Comments Off on Case Study: How an Irrevocable Trust Protects Assets from Nursing Home Costs
Last week I met with “Jennifer”, whose mother “Sally”, a long-time client of our office, had entered a nursing home several years ago. (Their names have been changed.) Two months ago, Sally died. Though always a sad occasion when a parent passes away, I told Jennifer that she should take comfort in knowing that she was there for her mother when she needed her most.
One of the ways that Jennifer had made Sally’s final years more comfortable was having urged her years ago to engage in estate planning, an important element of which involved taking actions to prevent all of Sally’s life savings from being spent on the nursing home. The technique that I had recommended to Sally, and which she implemented, was the transfer of a portion of her assets to an Irrevocable Trust.
When Sally eventually required nursing home care, the assets in the Irrevocable Trust did not need to be spent down in order for her to qualify for Rhode Island Medicaid benefits. Instead Jennifer was able to use the protected assets to pay to hold Sally’s bed in the nursing home during those times when Sally needed to go to the hospital for an extended period. And since Sally, like most Rhode Island Medicaid recipients in nursing homes was only allowed $50 per month for personal needs, Jennifer was able to pay for those extra things which Sally wanted but which she could not otherwise afford.
At our meeting, Jennifer reported that there was still some money—not a fortune, but some–remaining in the Irrevocable Trust. I advised Jennifer that, as Sally had specified in the Trust, that balance could be divided between herself and her sister. Jennifer was pleased with this, not so much for herself, but because she knew her sister could use some extra money with a child in college.
In the 25 years in which I have been privileged to represent clients like Sally and counsel their adult children like Jennifer, I have seen this result many times. It provides a significant measure of consolidation—and justified satisfaction– to sons and daughters like Jennifer to know that because they encouraged their parent to do planning, that not all of their father or mother’s life savings needed to consumed by nursing home costs.
And it is never too late to do this planning. At initial consultations, clients often lament that “we should have do this years ago”. I discourage this thinking, because I have seen many times positive outcomes like that of Sally’s which have occurred even when the planning has begun later in life.
Comments Off on When Long Term Care Insurance Does Not Really Insure Long Term Care
A March 8, 2013 article about long term care insurance in the Wall Street Journal entitled “Can You Afford to Get Older?”, drew a useful distinction between good and bad long term care insurance policies.
While noting that “[a] good long-term care policy can cover a significant of [long term care] costs…[a] bad policy could cost you a small fortune in premiums for coverage so limited it is is essentially worthless”.
Suppose someone enters a nursing home who has long term care insurance. He or she is all set financially, right? Not necessarily. I have seen many instances in which someone has purchased a long term care policy, only to find that the policy’s coverage equals only a fraction of what the nursing home actually ends up costing.
Take the gentleman who ten years ago was farsighted enough to anticipate the potential of his requiring long term care in the future. However, he had limited means, so the policy he purchased paid at the maximum rate of $100 per day for three years.
Fast forward ten years later. The gentlemen enters a nursing home whose daily rate is $300 per day. This means that he has a shortfall of $200 per day, or $6,000 per month! He receives $1000 per month in Social Security, meaning that he has to use his savings at the rate of $5000 per month, or $60,000 per year. This will pretty much wipe him out in less than a year.
So he diligently paid premiums over ten years on a policy which failed to achieve his goal of protecting this assets from the costs of long term care. As the Wall Street Journal article pointed out, good policies–meaning those from solid companies, with realistic coverage including inflation riders, etc–can be excellent investments. However, policies which fall short of these and other essential features can be a waste of money and provide a false sense of security.
So if you already have a long term care insurance policy, a “reality check” is in order. A good place to start is at the Genworth 2012 Cost of Care Survey, which provides statistics on the average cost of home care, assisted living, and nursing home costs in each of the 50 States. Though as the expression goes “your mileage may vary”, the Survey at least puts you in the ballpark of current reality of the cost of long term care.
If you find that there is a significant gap between what your policy pays and the cost of care in your area, don’t panic. Rather, consult with a trusted and competent long term care insurance professional or with an elder law attorney regarding your options. For even a long term care insurance policy that falls short of the current cost of care generally has a place in a comprehensive asset protection plan.
According to the Johnston Sun Rise, the event “aimed to give Medicare recipients an opportunity to learn about the common scams criminals use to obtain personal information, which often leads to identify theft.”
Among the tips shared at the event:
Medicare will never call you and ask for personal information over the phone, or send their officials to your door unannounced. Don’t ever disclose personal information over the phone – just hang up if someone tries to pressure you.
Treat your Medicare and Social Security cards as you would your credit card – keep your numbers private, and carry them only when needed. Only show them to your healthcare providers.
Always check your monthly Medicare statements for accuracy. Report any concerns immediately.
With almost 200,000 Medicare recipients in Rhode Island, these are messages that should be repeated widely and often.
Comments Off on RI Researcher Finds Only 1 in 3 Medicare Patients Die At Home
New research shows that one in three elderly Americans on Medicare passes away at home. This is not encouraging news, given that most seniors would prefer to die at home or the home of a loved one. But there is a positive development: the number of Medicare patients who died in hospital decreased from 32.6 percent in 2000 to 24.5 percent in 2009.
The results of a study led by Brown University professor Dr. Joan Teno were recently published in the Journal of the American Medical Association, and are both encouraging and discouraging. For example, the report stated that hospice use increased greatly from 2000 to 2009. On the downside, though, “In 2000, a Medicare patient who died was moved an average of two times in the last 90 days of life; by 2009, that average increased to three times.”
Dr. Teno “has devoted her career to understanding how to measure and improve the quality of frail, older and dying persons. She has led a statewide effort to improve pain management in nursing homes, for which she has received an award from the American Cancer Society.”
Comments Off on Rhode Island Strengthens Collection Efforts in Its Estate Recovery Program
New regulations regarding the estates of deceased Medicaid recipients make it even more important that clients do advance planning in order to minimize the impact of such estate recovery on their estate plans.
In an effort to strengthen collection efforts in its “estate recovery” program, the Rhode Island Office of Health and Human Services (OHHS) has recently finalized regulations prompted by a mandate contained in the FY 2013 budget enacted by the Rhode Island General Assembly in its last session.
OHHS was commendably inclusive its rule making process, involving meetings with stakeholders over the spring and summer of 2013 in which I was an active participant. The General Assembly’s action, and OHHS’ finalization of regulations make it clear that the State of Rhode Island is serious about recovering from the assets of deceased Medicaid recipients. See this notice from OHHS for more details.
Comments Off on Nursing Home Residents May Be Able to Retain Skilled Services Medicaid Benefits
As a result of a proposed settlement agreement reached in litigation, there appears to be clarification of the “improvement standard” as a prerequisite to a nursing home resident continuing to receive Medicare skilled nursing home benefits.
Once implemented, this will enable nursing home residents who have been discharged from a hospital and told that they can no longer receive Medicare benefits to continue to do so provided that they need skilled services, even to maintain level of functioning. According to Marsha Greenfield of LeadingAge,
“The settlement is expected to be approved by the court within the next few months, after a hearing to ensure that the settlement is fair to the plaintiffs. The final settlement is expected to certify a nationwide class of beneficiaries, estimated at 10,000, whose skilled nursing or home health services claims were denied by Medicare prior to Jan. 18, 2011, the filing date for the lawsuit.”