Most people over the age of 65 will eventually need help with activities of daily living. A man will need an estimated 2.2 years of such assistance and a woman will need an estimated 3.7 years. If only one spouse needs the help it can be financially devastating to the other spouse. One or both spouses may have to resort to Medicaid to pay for the care. There have to be options…right?
Some think that turning to Medicare will be the answer. However, there is little relief there. Medicare will pay for initial rehabilitation care but there are time and progression in treatment limits to care paid for by Medicare. This is not a long-term option for persons needing continued and long-term assistance.
So, What is the Plan?
The most well know option is long-term care insurance. This is an insurance policy purchased that will cover the cost of long-term care or nursing home care up to a dollar amount per diam and for a set number of years. When Medicaid only required a 3-year look back after the disposition of assets then a 3-year policy term was enough. Medicaid now has a 5-year look-back period related to the disposition of assets. To purchase a policy with a shorter term is to bet that you are at or below the average for years of care needed. This is not a safe bet. The annual premium for long-term care insurance for a 55-year-old couple is about $3000. As you age the premiums become more expensive. Additionally, the premiums can increase exponentially and may make this type of insurance prohibitive.
There is a ‘hybrid’ long-term care insurance option that combines life insurance or an annuity with a long-term care insurance rider. If you don’t use the long-term care rider then the funds or any funds not used are transferred to your heirs outside of probate. This product is chosen about 4 to 1 over traditional long-term care policies. The most common way to purchase this ‘hybrid’ is with an initial cash contribution of generally around $100,000. It is possible to pay in over time but you are looking at about $7000 per year for a couple.
It is possible to use the equity in your home to pay for long-term care. This can be accomplished either through the use of a reverse mortgage or a sale of the property. However, before you chose this option consult with your elder law attorney as there are exemptions for the need to use the house to pay for care before qualifying for Medicaid coverage if one spouse is remaining in the home. While a reverse mortgage can give you disposable income, even if you don’t yet need it to pay for long-term care, it is a tool to be considered in an assessment of your entire financial situation.
There is a certain type of trust that can protect your assets from having to be used for your long-term care. To establish this Trust you will have to divest yourself of ownership and the ability to benefit from your funds and do so preferably 5 years or more before you would need long-term care. This again is not a decision to be taken lightly but made with the assistance of your elder law attorney.
Spending down to qualify for Medicaid has complicated rules and exemptions of assets. There are allowances for the spouse remaining in the community to retain some assets and income. This again is a decision to be made with your elder law attorney and your financial planner.
This information was excerpted from the Cleveland Plain Dealer June 30, 2019 Business Section.
Contact Moseman Law for Your Long-term Care Planning
Heather Moseman is experienced in Elder law and long-term care planning, specifically as it concerns Medicare/Medicaid. Call her office today to schedule a consultation.