Elder Law Planning for Long Term Care

January 28, 2016

By:  Verena Meiser, J.D.verena@elvilleassociates.com, 443-393-7696

As Elder Law attorneys we advise clients on a broad range of estate planning matters, including long term care asset protection. Concerns about how to finance care during periods of disability or old age are not only on the minds of our clients with limited means but also on the minds of those with assets up to about four to five million dollars.

With the 2005 Deficit Reduction Act, the federal government made it quite clear: we are responsible for covering the cost of our long-term care. At the same time, Medicaid laws were amended, making it more difficult to qualify for Medicaid on a financial basis, while the cost for long term care has kept climbing. Clients should seek the advice of their estate planning and elder law attorney.

Nationally, an average of 70% of people need long-term care at some point in their lives. Yet, when we ask clients how many have long-term care insurance, only about 10% have such insurance. In a nutshell, long-term care insurance provides a certain amount of monthly benefits for a fixed period of time when certain health conditions have been met. Many cover care at home, most cover care in a nursing home. To learn more about the many different policies available on the market, please consult with a professional who can describe these insurance products.

Absent long-term care insurance, the next option to cover long-term care costs is private pay. If you plan to take this option, calculate what the best care is you can afford. If you can’t afford it, or if you don’t want to pay, you may consider Medicaid asset protection strategies. Most of the complex strategies available benefit married couples, where one spouse is healthy and continues to live in the community, and the other spouse is either going into a nursing home or has an illness likely to require a nursing home in the future.

Among such strategies, the couple may transfer assets out of the ill spouse’s name to the well spouse. Without going into great detail about how a couple’s assets are treated for purposes of qualifying for Medicaid, the couple will be expected to pay for the care of the ill spouse, until the healthy spouse has approximately one half of their combined assets left, up to a certain maximum amount. In Maryland, the allowance for the healthy spouse was just under $120,000 in 2015.

With time to plan, a couple can make gifts or transfer assets to an irrevocable trust. Such planning requires an evaluation of the family’s overall financial plan, and is best addressed by the team consisting of the family’s estate planning or elder law attorney, their financial planner and accountant. As with all planning, the time to give serious thought to a couple’s options is before a crisis situation arises.

There are planning options for individuals as well, who wish to qualify for Medicaid without spending down to approximately $2,000 to qualify for government benefits. Such planning typically involves the establishment of a special needs trust that is funded with the ill client’s own assets. Such a trust has to contain a provision to reimburse the client’s state for benefits paid on behalf of the client. An estate planning or elder law attorney can advise the unmarried client.

Maryland residents should ask their estate planning attorney about the Maryland Long-Term Care Partnership. It is an arrangement between the state government and private insurance companies selling long-term care insurance to Maryland residents. Policies that meet certain specifications allow the insured to keep assets in the amount of the benefits received under the policy and still qualify for the state’s Medical Assistance. Thus, if a policy pays $200K in benefits, the insured only needs to spend down to $202K and become financially eligible for Medical Assistance.

The above discussion focuses on long-term care. Assisted living is not covered by Medicaid, Medical Assistance or by traditional insurance. To find resources to cover such costs, people sometimes take equity out of their homes or sell their homes.

Given the increasing cost of care during periods of disability and old age, the conversation and strategic planning to finance such care while preserving clients’ assets is key to a complete estate plan and is best developed by an elder law attorney working closely with the client’s financial planner and accountant.

For more information, please call 443-393-7696 or complete the form below.