Planning for Nursing Home Expenses

The question raised in the article “Fact or Fiction: I Can Protect My Assets from a Nursing Home with a Revocable Trust” from New Hampshire Business Review is frequency asked, and the reason for it is understandable. Any form of long-term home care is costly and can quickly decimate a lifetime of savings. There are ways to protect assets, but a revocable trust is not one of them.

There are some reasons why a person might find a revocable trust attractive. For one thing, if the grantor (the person who creates the trust and is also the trustee (i.e., the person in charge of the trust)), there is no loss of control. It is as if you still own the assets that are in the trust. However, when you die, the assets in the trust don’t go through the probate process. Instead, they go directly to the beneficiaries named in the trust documents. A revocable trust also lets you make specific provisions for beneficiaries and beneficiaries with special needs.

There is a trust that can be used to protect assets from the cost of long-term care. It is the irrevocable trust, which must be properly prepared by an estate planning attorney and done in a timely fashion: five years before the person needs to go to a nursing home.

The difference is in the name: the irrevocable trust is irrevocable. Once it is created, you (the grantor) may not change it. Once an asset is placed in the trust, you don’t own it. The trust is the owner. You can’t change your mind. The grantor may also not serve as the trustee of the trust.

You have to be prepared to give up complete control of the assets that go into the trust.

Some people think simply by handing over their assets in the trust to their children, they’ve solved everything. However, there are problems. If your children are sued or run into debt problems, that lifetime of saving which is now in their control is also subject to creditors or claims. If you need to enter a nursing home within five years of your handing over the assets, you also won’t be eligible for Medicaid.

The best course of action is to meet with an estate planning attorney and discuss your overall estate plan. You should have a frank conversation about your wishes, what kind of a legacy you want to leave behind and your bigger picture for the world after you’ve passed. The attorney will help work out a plan that will protect you, your spouse, your assets and your family.

Remember that an estate plan is not a one-and-done document. Every three or four years, or as “life happens” and changes occur in your life, you should touch base with your attorney. A new family member by marriage, birth or adoption, may call for some changes to your estate plan. It might also be affected by the sadder events of life; death, divorce, or a significant health change. All require a phone call and a discussion to ensure that your estate plan still achieves your goals and protects those you love.

If you have any questions about your current estate plan, or would like a consultation click here.

Reference: New Hampshire Business Review (July 30, 2020) “Fact or Fiction: I Can Protect My Assets from a Nursing Home with a Revocable Trust”

How Else Can Nursing Homes Be Impacted by COVID-19?

Lack of funding is a big issue for nursing homes.“You layer COVID on top of that and… it’s a crisis on top of a crisis,” David Grabowski, a professor of health care policy at Harvard Medical School, told Yahoo Finance. “And that you started with a lot of nursing homes that didn’t have adequate staffing models, weren’t exactly strong at infection control, lacked resources in many, many regards, and then this hits, it’s definitely the industry.”

Yahoo Finance’s recent article entitled “U.S. nursing homes face ‘a crisis on top of a crisis’ with coronavirus and funding woes” explains that the nursing home industry has been facing a financial shortfall since at least 2013, particularly for non-Medicare margins, according to the American Health Care Association (AHCA). Non-Medicare margins are the revenues and costs associated with Medicaid and private payers for all lines of business. They dropped 3% in 2018, an increase from the year prior.

“Over 60% of people in the country that live in nursing facilities are dependent upon Medicaid,” AHCA President and CEO Mark Parkinson told Yahoo Finance. “And unfortunately, in most states, the Medicaid rates have been set at less than the actual cost to take care of the residents. So, it makes it very difficult to provide the kind of care that providers want when they’re underfunded so dramatically.”

In addition, Parkinson commented, “most of the people don’t understand that Medicaid is really a middle-class benefit, because if people live long enough to outlive their resources, it’s the only way that they can afford to be taken care of in a facility.”

Medicaid is a federal benefits program that gives health coverage to seniors, pregnant women, children, people with disabilities and eligible low-income adults. However, the federal government permits states to level the payment amounts long as they meet federal requirements.

“The failure to adequately fund Medicaid is primarily a problem with the states,” Parkinson said. “Each state gets to make its own decision on what its reimbursement will be for Medicaid. Although the national average is around $200 a day, the rate varies dramatically by states, and some states are as low as less than $150 a day. In the low funding states, like Illinois and Texas, the politicians just haven’t decided it’s an important enough priority to adequately fund it.”

According to the New York Times, COVID-19 has infected more than 282,000 people at about 12,000 facilities as of June 26. It has killed more than 54,000. There are roughly 15,600 nursing homes in the U.S., with more than 1.3 million residents and over 1.6 million staff.

“It’s important to note that COVID hasn’t discriminated, so it’s not just those worst-quality nursing homes that have seen cases,” Grabowski said. “It’s been equally apparent across the high quality and low-quality facilities, high Medicaid and low Medicaid facilities. We’ve found that it’s really about where you’re located that has driven these cases.”

Adding to the financial situation is the fact that testing for coronavirus in the thousands of nursing homes across the country can be very expensive. The AHCA and National Center for Assisted Living (NCAL) found that testing every U.S. nursing home resident and staff member just once, would cost $440 million. As the pandemic continues, more supplies are also needed. A recent NCAL survey found that many assisted living communities are running low on PPE (N95 masks, surgical face masks, face shields, gowns, and gloves).

Parkinson says, it’s a “failure to recognize the importance of the elderly. It’s a conscious political decision to underfund elder care,” he said. “It’s not defensible on any level, but it’s occurring in the vast majority of states.”

He went on to say that with more funding, nursing homes can be better prepared for the next health crisis.

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Reference: Yahoo Finance (June 30, 2020) “U.S. nursing homes face ‘a crisis on top of a crisis’ with coronavirus and funding woes”

Your Estate Plan Needs to Be Customized

The only thing worse than having no estate plan, is an estate plan created from a ‘fill-in-the-blank’ form, according to the recent article “Don’t settle for a generic estate plan” from The News-Enterprise. Compare having an estate plan created to buying a home. Before you start packing, you think about the kind of house you want and how much you can spend. You also talk with real estate agents and mortgage brokers to get ready.

Even when you find a house you love, you don’t write a check right away. You hire an engineer to inspect the property. You might even bring in contractors for repair estimates. At some point, you contact an insurance agent to learn how much it will cost to protect the house. You rely on professionals, because buying a home is an expensive proposition and you want to be sure it will suit your needs and be a sound investment.

The same process goes for your estate plan. You need the advice of a skilled professional–the estate planning lawyer. Sometimes you want input from trusted family members or friends. There other times when you need the estate planning lawyer to help you get past the emotions that can tangle up an estate plan and anticipate any family dynamics that could become a problem in the future.

An estate planning attorney will also help you to avoid problems you may not anticipate. If the family includes a special needs individual, leaving money to that person could result in their losing government benefits. Giving property to an adult child to try to avoid nursing home costs could backfire, making you ineligible for Medicaid coverage and cause your offspring to have an unexpected tax bill.

Your estate planning lawyer should work with your team of professional advisors, including your financial advisor, accountant and, if you own a business, your business advisor. Think of it this way—you wouldn’t ask your real estate agent to do a termite inspection or repair a faulty chimney. Your estate plan needs to be created and updated by a skilled professional: the estate planning lawyer.

Once your estate plan is completed, it’s not done yet. Make sure that the people who need to have original documents—like a power of attorney—have original documents or tell them where they can be found when needed. Keep in mind that many financial institutions will only accept their own power of attorney forms, so you may need to include those in your estate plan.

Medical documents, like advance directives and healthcare powers of attorney, should be given to the people you selected to make decisions on your behalf. Make a list of the documents in your estate plan and where they can be found.

Preparing an estate plan is not just signing a series of fill-in-the-blank forms. It is a means of protecting and passing down the estate that you have devoted a lifetime to creating, no matter its size.

Reference: The News-Enterprise (June 23, 2020) “Don’t settle for a generic estate plan”

 

Long Term Care Varies, State by State

What if your parents live in Oklahoma, you live in Nebraska and your brothers and sisters live in New York and California? Having the important conversation with your aging parents about what the future might hold if one of them should need long-term care is going to be a challenge, to say the least.

It’s not just about whether they want to leave their home, reports the article “What is the best state for long term care” from The Mercury. There are many more complications. Every state has different availability, levels of care and taxes. If the family is considering a continuing care retirement community, or if the parents already live in one, what are the terms of the contract?

The differences between states vary, and even within a state, there can be dramatic differences, depending upon whether the facility being considered is in a metropolitan, suburban or rural area. There’s also the question of whether the facility will accept Medicaid patients, if the parents have long-term care insurance or any other resources.

Here’s what often happens: you open up a glossy brochure of a senior community in a warm climate, like Florida or Arizona. There are golf courses, swimming pools and a great looking main house where clubs and other activities take place. However, what happens when the active phase of your life ends, slowly or suddenly? The questions to ask concern levels of care and quality of care. Where is the nearest hospital, and is it a good one? What kind of care can you receive in your own apartment? Are you locked into to your purchase, regardless of your wishes to sell and move to be closer to or live with your adult children?

And what happens if you or a “well” spouse runs out of money? That’s the question no one wants to think about, but it does have to be considered.

For people who move to Florida, which has a very generous homestead exemption for property taxes and no state tax, the incentives are strong. However, what if you become sick and need to return north?

For seniors who live in Pennsylvania and receive long-term care and other services, the well spouse’s retirement funds are exempt for Medicaid regardless of the amount. However, if you move over the state’s border to New Jersey, and those accounts will need to be spent down to qualify for Medicaid. The difference to the well spouse could be life changing.

Delaware and New Jersey have Medicaid available for assisted living/personal care. Pennsylvania does not. The Keystone State has strict income limitations regarding “at home” services through Medicaid, whereas California is very open in how it interprets rules about Medicaid gifting. Utah also has Medicaid available for nursing home care and has a segment that helps with assisted living cost called the New Choice Waiver.

The answer of where to live when long-term care is in play depends on many different factors. Your best bet is to meet with an estate planning elder care attorney who understands the pros and cons of your state, your family’s  situation and what will work best for you and your spouse, or you as an individual.

Reference: The Mercury (March 4, 2020) “What is the best state for long term care”

 

How Can I Fund A Special Needs Trust?

TapInto’s recent article entitled “Ways to Fund Special Needs Trusts” says that when sitting down to plan a special needs trust, one of the most urgent questions is, “When it comes to funding the trust, what are my options?”

There are four main ways to build up a third-party special needs trust. One way is to contribute personal assets, which in many cases come from immediate or extended family members. Another possible way to fund a special needs trust, is with permanent life insurance. In addition, the proceeds from a settlement or lawsuit can also make up the foundation of the trust assets. Finally, an inheritance can provide the financial bulwark to start and fund the special needs trust.

Families choosing the personal asset route may put a few thousand dollars of cash or other assets into the trust to start, with the intention that the initial investment will be augmented by later contributions from grandparents, siblings, or other relatives. Those subsequent contributions can be willed to the trust, or the trust may be named as a beneficiary of a retirement or investment account. It is vital that families use the services of an elder law or special trusts lawyer. Special needs trusts are very complicated, and if set up incorrectly, it can mean the loss of government program benefits.

If a special needs trust is started with life insurance, the trustor will name the trust as the beneficiary of the policy. When the trustor passes away, the policy’s death benefit is left, tax free, to the trust. When a lump-sum settlement or inheritance is invested within the trust, this can allow for the possibility of growth and compounding. With a worthy trustee in place, there is less chance of mismanagement, and the money may come out of the trust to support the beneficiary in a wise manner that doesn’t risk threatening government benefits.

In addition, a special needs trust can be funded with tangible, non-cash assets, such as real estate, securities, art or antiques. These assets (and others like them) can be left to the trustee of the special needs trust through a revocable living trust or will. Note that the objective of the trust is to provide the trust beneficiary with non-disqualifying cash and assets owned by the trust. As a result, these tangible assets will have to be sold or liquidated to meet that goal.

As mentioned above, you need to take care in the creation and administration of a special needs trust, which will entail the use of an experienced attorney who practices in this area and a trustee well-versed in the rules and regulations governing public assistance. Consequently, the resulting trust will be a product of close collaboration.

Reference: TapInto (February 2, 2020) “Ways to Fund Special Needs Trusts”

 

Common Myths about Your Estate When You Die

There are many misconceptions about the law in general and about estate planning in particular. There are also many opportunities to use the law to protect those we love, when it comes to helping families navigate life and the legal processes that happen after the death or disability of a loved one. The best option is to plan ahead, reports the article “I’m dead, now what? Myths about deaths in Georgia” from the Cherokee Tribune & Ledger-News. Here are the top four myths about what happens when someone dies.

A Will. If there’s no will, my spouse gets everything. Well, no. While you are a team, and you may want your spouse to get everything, if there’s no will, the laws of your state will determine who gets what. Your spouse in some states will split your possessions with your children. Your spouse in some states will get no less than a third of your assets. If you want your spouse to inherit everything, you need a will.

You also need a will if you want your spouse to receive everything so they can take care of your children, if something unexpected happens to you. Without it, your spouse will have to create a budget for your children’s needs and present that to the court before they can spend any of the children’s money. That’s how it works in Georgia. Check with a local estate planning attorney to make sure that’s what you’re prepared to leave for your spouse to do, or what your state’s laws say.

Having a will allows you to determine who you want to inherit what.

A will means there’s no need for probate court. Wrong again! Having a will does not mean you avoid probate court and the legal process known as probate. A will is not legally effective, until the nominated executor presents your will to the probate court and the court accepts the will and declares it to be valid. This is a longer process in some jurisdictions. However, there are potential problems. If there’s a disgruntled family member or a need for privacy, the probate process creates a public record and information can and often is obtained by family members. To avoid making your life a public matter, you need an estate plan that includes trusts, which do not go through the probate process and do not become public records.

If I don’t have a will, the state will take it all. It’s very rare that any state will take everything, even if there is no will. The state only does that if absolutely no family members can be found, or if the state’s Medicaid program has an aggressive claw back policy that seeks to recover the cost of nursing home care provided to the decedent. If the person who died did not need Medicaid services, then it’s unlikely that the state will take the assets. More likely? A family member, determined by degree of kinship, will be entitled to inherit. Again, the law varies by state, so check with an experienced estate planning lawyer in your state.

The family gets stuck with the debts. That’s a yes and no answer. The debts of family members do not have to be paid by the family. However, they are paid by the deceased’s estate, which will be decreased by the amount of debt owed. Therefore, the family members will inherit less, but it’s not coming out of their own pockets. The debts of the deceased are to be paid by whatever assets he or she owned at the time of death. If there’s not enough in the estate, the family is not obligated to pay the debt. The exception is if the spouse was a joint borrower or otherwise legally obligated to pay the debt.

What you know and don’t know about estate planning can hurt you and your family. An easy way to address this: meet with an experienced estate planning attorney and make a plan that will distribute your assets according to your wishes.

Reference: Cherokee Tribune & Ledger-News (Feb. 1, 2020) “I’m dead, now what? Myths about deaths in Georgia”

Making a Fresh Start for 2020? Here’s Help

Some people like to start their New Year’s off with a clean slate, going through the past year’s documents and organizing, tossing, or shredding anything they don’t absolutely need. However, many don’t, in part because we’re not sure exactly what documents we need to keep, and which we can toss. This article from AARP Magazine provides the missing information so you can get started: “When to Keep, Shred or Scan Important Papers.”

Tax Returns. Unless you’re planning on running for office, the last three years of tax returns and supporting documents are enough. That’s the window the IRS has to audit taxpayers. But there are some exceptions: if you are self-employed or have a complex return, double that number to six years, which is how much time the IRS has to audit you, if it suspects something’s fishy.

Regardless of how you earn your income, visit MySocialSecurity.gov account before shredding to make sure that your income is being accurately recorded. Having your tax records in hand will make it easier to get any figures fixed.

As for documents regarding home ownership, keep records related until you sell the house. You can use home-improvement receipts to possibly reduce taxes at that time.

Banking and Investments. If you or your spouse might be applying for Medicaid to pay nursing home costs, you’ll need to have five years of financial records. That includes bank statements, credit card statements, and statements from brokerage or financial advisors. This is so the government can look for any asset transfers that might delay eligibility.

If that’s not the case, then you only need banking and financial statements for a year, except for those issued for income-related purposes to provide the IRS with a record of tax-related transactions. Your bank or credit card issuer may have online statements going back several years online. However, if not, download statements and save them in a password protected folder on your home computer.

Stocks and bonds purchases need to be kept for six years after filing the return reporting the sale of the security. Again, this is for the IRS.

If you have a stack of cancelled checks, shred them. Most every bank and credit union today have an electronic version of your checks.

Medical Records. These are the documents you want to organize and keep indefinitely, especially if you have had a serious illness or injury. The information may make a difference in how your physicians treat you in the future, so normal or not, hang on to the following documents: surgical reports, hospital discharge summaries and treatment plans for major illnesses. Put these in a password-protected folder in your computer or a secure cloud-based account, so they can be shared with future healthcare providers. You should also keep immunization and vaccination records. The goal is to have your own medical records and not to rely on your doctor’s office for these documents.

Maintain proof of payments to medical providers for six years, with the relevant tax return, in case the IRS questions a health care deduction. If you have questions consult your elder law attorney.

Reference: AARP Magazine (August 5, 2019) “When to Keep, Shred or Scan Important Papers”

Q & A – Medicaid for Nursing Home Care

As we approach our third act, new terminology comes into our daily lives that we may have heard before, but maybe never gave much thought to. Terms like Medicare, Medicaid, Social Security, Long-Term Care, and so on, can become sources of anxiety, if we don’t truly understand them. Therefore, today we’re answering some of the fundamental questions about Medicaid for nursing home care, in the hopes that we can alleviate at least one source of anxiety for you.

Question #1 – What is Medicaid?

Medicaid is a state and federal government-funded program that provides medical services to financially eligible individuals. Unlike Medicare, you do not have to be elderly to qualify for Medicaid, and many elderly individuals receive Medicaid benefits, including nursing home care. Every state administers its own version of Medicaid. For more information on Medicaid programs in your state, visit the Medicaid website, and select your state.

Question #2 – What are Medicaid’s basic financial eligibility requirements for nursing home care?

To determine your eligibility for nursing home benefits under Medicaid, the government will look at your income and resources in a given month to ensure you are within the legal limits for Medicaid benefits. To qualify for Medicaid, your monthly income must be less than the Medicaid rate for nursing home care, plus your typical monthly healthcare expenses. If you are eligible, you are allowed to keep $70 of your income for personal use. The rest is taken to pay for your care.

Question #3 – What is the Medically Needy Program under Medicaid?

For individuals that may exceed the financial limits to receive Medicaid, they may still qualify to receive Medicaid benefits under the medically needy program. This program allows individuals with medical needs to “spend down” their income to acceptable rates, by paying for medical care for which they have no insurance. For individuals over the age of 65, states are required to allow you to spend down your income regardless of medical necessity.

Question #4 – What resources can we have if my spouse is applying for Medicaid?

When a married couple applies for Medicaid, both spouses’ income and resources are included in the qualifying calculations. You may have all of the “exempt” resources, like an automobile and a house, along with one non-exempt item that does not exceed a set value (currently just over $58,000), such as cash or investments. Once your spouse qualifies for Medicaid, after one year, all excess income and resources must be transferred to the non-Medicaid-benefitted individual. That spouse may also accrue income and resources over and above the limits that Medicaid imposes on the benefitted spouse.

More information can be found on the Medicaid website, including requirements and benefits information for the state in which you reside. If you are interested in more information about long term care planning, speak with a qualified elder law attorney.

References:

Medicaid.gov. (Accessed November 28, 2019) https://www.medicaid.gov/medicaid/index.html

Holiday Gatherings Often Reveal Changes in Aging Family Members

A look in the refrigerator finds expired foods and an elderly relative is asking the same questions repeatedly. The same person who would never let you walk into the house with your shoes on now, is living in a mess. The children agree, Mom or Dad can’t live on their own anymore. It’s time to look into other options like assisted living or home care.

One of the biggest questions, according to the Cherokee Tribune & Ledger-News’ article is “How to pay for long-term care.”

The first question involves the types of facilities. There are many different options but the distinctions between them are often misunderstood. Assisted living facilities provide lodging, meals, assistance with eating, bathing, toileting, dressing, medication management and transportation. However, a skilled nursing facility adds more comprehensive health care services. There’s also the personal care home, which provides assisted-living type accommodations, but on a smaller scale.

The next question is how to pay for the residential care of an elderly family. This weighs heavily on the family. That elderly person is often the one who did the caregiving for so many years. The reversal of roles can also be emotionally difficult.

There are a few different ways people pay for care for an elderly family member.

Long-term care insurance, or LTC insurance. Few elderly people have the insurance to cover their residential facility stay, but some do. Ask if such a policy exists, or go through the piles of paperwork to see if there is such a policy. It will be worth the search.

Veteran’s benefits. If your loved one or their spouse served during certain times of war, is over 65 or is disabled and received an honorable discharge, he or she may be entitled to certain programs that pay for care through the Department of Veterans Affairs.

Private pay. If your loved one has financial accounts or other assets, they may need to pay the cost of their residential facility from these assets. If they don’t have assets, the family may wish to contribute to their care.

Another route is to apply for Medicaid. An elder law attorney in their state of residence will be able to help the individual and their family navigate the Medicaid application, explore if there are any options to preserving assets like the family home, and help with the necessary legal strategy and documents that need to be prepared.

Meet with an elder law estate planning attorney to learn what the steps are to help your elderly loved one enjoy their quality of life, as they move into this next phase of their life.

Reference: Cherokee Tribune & Ledger-News (November 30, 2019) “How to pay for longterm care.”

The Dark Side of Dementia Care

You might expect the federal government to oversee and regulate assisted living facilities. However, since Medicare and Medicaid usually do not pay for stays at these facilities, there is no federal protection for the residents. When you consider how many assisted living centers now claim to offer dementia and memory care, you can see the brewing of a perfect storm. Highly vulnerable people are at the mercy of unregulated facilities. If you have a loved one in an assisted living center, you need to know about the dark side of dementia care.

People who live in nursing homes have some protections through federal legislation. The government imposes strict rules on nursing homes that receive funding from Medicare or Medicaid. Most assisted living centers are private pay, so the federal government cannot regulate them.

Some states have regulations designed to protect people in long-term care facilities. These states are discovering appalling conditions at many assisted living centers that advertise dementia care. Let’s be clear – there are wonderful facilities that provide fantastic dementia care. The problem is, a great number of for-profit facilities have sprung up quickly, without enough focus on the best interests of the residents.

The Reasons for Unacceptable Conditions at Dementia Care Facilities

The number of Americans with Alzheimer’s disease and other forms of dementia has risen dramatically over the last 20 years. Businesses all over the nation have seized on this opportunity to make a profit, by providing specialized care services. The problem is, many of these facilities do not deliver the promised level of care and security for these residents.

Long-term care can cost $5,000 to $7,000 a month or more. Most of the facility employees get paid low wages, particularly the workers who provide the lion’s share of the hands-on care of residents. To increase profits, the corporations that own and run these facilities often have high patient-to-staff ratios. In short, the centers are understaffed, and the workers are underpaid. Neither of those factors is conducive to the safe, attentive, nurturing environment that a person with dementia needs.

A Climate of Not Caring

Even when a state has regulations for assisted living centers, the punishments show little value for the well-being and lives of the elderly. For example, a 90-year-old lady with dementia lived in an assisted living facility in South Carolina. When she wandered away from the center one night, her absence went unnoticed for seven hours. By the time someone finally realized she was missing, she had already met a gory death.

An alligator in the pond next to the center killed and partially ate her. Her granddaughter was one of the first people to find the remains of the body. A year later, the state cited the facility for more than 10 violations involving patient safety, including not maintaining adequate numbers of staff and failing to perform nightly checks of residents. The state imposed a fine of $6,400.

Long-term care ombudsmen across the U.S. say that many facilities use psychotropic drugs as chemical restraints, instead of providing the quality care the residents need and for which they are paying thousands of dollars every month. The staff members often do not have training in dementia care, but even in states with a training requirement, industry experts say the regulations get ignored.

Every state makes its own regulations. Be sure to talk with an elder law attorney near you to find out how your state might differ from the general law of this article.

References:

Huffpost. “Dementia Care Is A Lucrative Business. Its Breakneck Growth Is Costing Patients’ Safety.” (accessed November 8, 2019) https://www.huffpost.com/entry/assisted-living-dementia-injuries_b_5c1d6f88e4b04aa0a171b895