Chart Your Course: A Guide
Long-Term Care Planning
This column presents general information regarding estate and disability planning and probate. It is not intended to create an attorney-client relationship or constitute legal advice to readers. Individuals with legal concerns should consult with an attorney for advice regarding their specific circumstance.
By Jessica L. Estes
With the advent of modern medicine, people are living longer. Yet very few of us have planned properly, if at all, for our future long-term care needs. According to the U.S. Department of Health and Human Services, 70 percent of people turning age 65 can expect to use some form of long-term care during their lives.
What is long-term care? Long-term care is required when an individual is unable to perform the basic activities of daily living such as bathing, dressing, eating, using the toilet, walking and moving about, for a period exceeding 30 days. Long-term care can include home care, adult day care, respite care and assisted living or nursing home services.
In the DC-Baltimore metro area, long-term care costs for an individual often exceed $100,000 per year. That is a lot of money and most people simply cannot afford to pay. Still, the majority of individuals do not have long-term care insurance. Instead, people mistakenly believe that their health insurance will pay for their long-term care needs, or that they will not need long-term care. Unfortunately, these people find out too late that they were wrong.
If someone does not have long-term care insurance, but requires long-term care, how do they pay for it?
Either they will use their own resources to fund their care, or they are going to have government programs such as Medicare, Medicaid or certain veterans’ benefits help pay for it. Medicare is health insurance, which under certain circumstances may cover a portion of the cost, but only for a limited time. After that, Medicare does not pay anything toward long-term care.
Medicaid, on the other hand, is a needs-based program that helps qualified individuals pay for medical and long-term care costs. There are several different Medicaid programs, but some of these programs have lengthy wait lists, which is why it is important to plan now. Similarly, the Aid and Attendance benefit available to qualified veterans is also a needs-based program that can provide a monthly income to cover a portion of the veteran’s long-term care costs. However, because these are needs-based programs, most people will not qualify until they have spent down a majority of their own funds.
How do I plan properly for my future long-term care needs? It really depends on your individual situation. For most, long-term care insurance is always a good idea if you can afford it and if you can qualify medically. If not, there may be certain asset protection trusts that could be used to preserve most, if not all, of your assets so when the time comes, you can qualify for government benefits. Government benefits such as Medicaid or Aid and Attendance help cover such costs or, some people choose to enter a continuing care retirement community. There are a variety of options, but one thing is certain: Everyone is different and what is right for you will depend on a number of factors including your monthly income, assets, age, family dynamics and desire for a particular quality of life.
Are there any pitfalls to avoid in long-term care planning? Transferring your home to a revocable living trust or owning a life estate in your home “with powers,” could disqualify you from certain government benefits.
Moreover, while the IRS allows gifts of $14,000 per year to any number of individuals without having to report those gifts, Medicaid does not. For Medicaid purposes, those gifts will be subject to penalty and could jeopardize your eligibility. Likewise, if you have a 529 Plan for your grandchild, it is likely this account will have to be spent down before you will qualify for Medicaid, which could result in hefty tax consequences and withdrawal penalties.
Finally, with regard to durable general powers of attorney, you want to make sure that your named agent is authorized to give assets, engage in Medicaid planning and is able to create and fund an irrevocable trust. That way, if you are unable to do so yourself, your agent can implement a plan for your long-term care needs.
Ultimately, it is your future. Planning now not only ensures that you are making your own decisions, but that you will be able to have the quality of life you want. And because these decisions are yours, your loved ones will not have any stress or guilt over them.
Jessica L. Estes is an elder law and estate planning attorney at Byrd & Byrd, LLC with offices in Bowie and Prince Frederick. She can be reached at 301.464.7448 or on the website at byrdandbyrd.com