Tax Free Planning Opportunity for Long Term Care Expenses

 

This posting is courtesy of attorney Marc Soss of Florida:

The aging demographics of the United States coupled with the Pension and Recovery Act of 2006 (the "PPA”) and Deficit Reduction Act of 2007 (“DRA”) have provided an excellent planning opportunity to create tax efficient vehicles to solve a clients’ long-term care planning needs. Beginning on January 1, 2010, a tax-free planning option will become available for individuals who desire to provide for long-term medical care by utilizing an existing annuity or life insurance contract purchased after 1996. While not a new concept (it dates back to 1997), the 2010 tax-free planning opportunity may be beneficial to an individual with a larger than needed life insurance policy death benefit, unaffordable monthly or annual premiums, an under-performing or matured deferred annuity contract, or the desire to incorporate long-term medical care into his or her estate plan. 

 

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Nursing Homes for Veterans

Nursing home coverage for veterans is available from two sources within the Department of Veterans Affairs -- the veterans health care system and the state veterans homes system.

Nursing Home Coverage through the VA Health Care System
Nursing home coverage along with other long term care services such as home care and assisted living as well as geriatric care management are available through the Veterans Health Administration for qualifying veterans.

In order to get into the veterans health care program, the veteran must have service-connected disabilities, or be below a qualifying income level or be receiving Veterans Pension income. Once in the system, veterans are not guaranteed long term care services, including nursing home care, unless they meet specific requirements. Here is a list of these requirements for nursing home coverage.

 

 

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"Aging in America" Recording Available on NAELA Webiste

A recorded version of the National Academy of Elder Law Attorneys (NAELA)'s public webcast "Aging in America: How to Plan for it" is available for  through November 30 on the NAELA websiteDuring the one-hour program, AARP and NAELA officials discuss talking with one's parents about aging, family issues in elder care, healthcare decision making, long term care insurance, reverse mortgages and more.

NAELA Announces New Senior Housing Locator Website

The National Academy of Elder Law Attorneys  (NAELA) has unveiled its new Senior Housing Locator powered by SNAPforSeniors®, an online navigational tool designed to help easily find senior housing anywhere in the country.

Users can search a database of more than 60,000 senior housing communities, including listings for all licensed senior housing in the U.S. Searches can be conducted by city, county, ZIP code, community name, etc., and can be refined by criteria such as desired care services, payment options, and lifestyle amenities.

According to SNAPforSeniors, there are 247 different senior housing license types across the country and new license types are emerging each year. The NAELA Senior Housing Locator offers definitions for each type.

The site also provides users with a simple way to check how nursing home and rehab communities compare in inspection reports. The listings of all Medicare Certified facilities include a link which takes users directly to each facility’s Nursing Home Compare Report page on medicare.gov, bypassing 7-10 clicks through other pages to find the page desired.

 

 

Planning to Self-Insure the Risk of Long-Term Care Expenses?

Planning for long-term care expenses should be a part of everyone's estate plan by the time they reach 50.  Here's a piece by Alex Townsend, CLTC of Raleigh on why it may not be a good idea to try self-insure:

Things To Consider:

“How much does someone have to be worth to not need long-term care insurance?”

What’s the magic number? How rich is too rich to not need LTC insurance protection? Even though I think that is the wrong question to ask (see next question), my answer is this: If you can write a check each month, indefinitely, for the kind of long-term care that you and your spouse will desire should you have the need, and it doesn’t bother you to write this check, then you may want to pass on LTC insurance.

“I want a number. Exactly how much does someone have to have to not need LTC insurance?”

My answer is a question. How much does someone have to be worth to not need Major Medical or Medicare Supplement or homeowners insurance? The reason I ask these questions is that we don’t think of other types of insurance in terms of whether we have enough money to not need them. Think about it: There are many wealthy people who could afford to rebuild their home if it burned to the ground, and the likelihood of that kind of total loss is minimal. You may want to take this opportunity to review all your insurance with a critical eye applying sound risk management principles. Perhaps LTC coverage is not the only potentially catastrophic cost you should consider
self-insuring. Assuming that you believe in the value of insurance and you insure for other large risks, why is long-term care insurance the one insurance that you won’t buy? Financially astute people don’t make the best decisions every time, but they also don’t make big mistakes. Most wealthy people don’t like their money to be vulnerable. If you buy LTC insurance and never use it, you might say you’ve made a small mistake. If you don’t buy LTC insurance and need it, you might say it was a big mistake.

Other Considerations:

  • Today’s average cost (2007) in a skilled facility in the Piedmont NC area is approximately $190 per day or $70,000 per year. In 25 years, at a time you’re more likely to need care, if costs rise at just 5% annually, the cost will be approximately $700,000 per year. A need of 3 years would mean $2,100,000 total costs. Regardless of how much money you have, you or your family probably won’t be happy about writing those kinds of checks!
  • The above example assumes just one person needs LTC. What if both spouses need it at the same time? I have clients where this is the case. It can and does happen.
  •  How “liquid” will your assets be at claim time? Which asset will you liquidate first? Will you have to sell an equity that happens to be way down at the time? Will liquidation trigger unwanted capital gains taxes? As you save for the eventuality of needing LTC, what if your health takes an unexpected change for the worse sooner rather than later?

Often, after purchasing a policy, I have had many people tell me that they felt a tremendous sense of freedom, relief, and peace of mind saying things like, “now I can enjoy my money because I have so much more confidence knowing I have a resource in place in case the unthinkable happens”.

Plan...then relax!

 

Medicaid Patients May be Vulnerable to Eviction by Facilities

Nursing homes are being accused by some patient advocates and state long-term care ombudsmen of increasingly evicting patients who are too inconvenient or too costly to care for. And the most vulnerable appear to be those patients with dementia or highly vocal families who are on Medicaid, according to a recent Wall Street Journal report.

The federal government permits nursing homes to evict patients for specific reasons, such as endangering the health or safety of others and needing care only available elsewhere.

The facilities claim they play by the rules and follow federal guidelines, but an increasing numbers of formal complaints about nursing home discharge practices suggest otherwise.

The U.S. Administration on Aging has seen complaints double from 1996 to 2006. And this doesn’t take into account informal complaints or unreported incidents.

The reason for the increase in nursing home evictions – also referred to as involuntary discharges – appears to be financial. Evicted Medicaid patients are replaced by patients coming out of the hospital who pay a higher daily rate for short-term care and rely on Medicare or private insurance to pick up the tab.

This new focus on short-term recovery and rehabilitation makes good financial sense for facilities. One nursing home chain claims it averages $411 a day from Medicare patients but just $166 from those on Medicaid. As an industry, nursing homes report Medicaid reimbursements are $4.4 billion short of the actual cost of care.

Of course it’s the patients who suffer the most. Elderly and frail, they are transferred to other nursing home facilities, hospitals or psychiatric facilities, where they find it difficult to thrive in a totally new environment. The “transfer trauma” they experience results in mental health problems, weight loss, and frequent falls that can lead to death within months of a change in venue.

In comparison with nursing home patients, assisted living residents have even less protection. Management in assisted living centers can evict residents without reason or appeal process just by giving them one or two month’s notice. Here, too, the U.S. Administration on Aging has seen discharge practice complaints soar over the last decade. Accusations are growing that Medicaid patients are being targeted for eviction and two states are pursuing assisted-living companies on these charges.

Source: To be Old, Frail and Evicted: Patients at Risk. Wall Street Journal, 7 August.

 

 

Avoid Probate of Equity Refunds from Continuing Care Communities

The Problem: Continuing care retirement communities have been growing in popularity with seniors for years.  Such communities usually require a "buy-in" upon admittance and many provide for a refund of a portion of the fee upon death.  The contracts (often called Residence and Care Agreements or the like) generally provide that the refund will be paid to the estate of the resident.  The trouble with this is that the refund triggers probate even if there are no other probate assets.  Since the refunds are often hundreds of thousands of dollars, unnecessary probate fees of $1,000 or more often result.

The Solution:  For those residents with living trusts, this can be avoided by a simple amendment to the Residence and Care Agreement that provides that the refund will be paid to the resident's living trust rather than his or her estate.  The amendment (or addendum, as some facilities call it) must be signed by the resident and the management of the facility.

For those residents without living trusts, the cost of having a trust prepared will generally be at least equaled by the probate cost savings alone, not to mention time and trouble avoided by escaping probate.

Worst Nursing Homes in U.S. - One is in NC

The U.S. government's Center for Medicare and Medicaid Services has released a report listing the poorest quality nursing homes in the country.  One is in North Carolina - Sunbridge Care and Rehab of the Triad in High Point, which has been poorly performing for 34 months!

Many NC Nursing Homes Have No Liability Insurance

A recent article in the Raleigh News and Observer describes how many assisted living and nursing homes in North Carolina lack liability insurance, as state law does not require it.  This, and the fact that it is difficult to prove economic damages to a family due to the death or injury of an older and possibly disabled person, often leave families with little recourse when a loved one is the victim of neglience in an elder care home.