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Myths and Realities of Long-Term Care Planning

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Long Term Care Planning?

True or Falselong term care planning and smiling
1. ________ ________ I will never end up in a nursing home.
Of those Americans reaching age 65 in any year, 24 percent are expected to spend a year or more in a nursing home. Fifty-seven percent will never enter a nursing home and 19 percent will spend less than a year in a nursing home. Nine percent will spend more than five years.

2.________ ________ An average nursing home costs $5,000 a month.
In Rhode Island, typical nursing homes cost $10,000 a month, or more than $120,000 a year.

3.________ ________ Medicare will pay for any long-term costs I may have.
No. It will pay for up to 100 days of skilled nursing facility care if you meet the certain requirements, including: (1) you must have moved to the nursing home within 30 days of a hospital discharge, the hospital stay having lasted at least three days; and (2) you must receive a skilled level of care. Medicare pays entirely for the first 20 days and everything above a copayment of $114 a day for days 21-100. The copayment is generally covered by Medigap insurance. The general rule of thumb if your coverage is denied or terminated due to the lack of need for skilled care is to ask for the bill to be submitted to the fiscal intermediary anyway. This review costs nothing and may result in coverage.
Medicare pays for home health care on a part-time or intermittent basis. Part-time generally means up to 20 hours a week. You must require a skilled component to your care to get this coverage.

4.________ ________ Medicaid is a program only for “poor” people (not me).
In 2010, the total cost of nursing home care was approximately $342 billion. This amount was paid from the following sources:

  • 41% Medicaid
  • 20% Medicare
  • 15% Out-of-Pocket
  • 17% Miscellaneous
  • 7% Private insurance

5.________ ________ To qualify for Medicaid I will have to give up my home
False. In Rhode Island you may keep your home as long as you intend to return to live there, no matter whether you really can or do. However, if the house is in your estate at your death, the state will have the right to recover whatever it has spent on your care

6. ________ ________ If my spouse enters a nursing home all our joint savings will have to be spent on his/her care.
False. You are entitled to keep half of your combined liquid savings up to $119,220 for 2016. In some circumstances, you may be entitled to keep more than this amount.

7.________ ________ If I give money to my children I will be ineligible for Medicaid benefits for 60 months.
Maybe. You will be ineligible for 60 months for every penalized transfer. There are some exceptions to this transfer penalty.

8. ________ ________ If I apply for Medicaid, the Department of Human Services and the nursing home staff will reliably guide me through the process.
Yes, and in most cases their help will be sufficient. However, they may not know the intricacies of spousal impoverishment and other rules. They may not be able to advise you on when to appeal a denial. You should be aware that applications for Medicaid require extensive documentation and can be quite time-consuming.

9.________ ________ Legally I can give away only $14,000 to each of my children each year.
You can give away any amount, but have to report gifts in excess of $14,000 per recipient per year ($28,000 if both husband and wife make the gift). The reporting requirement is not an issue for most people because an estate must be greater than $10.9 million in 2016 to be taxable under federal law (In Rhode Island the reporting requirement is when an estate exceeds $1.5 million). MAKING GIFTS AND UNCOMPENSATED TRANSFERS CONSTITUTE A DISQUALIFY TRANSFER UNDER THE MEDICAID RULES AND SHOULD NOT BE DONE UNLESS YOU ARE ASSURED YOU WILL NOT NEED TO APPLY FOR MEDICAID WITH THE 5 YEAR LOOK-BACK PERIOD.

10. ________ ________ I can wait to do long-term care planning until I or my spouse gets sick.
Yes and no. Usually there are things that can be done even if no advance planning steps have been taken. However, you will be much better off if you have taken planning steps in advance. Here are the steps that we recommend that our clients at least consider.

You cannot predict whether you or a family member will require long-term nursing home care. But if we define “long term” as a year or longer, one in four of you will. That means one in four will face costs of more than $70,000-more than one in four couples will face such costs.
Medicare will not pay these costs, which leaves you with three choices:

  1. Long-term care insurance
  2. Out-of-pocket
  3. Medicaid

Long-term care insurance is great if you can afford it. But follow these ground rules:

  1. Buy an individual policy, not a group policy.
  2. Buy home care coverage.
  3. Get an inflation rider.
  4. Buy enough coverage.
  5. Buy at least three years of coverage.
  6. Tell the agent the complete truth about your current condition and situation.
  7. Make sure you can afford the policy. This means you are paying for it with 5 percent or less of your income or with money you would otherwise add to your savings. Do not change your current standard of living for the policy, or get your kids to buy it.

Key Medicaid rules:

  1. Only $4,000 in countable assets.
  2. Countable assets are everything that you and your spouse own (individually and jointly) other than your home and other noncountable or inaccessible assets. You never need to give up your home in order to qualify for Medicaid.
  3. The at-home spouse is entitled to retain up to $119,220 in total countable assets. In some cases the at-home spouse can appeal for a higher resource allowance.
  4. All income of a nursing home Medicaid beneficiary goes to the nursing home, except for (1) $50.00 a month personal needs allowance, (2) the cost of any health insurance premiums, and (3) any allowance for the at-home spouse or minor children.
  5. The community spouse is entitled to a share of the nursing home spouse’s income if the community spouse’s own income does not meet a minimum guarantee.
  6. The state may recover whatever it pays for the Medicaid recipient’s care from his or her probate estate.
  7. The Medicaid application process is long and cumbersome. Do not expect to get sound advice from health care workers, friends, or anyone but an experienced elder law attorney.
  8. Plan ahead, especially with a durable power of attorney and health care proxy.

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Long-Term Care Insurance: 4 Must Follow Rules

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Long-Term Care Insurance – To get or not to get?

For those who can afford it, Long-Term Care Insurance is becoming increasingly popular as a means of paying for nursing home or home care. The problem is choosing a good policy and being able to afford it.

Here are a few Long-Term Care Insurance rules of thumb:

  • Only buy policies that are approved in your state. Generally, these are individual, as opposed to group, policies. A group policy may be just as good, but since it is not regulated you must be extra careful in seeking professional assistance in examining it. In addition, if you do require Medicaid assistance despite the fact that you own a Long-Term Care Insurance policy, owning an individual policy will protect you from estate recovery; owning a group policy will not.
  • Buy enough coverage. It will not do you much good to have insurance coverage if it is insufficient to meet your cost of care. Anticipate your need for the insurance to occur at least ten years off and anticipate the inflation in Long-Term Care Insurance costs to exceed the growth in your income by at least 5 percent a year. However, there is another school of thought that recommends purchasing enough coverage to pay for assisted living if you can only afford the lower premiums.
  • Buy home care coverage. If you have nursing home coverage and not home care coverage you may feel compelled to move to a nursing home in order to save money. Do not put yourself in that bind.
  • Only buy the insurance if you can afford it. The guidelines above will all increase the cost of the policy. But if you cannot afford them, then do not buy the insurance. How do you know if you can afford a certain premium? A rule of thumb is that payment of the premium should not affect your standard of living. So you can afford the premium if you are using money that you would otherwise set aside to add to your savings. An alternative would be to purchase an annuity that pays sufficient benefits to cover the long-term care insurance premiums.

Long-Term Care Insurance is not an option for you? You can still qualify for nursing care without spending your entire life savings. How? A properly drafted estate plan using Income Only Trusts can achieve the same goal.

Want to lean more? Contact our office for a free consultation.

Long-term care insurance information, form, Folders and stethoscope.

Long Term Care Insurance Policy

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