 will need some kind of long-term care. It may be care provided in a facility or at home, but however the care is delivered, it will be costly.

CNBC’s recent article, “Not having long-term care insurance can be ‘the single biggest devastator’ of your financial plan,” reports that over 8 million Americans have long-term care insurance. However, the cost of that insurance is rising. This increase is because of several factors, including the fact that companies underpriced their policies for years and misjudged how many would drop coverage.

Because of those rising premiums, some individuals may choose self-insurance. That means saving a pool of money to earmark for long-term care. Coverage is also available through Medicaid, which has eligibility requirements.

Even with these increases, you should purchase some form of coverage. This is because not being insured can be the biggest devastator of a financial plan.

The rule of thumb has been to buy LTC coverage at age 55. However, it really depends on your situation. The big unknown is health, and the odds of being able to qualify for coverage at age 60 compared to age 30 or 40 is vastly different.

A traditional LTC policy will cover the costs of care for a certain period of time, generally up to six years. The amount of coverage is based on the average cost of care for your location. Most insurers offer it in the form of a monthly benefit, and possibly with some inflation protection.

There’s also a hybrid policy that covers long-term care costs but becomes life insurance paid to heirs, if it’s not used. Of the 350,000 Americans who purchased long-term care protection in 2018, 85% chose the hybrid coverage. It’s also called combo or linked-benefit. The big difference is price: you’ll pay more for the hybrid policy.

For people who have no assets, Medicaid is the solution, but the choices for care are not often ideal. For those who seek to protect their assets, an elder law attorney will be needed to use legal strategies for protecting the healthy spouse and assets. Applying for Medicaid while protecting assets requires advance planning, since there is a five-year look back period. Talk with an attorney beforehand.

Reference: CNBC (October 14, 2019) “Not having long-term care insurance can be ‘the single biggest devastator’ of your financial plan”

Senior Veterans Should Apply for These Benefits

Senior budgets are part of the challenge of aging. For veterans, there’s good news from a recent article from U.S. News & World Report, “Veteran Benefits for Assisted Living,” that says some senior living companies are working to help veterans obtain benefits that can help with their costs.

Note that the VA won’t pay for a veteran’s rent in an assisted living facility. However, VA benefits may pay for some of the extra services required, like nursing assistance, help with bathing and toileting, and possibly meals.

There are a variety of benefits that may help, based on a vet’s specific service history and eligibility. The most commonly used benefits are the Aid & Attendance Pension. Another common benefit is the Survivor’s Pension for spouses of a deceased veteran with wartime service.

The VA’s Aid & Attendance and Housebound program is part of the pension benefits paid to veterans and survivors. The VA says these benefits are paid, in addition to a monthly pension. A vet must satisfy one of the potential conditions, including:

• Requiring the aid of another person to perform personal functions, like bathing, dressing, eating, toileting, or staying safe from hazards;
• Being disabled and bedridden, above what would be thought of as recovery from a course of treatment, such as surgery;
• Being a patient in a nursing home due to physical or mental incapacity; and
• Having very poor eyesight (5/200 corrected visual acuity or less in both eyes) or a field of vision limited to five degrees or less.

Vets may qualify for these benefits, which are added to the standard monthly pension, when he or she is “substantially confined to your immediate premises because of permanent disability,” the VA says. Eligibility for the program is based on a case by case basis and involves a review by the VA.

Like any other government benefit, it’s important to start the application process early, rather than waiting until a crisis hits and benefits are critical. The goal is to maximize the use of the money saved, so that the individual can afford high-quality care for as long as possible, and the hope is that the VA benefits will help to do that. An experienced estate planning or elder law attorney who routinely works with veterans and their families will be an important resource.

Reference: U.S. News & World Report (August 12, 2019) “Veteran Benefits for Assisted Living”

Can an Entire Generation Skip Retirement Planning?

Always going their own way, boomers seem to have decided it’s okay to plan a funeral but not plan for failing health during retirement, reports MarketWatch in a recent article, “Baby boomers are more prepared for death than they are for their own lives.”

A study from the Bankers Life Center for a Secure Retirement revealed that eight in 10 middle-income boomers have done something about their death, either preparing a will or making their funeral preferences known to children. However, few seem to be motivated for dealing with the hard realities of aging. Only a third have made any plans about receiving care, if their health fails. Just under a third have less than $1,000 saved for emergencies, like a healthcare issue, and only 20% have savings dedicated for long-term care.

And many—40%—aren’t even concerned about care during retirement , saying it’s a low priority, or not a priority at all.

The reality is that failing health is likely to affect most of us, often to a point that we’ll need to get a caregiver or even go into a nursing home. According to the Family Caregiver Alliance, 69% of people 65 and older will have disabilities before they die, and 35% will enter a nursing home. Therefore, why are boomers so resistant to planning for the care they might need in life? Perhaps it’s a topic that makes people uncomfortable and because they don’t know where to start.

Of those who don’t have a retirement care plan, 32% responded that they needed advice but didn’t know who to trust, and 21% said that planning was too complicated. Others said it was too hard to talk about (20%), while 16% reported that they believe a plan isn’t needed.

Many people are also unaware of the fundamental facts about Medicare and paying for retirement care. About 56% mistakenly think they’ll use Medicare to pay for care, even though it typically doesn’t pay for long-term care, like a nursing home. If you factor in their lack of preparation, 81% of boomers underestimate the cost of nursing home care. However, whatever the reasons, it’s vital to plan for caregiving, so that our wishes can be honored, and we can afford to pay for the care we’d like. Let’s look at how to do this.

Draft an advance directive, which details your medical wishes, if you become unable to voice those wishes for yourself. You can also name someone else to make the decisions on your behalf, if you’re unable to do so.

Think about how you’d afford long-term care, if required. Long-term care insurance may cover the nursing home, assisted living or in-home-care costs that Medicare won’t, but it can be costly. It also has limitations, like possible specifications that may require you to be in a very high-level assisted living or nursing home, before the policy starts.

It would be wise to set money aside specifically for the cost of medical care in general. Studies show that the average retired couple should expect to spend about $280,000 for medical costs in retirement, and that does not include the cost of long-term care.

One option is to put money into an HSA, if you are still working. You can contribute with pretax dollars, which can grow and be withdrawn tax-free for federal tax purposes, if used for qualified medical expenses.

While we can never know what illness or injury will occur, staying as healthy as you can is a valuable and often overlooked strategy for a successful retirement.

Reference: MarketWatch (March 15, 2019) “Baby boomers are more prepared for death than they are for their own lives”

Medicaid Penalties to Be Aware Of

When someone applies for Medicaid, the government wants to be sure that they need the benefits. If you own an investment home and sell it to your daughter for a single dollar, you aren’t going to fool the people at Medicaid. There’s a look-back penalty, advises nj.com in the recent article, “If mom sells her house for $1, what Medicaid penalty will apply?”

A Medicaid applicant is required by the government to document all of her financial transactions during the "look-back period." That period is five years immediately prior to the date of application.

If the applicant’s financial records show a transfer of assets within that period, the Medicaid administrators will presume that the assets were transferred to promote eligibility for Medicaid benefits. This could be a check or withdrawal, for which there is no explanation other than a gift.

The value of the transfer will be divided by the statewide daily nursing home rate to get the number of months of the ineligibility, also known as the penalty period. In New Jersey, that rate is currently $343.85, or $10,459 per month.

The five-year year look-back period commences when the transfer is made. However, the penalty period of ineligibility starts on the date the applicant is otherwise eligible for medical assistance under the State plan, but for the application of the penalty period.

So, in our $1 house example, if the New Jersey Medicaid applicant transferred $300,000, the monthly penalty period of ineligibility for this transfer would be calculated by dividing $300,000 by $10,459, which equals 28.68 months of ineligibility. There is no rounding down, by the way.

The penalty period would start when the applicant medically needs an institutional level of care, has countable resources below $2,000 and has filed a Medicaid application to establish that she would have been otherwise eligible but for the asset transfer. Note: there’s no limit on the length of the penalty period.

Thus, assuming the applicant otherwise would have qualified for Medicaid but for the asset transfer, the applicant wouldn’t be eligible for Medicaid for an additional 28.68 months.

However, if the application was made more than 60 months after the transfer date, then the transfer would be outside of the 60-month lookback period and, if no other transfers were made, then no penalty period would be imposed, and the applicant would be eligible 61 months after the transfer date.

An elder law attorney should be contacted to create a strategic plan that incorporates any available asset protection tools. It is far better to do this in advance, rather than on an emergency basis. Any strategies will need to be done in accordance with Medicaid rules.

Reference: nj.com (December 25, 2018) “If mom sells her house for $1, what Medicaid penalty will apply?”

How Does Medicare Differ from Medicaid?

Maybe people get confused because the first six letters of both Medicare and Medicaid are identical. But they are very different, as the article “Medicare vs. Medicaid” from U.S. News & World Report explains.

Each program concentrates on different populations and offers specific benefits for its insured. There are several differences between Medicare and Medicaid. However, they share one thing: they are similarly complex. Let’s look at the key differences between Medicare and Medicaid and how each health insurance program works.

Medicare

Medicare beneficiaries are primarily seniors. Everyone who has paid into the Medicare system becomes eligible for Medicare when they reach age 65. Medicare isn’t based on income. Those who’ve received Social Security disability benefits for two years or who have certain conditions, like ALS (Lou Gehrig’s Disease), are also eligible. Medicare is operated by the federal government, and expenses are paid from Medicare trust funds. Original Medicare includes Part A, which pays for expenses related to hospitalizations, and Part B, which covers outpatient care. Beneficiaries can also buy a separate Part D plan for prescription drugs. There may be deductible and copayment costs associated with these plans.

Those who’d rather get benefits from a private insurer, instead of from the government, can sign up for Medicare Advantage, or Part C. These plans are required to cover everything provided by Medicare Parts A and B, and many also provide Part D coverage and dental or vision care benefits. Medicare Advantage plans vary in their deductibles and out-of-pocket costs and can restrict participants to the use of a network of approved providers.

Medicaid

Medicaid is the government health insurance program for those in low to moderate income households. People may also be eligible if they have physical, intellectual, or behavioral disabilities. The income and asset limits vary by state, but 138% of the federal poverty limit is the median eligibility requirement for adults. Applicants can usually have no more than $2,000 in liquid assets. Medicaid coverage includes hospitalizations, outpatient care and prescription drugs, as well as long-term care. Many enrollees have little or no out-of-pocket costs for coverage.

To be eligible for Medicaid, seniors must spend down most of their assets, as well as meet income requirements. Most states have a five-year look-back period that prevents seniors from transferring assets to another family member to meet Medicaid eligibility.

Medicare and Medicaid pay for many of the basic services, but there may be gaps in coverage, such as dental services or prescriptions. One can close the gap in dental care, by coupling their Medicare or Medicaid coverage with an affordable alternative to dental insurance, such as a dental savings plan, which can save members between 10 to 60% on procedures. For prescriptions, free discount services can reduce drug costs by half or more.

One of the areas of practice for an elder law attorney is helping clients protect their assets and their families, so that they can qualify for Medicaid benefits, especially in a situation where they need long-term care. An estate planning attorney can also guide you through this complex process.

Reference: U.S. News & World Report (November 21, 2018) “Medicare vs. Medicaid”

What You Need to Know About Nursing Homes

A nursing home is defined by Medicare as a special facility or part of a hospital that provides medically necessary professional services from a nurse, physical or occupational therapists, speech pathologists or audiologists. These rules are specific to a skilled nursing facilities, reports Investopedia in the article, “Things Nursing Homes Are Not Allowed to Do.” These rules do not apply to assisted living facilities or retirement homes, which have their own rules.

The following are some of the patient’s rights as spelled out by Medicare, and some are insights shared by a nursing home expert.

Discrimination. Skilled nursing facilities are prohibited by federal law from making a decision about whether someone can become a resident for reasons of race, color, religion, age, sex or any other protected characteristic.

Provided Services. The types of services to be provided and fees must be stated in writing before a patient becomes a resident. In some facilities, like continuing care communities, a large buy-in fee is required that ensures that residents will have access to various levels of care, as health needs change. Skilled nursing facilities may not charge those fees.

Patient Health Assessment. Patients receive a health assessment when they first enter a nursing home, and every day for as long as they are in the nursing home. The medical staff evaluates the physical and mental health, ability to speak and make decisions and to perform basic acts of daily living. The information from the assessment is used to plan treatment, evaluate progress and decide if the patient continues to be eligible for Medicare coverage. Residents have the right to be actively involved in their care planning. If they cannot, an adult child can participate for them.

Finances. While the nursing home is permitted to manage a resident’s personal finances, it cannot require a resident to do s, and it cannot do so without the written consent of the resident. If the resident decides to permit the nursing home to manage his money, they must receive quarterly financial statements, may not prevent residents from accessing their accounts, cash or financial documents and if more than $50 is deposited, the account must pay interest.

Respect and Dignity. It’s unfortunate that this has to be a law, but it does. Residents have the right to decide when they want to go to bed, when they want to wake, when they want to take their meals and what activities they want to do, as long as their decisions do not conflict with the plan of care. Abuse is not allowed, verbal or physical. No one is allowed to be medicated with any drugs not in their treatment plan. Physical restraint is not permitted, unless they pose a danger to themselves or others, and no one should be isolated. Residents also have the right to own personal property, privacy and security.

Visitation. Patients have the same rights in the nursing home that they have at their own homes. They may have visitors during reasonable times of day and they have the right not to see people, if they do not wish to see them. Family members must be permitted to visit at any time, unless the patient does not wish to see them.

General Health. The patient has the right to be treated like an adult, regardless of his or her physical or mental health. That means she is entitled to know her diagnoses, what medications she is being given and to see her medical records. She is also entitled to see her own doctor and not those of the nursing home. She may refuse treatments and medications, just as an outpatient may do. If she requests mental, legal or financial counseling, those services must be provided.

Medicare Benefits. Things get a little tricky here. The nursing home is not required to track the Medicare benefits being used to pay for the patient’s care. They also don’t have notify residents that the benefit days are ending. The only exception: if Original Medicare benefits stop earlier than expected because the patient is deemed not to be in need of the care. That’s the only time the nursing home is legally obligated to inform the patient. Patients or their family members need to be very cognizant of their coverage status. Medicare may cover a certain amount of time, under certain conditions, and then the benefits may end. Patients will be responsible for the rest of the bill.

Discharge Planning. Patients have the right to have help from the nursing home in the discharge planning process. Without the patient’s consent, they may not be discharged or transferred, unless:

• the patient’s health has declined to the stage, where the facility can no longer meet his needs;
• the patient has improved to the point, where he no longer requires the facility’s services; or
• the patient poses a threat to his own welfare or that of other residents.

In addition, a resident can be discharged for not paying the facility’s bills (but not when the delinquency is caused by waiting for Medicaid payments from the government).

Complaints. Residents and their advocates have a right to complain about any issue they have in a nursing home, and nursing homes can’t punish someone for doing so.

Ability to Sue. A 2016 regulation gave nursing home residents and their families the ability to sue any nursing home that receives federal funding. Before this, nursing homes could try to force people into arbitration, and any quality of care and safety issues could be kept private. However, a preliminary injunction granted in Mississippi in late in 2016 put this regulation on hold for now.

New Rules. There are new rules that give nursing home residents more rights. Residents will be allowed to receive any visitor, not just relatives, at any hour of the day, provided visitors don’t disturb fellow residents. Residents who want to live together will be permitted to do so, and nursing homes will have greater responsibility for ensuring that residents’ personal belongings aren’t lost or taken. In addition, nursing homes will be required to provide meals and snacks when residents want them, rather than only at set times. Staff will get more training in caring for dementia patients and preventing elder abuse, and nursing homes won’t be able to easily discharge residents with dementia, by sending them to a hospital and then refusing to readmit them.

At the essence, the patient’s rights in a nursing home should be the same as the patient’s rights in their own home. The more family members can be involved in their loved one’s day to day life at the home, the better the quality of life will be for the patient.

Reference: Investopedia (September 30, 2018) “Things Nursing Homes Are Not Allowed to Do”

Qualifying for Medicaid

Medicaid was designed to allow people who are disabled or 65 and over with little or no assets, to obtain long-term care. For many middle-income families, Medicaid is a frightening concept. If the family does not have long-term care insurance and one spouse needs to apply, many questions and concerns are raised. Will the family home have to be sold? Will all of the family’s assets have to be spent down to qualify?

Investopedia’s recent article, “How to Qualify for Medicaid: Tips and Eligibility Requirements,” explains that while Medicaid is federally funded, it’s administered at the state level. Each state also has its own set of rules and regulations for the program. If you’re single, you typically can’t have more than $2,000 worth of cash or other assets outside of your personal residence, vehicle, and other necessary items. If you’re married and your spouse is still able to live independently (known as a “community spouse”), he or she is allowed to keep up to 50% of your joint assets. Your single or joint income usually can’t exceed 133% of the federal poverty level, but several states have thresholds above this.

You’ll also have to prove medically you’re disabled in most cases, although certain exceptions apply. And you must also be either a U.S. citizen or have a green card and prove your residency within the state. However, if your assets or income exceed the state thresholds, you’ll need to reduce your estate. This is known as “spending down.” You might also be able to create a spend-down trust.  However, this is non-enforceable by you—and you may lose assets permanently, if the party you gift them to gets into financial trouble.

A frequent reason for people to be denied Medicaid coverage, is incomplete information on the application. Before you start, collect these documents to submit:

• Birth certificate or driver license (to prove your age);
• Proof of citizenship;
• Assets and income documentation;
• Copies of your mortgage, lease, rent payment receipts, utility bills, or other documents that prove where you live;
• Medical records showing your disability; and
• Information about any other health insurance coverage you may have.

You state may require different or additional documentation.

You cannot simply gift your assets or belongings to your children or a reliable friend to use them on your behalf. Before or during the Medicaid application process, consider consulting with attorney who specializes in elder law and thoroughly understands the Medicaid laws in your state. He or she can help you with creating a Medicaid trust or other legal gifting moves that you may be able to make.

An experienced elder law attorney will be able to explain the process of filing for Medicaid and what needs to happen to your assets, before the application can be filed. Understand that planning may include reducing your estate significantly to meet the eligibility thresholds, as set by your state.

Reference: Investopedia (October 6, 2018) “How to Qualify for Medicaid: Tips and Eligibility Requirements”

Veteran’s Administration New Long-Term Care Rules Go Into Effect

The Aid and Attendance program was created to help qualifying veterans with the cost of long-term care. It’s just gotten harder to qualify.

Think Advisor’s recent article, “VA Is Tightening Rules on LTC Benefit for Veterans,” reports that changes finalized by the Department of Veterans Affairs will place “an asset limit, a lookback period, and asset transfer penalties” for those who apply for VA pension benefits that require a showing of financial need. Aid and Attendance is at the top of the list of those benefits. This program can help veterans who require long-term care.

The program previously had income restrictions to qualify for the benefit, but now the new rules will add more administrative hoops. These new regulations limit veterans to a net worth limit of $123,600—the same as a Medicaid applicant’s spouse may keep. However, this dollar figure includes both the applicant’s assets and income. There are also revisions to policies for qualifying medical expenses to determine IVAP (the veteran’s household income minus all unreimbursed medical expenses).

In addition, the new rules place a three-year lookback period now on applicants. Therefore, if a person has transferred assets to protect themselves within that timeframe, they’ll be penalized by being denied benefits for up to five years. One exception is for transfers to a trust for a child who cannot “self-support.”

There are also new transfer penalties for any gifts and/or transfers that were made at less than fair market value (FMV).

The use of immediate annuities and planning strategies concerning gifting are also being limited.

The new rules went into effect on October 18.

The best advice for veterans is to contact their estate planning attorney about any strategic planning that had been done in the past and make sure that they are prepared now that the rules have changed. The report does say that “The VA will disregard asset transfers made before that date. Applicants may still have time to get through the process before the rules are in place.” However, veterans are advised not to wait to make sure that they are prepared, if they anticipate needing to access these benefits.

Reference: Think Advisor (September 26, 2018) “VA Is Tightening Rules on LTC Benefit for Veterans”

Planning Ahead for Senior Care When You’re Not A Billionaire

With big money, moguls, a lover with bad intentions and heirs seeking to gain control of an empire, the HBO series Succession borrowed a lot of juicy details from the real-life drama of Sumner Redstone.

Forbes’s recent article, “What 'Succession' And Sumner Redstone Can Teach Us About Planning Ahead For Senior Care,” says that many of us won’t need to concern ourselves with a multi-billion-dollar empire, so our family struggles may look fairly mundane in comparison. However, disagreements over money can and frequently do keep families from making the right decisions about elder care.

A family’s financial resources—or lack thereof—may determine the options available and the type of long-term care a senior will ultimately receive. The big surprise for many retirees is that Medicare doesn’t usually pay for long-term care services. This means that nursing home expenses, which run more than $80,000 a year on average, must be paid in some other way. With most people preferring to age in place, in-home care may be the best option.

The tough news for many who aren’t rich enough to afford the skyrocketing cost of long-term care, is that they don’t qualify for Medicaid either. If you’re one of the “in-betweeners,” you’ll need to be resourceful and there’s a lot to learn.

Baby Boomers are turning 65 at a rate of 10,000 people a day, so it might be time to plan for what comes next. Roughly 70% of Americans over age 65 will need some form of long-term care during their lifetime. If you don’t make plans, you and your family will have to prepare on the fly, when a crisis happens. Let’s discuss some of the things you’ll want to learn about:

Medicare vs. Medicaid. You’re not the only one to get these two programs mixed up. Medicare is a federally-funded insurance program for people aged 65 and over (as well as for those under 65 with certain disabilities, regardless of income). Medicaid is funded jointly by states and the federal government. It is also the largest funding source for long-term care in nursing homes. Medicaid is for people with low incomes, who typically don’t have more than $2,000 in assets. There are specific eligibility rules for each state, so plan ahead with an elder law attorney.

Long-Term Care Insurance. Long-term care insurance is a type of private insurance that gives you limited coverage (often after an initial waiting period) for long-term care. The cost varies, based on the type of plan, the senior’s age, and his or her health status.

Veteran’s Benefits. The Department of Veteran’s Affairs has long-term care benefits for eligible veterans, who’re either homebound or need assistance with their activities of daily living. Although there’s a lot of bureaucratic red tape to apply for veteran’s benefits, it can really be worth it.

Before your own family’s saga takes a dramatic turn, sit down with your aging parents and discuss whether or not they have an estate plan in place, including plans for long term care. If they have not done any planning, it’s time to have the talk and to make an appointment with an estate planning attorney.

Reference: Forbes (September 27, 2018) “What 'Succession' And Sumner Redstone Can Teach Us About Planning Ahead For Senior Care”