How to Avoid the Catastrophic Costs and Effects of Long Term Care

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If you had a long-term care need, you would be able to draw down or accelerate the death benefit amount to pay for your care, subject to a monthly maximum amount. However, even if you used up the entire death benefit, the insurance company would still provide additional long-term care coverage.

Another type of hybrid is a long-term care annuity, which provides long-term care insurance at a multiple of the initial investment amount. The investment grows tax free at a fixed rate of return, and, if used for long-term care expenses, gains will be received income tax free. If you qualify for long-term care benefits, the long-term care coverage would draw down both the account value and the long-term care pool. Once your account value has been exhausted, the insurer would provide the remaining long-term care pool benefits, which is effectively the insurance component of the policy.

However, today's low-interest-rate environment has made it challenging for insurers to provide annuities with long-term care coverage. So, it's important to note that these products have yet to gain any significant traction in the market, and, as a result, may not be available through your insurance company. Using your personal savings to pay for long-term care costs can provide you with greater flexibility. However, before using your savings, ask yourself if your retirement plan is built to withstand these potential expenses.

And even if you believe your plan is sound, keep in mind that long-term care coverage can also help protect your other assets and allow you to pass your wealth on to your loved ones. If you do use your qualified retirement accounts, such as your k or IRA, there may be tax ramifications for withdrawals. If you've decided you want long-term care insurance, you need to think about when to buy it, how much coverage you want, and the types of features that make sense for your situation. How does someone actually figure out whether long-term care insurance is right for them?

The older you are, the greater the chance you'll have a medical event that requires long-term care, or that you'll develop a health issue that will keep insurers from approving your policy application. At that point in your life, Ewanich says, "you're old enough to think seriously about long-term care and there are advantages to making the decision at this time rather than putting it off until later. You're likely to pay less for the same amount of coverage than if you wait until you're older and you're less likely to have medical issues that disqualify you for coverage.

In addition to the risk of your health deteriorating as you age, the financial cost of waiting to purchase a policy should be considered as it will typically become more expensive to purchase the same amount of long-term care coverage each year you wait. Typically, you become eligible for your long-term care benefits when you can no longer perform 2 "ADLs," or Activities of Daily Living e.

Then, most policies have a waiting period "elimination" or "deductible" period , during which you pay for your care separately from your policy until your waiting period is completed and you can start long-term care benefits. Most long-term care policies cover the same types of costs, from nursing home stays to home health aides. You have to decide how much coverage you want, both in terms of the dollar amount of your benefits and how many years you want those benefits to last. As Ewanich points out, buying long-term care insurance is like purchasing a pool of money that you can use for daily coverage e.

Importantly, don't buy more coverage than you can afford. Instead, consider reducing the amount of coverage to balance your financial situation with your long-term care needs. Also, recognize that there are different ways to pay for your policy. While some are single-payment-premium policies that you pay in one lump sum, other policies, like traditional long-term care coverage, can be paid for through periodic premium payments.

A perspective on long-term care for the elderly

If you're going to spend the money on long-term care insurance, make sure your benefits will be sufficient—and available to support you. Since long-term costs will likely continue their upward climb, you might consider adding inflation protection. Also, choose an insurance company with a strong track record and solid financial health. You want to make sure the company has the longevity to be around for the long-term, so it can pay your benefits when you need them.


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  7. Long-term care: options and considerations.

Your long-term care insurance should fit your personal situation. An individual may need a different level of coverage than a married couple because a single person has to consider the long-term care needs of only one person. For couples, consider the effect on your spouse's financial situation if you have an extended long-term care situation. A thoughtful long-term care coverage decision is all about balance—weighing what you can afford, the kind of care you expect, and the risks you might face.

It is not just a financial decision but using insurance may help relieve the emotional and physical burden for caregivers such as family members and friends. Another possible payment source is insurance. But few seniors have this kind of coverage. And premiums have been increasing a lot in recent years.

But Medicaid has complicated financial qualification rules that can prevent a long-term care recipient from qualifying for the program. An experienced elder law attorney will be able to help families find their way through the qualification maze and qualify for Medicaid sooner rather than later. Here are three techniques that elder law attorneys utilize in the right circumstances.

For example, a couple may elect to pay off existing debts; to prepay real estate taxes, insurance, or other large bills; or to prepay funeral expenses. Medicaid eligibility rules do not count certain assets such as a home, a car, and personal effects. Therefore, in appropriate cases a community spouse might take money from countable savings to buy a more expensive home; repair or improve an existing home; or buy a new car, new household furnishings, or personal effects.

Three Ways to Protect your Assets from Nursing Home Costs

Medicaid rules do not restrict spending countable assets on non-countable ones of equivalent value. Because of this allowable spending John is now financially eligible for Medicaid. Some strategies are designed to convert excess assets into income for use by the community spouse.

How to use the forgotten products for retirement security - Let's Get Down to Business

In order to avoid a Medicaid penalty the community spouse must receive something of equal value in exchange for the converted assets. Annuities are contractual arrangements in which an individual pays a lump sum to receive a future stream of income in return. They are offered in a bewildering variety of forms by commercial financial entities, and can involve poorly understood consequences and costs to the consumer.

Most annuities are inappropriate vehicles for Medicaid planning. The at-home spouse can either spend that income or reinvest it, effectively recouping all of the assets used to purchase the annuity.

A perspective on long-term care for the elderly

If done correctly, there is no transfer penalty and, since the check is payable to the community spouse, the payments received are income to the community spouse and do not impact the Medicaid eligibility determination. This meant that Robert was ineligible for Medicaid payments. Can Betty be helped? There are strategies and techniques that can be used to plan in advance how Betty would like to be cared for and how the cost of care will be covered.

By pre-planning now, Aunt Betty may be able to preserve assets so that she does not end up in a crisis situation, requiring her to quickly spend down her assets in order to quality for government benefits.

It is probably also a good idea for Aunt Betty to consider developing a good relationship with a geriatric care manager and Elder Law attorney to help her because her children live far away. Incapacity is not typically something that happens over night, but rather is a gradual process. Thus, in all circumstances, it is best to have someone there for an aging parent to rely on for support and advice, should more assistance down the road be required. She really wants the home to be transferred to her children who grew up in the home.

There are some important planning steps that should be undertaken to protect the family home from a later Medi-Cal recovery action. This can be accomplished through a special type of Irrevocable Trust See Chapter 8 for more details. Other assets may be transferred to this special type of irrevocable trust as well. The sooner we do this however, the better.

New promulgated regulations have been introduced for public comment as of the publication date of this book. We are now awaiting approval and adoption of the new rules, thereby changing California Medicaid Medi-Cal law.

Coverage options for long-term care

One of the major effects of DRA implementation will be an expanded penalty period, including when a penalty period will begin as a result of gifts being made. Currently, if any penalty period is triggered, the penalty runs from the date the gift was made, not when an application for benefits under Medi-Cal is filed. That is expected to change when the DRA is implemented in California. The penalty period will begin on the date of application for Medi-Cal provided that such individual is otherwise eligible for Long Term Care Medi-Cal. This is a huge change from the current law and will severely restrict and affect new Medi-Cal applicants.

This will impact many unknowing seniors who make gifts to family members and who will need nursing home care in the future. For example, if Aunt Betty made a gift to an irrevocable trust for her children that triggered a 10 month penalty period right now, current law in California , the penalty period would run from the date she made the gift and it would expire in 10 months.

Under the new proposed rules, if Betty applied for benefits even 59 months from now, the 10 month penalty period would begin at that point in time, making her ineligible for Medi-Cal for 10 months from the date she applied. Therefore, doing the planning now has a huge advantage under the current set of rules. There are many other strategies and techniques to help aid a family in planning for long-term care. Veterans benefits may also may be a part of the planning process for long term care.