What If I Can’t Afford Long-Term Care When I Need It?

June 3, 2019

The biggest threat to a person’s estate is the incurred cost of long-term health care, which totals between $5,000 and $6,000 per month in Oklahoma. For many of us, that would deplete our estates pretty quickly if we hadn’t properly planned for it, and because one out of every two people will need long-term care for an average of three years, it’s not a topic you can ignore. Individuals diagnosed with Alzheimer’s or dementia need care for more than 10 years, on average!

So, what are the options to pay for long-term care, and thus, protect your estate for future generations? There are four primary options. However, long-term care planning is complex and highly customized. Medicaid rules, asset and income limitations, personal health, planning options and other factors can make it complicated in a hurry, so be sure to work with experienced legal counsel to ensure your planning is done properly.

Use your assets. The simplest option is to pay for long-term care with your own assets, although it’s also the most expensive route. There’s no red tape when writing a check from your own accounts directly to your health care provider. However, it does require significant advance planning, which many people fail to do until faced with a health care or financial emergency. If you haven’t planned to pay out-of-pocket, it can deplete assets quickly that surviving family members might need. But if you have planned ahead for this expense, your estate can be protected through one of several Medicaid-qualified planning devices.

Use long-term care insurance. If you and your spouse are healthy and between the ages of 40 and 60, I recommend obtaining quotes on long-term care insurance. Whether you should buy it depends upon the quotes and your unique situation. If purchased, daily or monthly insurance payments will cover much of your health care costs, and the remainder of your estate can be protected through a will or revocable trust depending on whether you wish to avoid probate. A will must be probated while a revocable trust does not require probate. (More on that here.) However, after age 60, long-term care insurance is often cost prohibitive. If it’s no longer reasonable to pay the estimated premiums, we’ll need to explore alternate funding methods.

Use Medicaid. American adults have paid into Social Security and its sister programs, Medicaid and Medicare, during their working years. Medicaid is designed to help Americans pay for long-term care (among other things) and typically covers the cost of a semi-private room in most facilities, medications and unreimbursed medical expenses. You can opt to reside in a private room and still receive Medicaid. Or, you can apply your Medicaid payment toward in-home care rather than moving into a facility, if desired, but not everyone will qualify. The applicant must have $2,000 or less of “countable” assets while a spouse is allowed up to approximately $125,000 of “countable” assets. However, many assets are excluded as “countable.” With proper planning, a Medicaid applicant and spouse, if applicable, can have an unlimited number of “non-countable” assets. Medicaid can be used in conjunction with insurance or other benefits in many situations, but again, it’s a complicated arena that requires further discussion with an experienced attorney and financial advisor. Using Medicaid to pay for long-term care necessitates more involved Medicaid-qualified planning devices, and there are only a handful of attorneys in Oklahoma experienced at creating these structures.

Use veteran benefits. If you or your spouse completed at least 90 days of military service during wartime, were discharged any way other than dishonorably and need assistance with at least two aspects of daily living, you likely qualify for the Veteran’s Administration Aid and Attendance benefit. In my experience, about 80 percent of people eligible for this benefit aren’t even aware they are eligible. Many people assume that to qualify they need to have been injured during the time of service or have been stationed in a theater of war, both of which are incorrect. It can be layered on top of Medicaid or long-term care insurance, but it can take six to nine months for applications to be approved. Once approved, benefits are paid back to the time of application filing. Again, long-term care needs should be planned for through VA-qualified planning devices.

If you or your spouse think you’ll need long-term care in your final years (and remember, half of us will), this is a critical part of your financial planning. It makes a significant difference in the type of estate planning you need, but the good news is, once your planning is complete, you’re grandfathered in if Medicaid or VA rules change in the future. So, schedule time to visit with your financial advisor before your family’s long-term care becomes an urgent need.

 

Blog by Craig Riffel, General Counsel.

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