Long-Term Care

Article submitted by Robert Mitchell, Attorney at Law.
For more information, he can be reached at 1-888-544-0700, or by e-mail at bob@rmitchell.com or bmitchell@investorscapital.com.

Many times I am visited by family members because their spouse or parent is in a nursing home or a nursing home stay is imminent. At that point in time often the options available for planning are very much constrained and hard choices must be made by the family.

As with anything, the best time to plan for a problem is before it arises. Long Term Care is no different. Many people are under the misconception that their hospitalization and or Medicare will step forward and pay the costs. The answer is "no". While there is a small benefit from Medicare, it will in no way cover the enormous costs and burden upon a family.

There are several ways to go. The one most people choose is Medicaid. There are restrictions on this government program and not everyone qualifies. The first thing that happens upon your application for Medicaid is an examination of the institutionalized spouse/parent to determine if the physical condition is such that long term nursing home care is appropriate. Once that initial determination is made, then the financial resources of the individual are examined. If you are a single person and have not planned, then your assets must be spent down to $8,000 ($2,400 if the income is over $1737 per month). The exclusion you have for the most part is a burial reserve account. In essence you must be poor.

If you are a married couple you can get some relief. As a married couple, there are certain assets which are considered exempt. The residence is exempt. Now if you own a lake house and a home, only the home is exempt. You are permitted one car. So if you have a Ford Pinto and a Mercedes Benz, you keep the Mercedes and give up the Ford Pinto. There is no dollar amount restriction on the vehicle you keep. You are permitted to have a burial reserve account. Generally between $8,000 and $10,000 is appropriate. However the account must be established before the benefits are provided. Life Insurance with a face amount death benefit of $1,500 is exempt. Anything over that amount, then the cash value is considered an available asset.

If you take enough time to plan, you have several opportunities to protect the assets that you have been able to accumulate over your life and would like to pass onto your children. The first opportunity is to purchase long term care insurance. The benefit of long term care insurance is two fold. First, you generally will get the same benefit for personal care or care for you to stay at home as you would get if you were in a nursing home. You can also control the cost to you by deciding how much or how little of the monthly cost of benefit will be. One of the complaints I often hear is that it is too expensive and if I don't use it I've wasted all that money. Much of the insurance you own today is that way. I wish I had half of the premiums I've paid in home owners and automobile insurance over the past several decades. With that amount I could easily put my children through college (or at least make the bill a lot easier to swallow). However, you do have alternatives. Some policies have a provision that if you do not use the benefit, your beneficiaries will get the premium returned to them. You may also be able get a policy that is paid-up after only ten years.

If you still have your mind set against long term care, then your other alternative is self pay until you run out of assets or are no longer in a nursing home.

If that alternative does not seem palatable, then you must rely upon the government for assistance. Hence you are subject to their rules and conditions because Medicaid is not a right but an entitlement for which you must establish your entitlement to receive it.

Now there are many planning tools available, especially if you do not wait until the last minute. There is gifting, provided it doesn't occur within three years of your application. A gift is anything that was given away for no consideration or less than full consideration. Love and affection or $1.00 is considered a gift. If you have a house with a fair market value of $100,000 and you sell it to your children for $50,000, you have made a gift of the other $50,000 of fair market value. There is the Rule of Halves, which essentially says that if you've gifted away money during the three year look back period your eligibility is denied for the amount of the gift. You have $100,000 and you give $50,000 to your children. You'll be disqualified for the amount of time that the $50,000 would have covered. You use the remaining $50,000 to pay for the ineligibility period.

You may also establish a trust. If you are going to use a trust, the look back period is five years from the date of application. Hence, long term planning is necessary. But a trust has many benefits that are too significant for the space available.

Remember, approximately 50% of you who are reading this article today will need some form of long term care. Of that fifty percent, approximately 35% will have a stay in a nursing home of between 3 to 5 years. At the average rate of $6,062 per month, even a large estate can be decimated the costs.

If you want to learn more about the options you have in planning for long term care, call my office for a consultation. Mention this article or advertisement and your consultation will be free. Whatever you do, just don't think about it. If you think about it too long it will be too late. Make life easier on yourself and your family by taking a little time to prepare for this major financial burden.

This article is intended solely for educational purposes and is not to be taken as legal advice.