Total Counsel Law Group

Is There a Market for My Long-Term Care Insurance Policy?

“Some people have life insurance policies that have long-term care riders that allow them to access up to the death benefit for long-term care needs. These might be able to be sold through a life settlement.”

There is a market to sell life insurance through what is known as a life settlement. However, there’s no such market for long-term care policies.

A life settlement is the sale of a life insurance policy to a third party. Usually the owner of the policy receives an amount that’s valued at more than the policy's cash surrender value, but less than its face value or death benefit.

nj.com’s recent article asks, “Can I sell my long-term care insurance policy?” The article explains that HMOs typically don’t include the costs of long-term care or skilled nursing care.

However, some people purchase life insurance policies that contain long-term care riders. This type of policy lets the owner tap into the death benefit for long-term care needs. The policy owner may be able to sell this insurance through a life settlement.

When contemplating the sale of your life insurance policy, you should be certain that you don’t need the life insurance for legacy, estate planning needs or income needs.

Remember that HMOs don’t cover any potential needs for skilled nursing care. A person who moves along the continuum of care to an assisted living facility will need the long-term care insurance.

Be sure to look over the policy details. Long-term care insurance policies, once they’re employed, usually no longer require you to pay the premium.

According to the Genworth Cost of Care annual report, the costs for assisted living facilities in New Jersey, for example, can average over $6,000 a month, while nursing homes average $10,600 per month. This is a significant ongoing expense.

Only a long-term care insurance policy is going to cover the skilled assistance a person will need when she’s not able to do daily living activities, like bathing, toileting, transferring, eating, continence and getting dressed.

Medicare will only pay for up to 100 days in a skilled facility after a hospital stay.

Reference: nj.com (May 21, 2019) “Can I sell my long-term care insurance policy?”

Should I Leave an Inheritance to My Kids?

“Deciding whether to leave an inheritance for your children impacts the amount you save, the retirement plans you choose and how you take qualified retirement plan distributions. However, beyond your desire to leave some wealth to your children (or not), there are some essential personal financial issues to consider.”

Some retirees make a big mistake and give their retirement savings away without considering their own income needs. Before you make gifts to others, take a look at how much to spend on yourself. Determine how much you need to save and how much you can withdraw each year, when you retire.

Investopedia’s article, “Challenges in Leaving Inheritance to Children,” says to consider the effect of inflation and taxes and maintain a diversified portfolio of growth and income investments to help your portfolio keep pace with inflation.

The biggest unknowns with retirement income and children's inheritance are unexpected illness and high healthcare costs. Government programs are frequently not helpful in paying for nursing homes and other forms of long-term medical care. Medicare covers nursing home stays for a very limited period. Medicaid mandates that you spend nearly all of your own money, before it will pay for long-term care. You can’t just move assets to family members to qualify for Medicaid, because the program restricts benefits, if asset transfers were made within five years prior to applying for Medicaid. The rules are tricky, when it comes to eligibility.

You can protect your assets from the costs of catastrophic illness with a long-term care insurance policy. However, these policies can be very expensive and have coverage limitations. Consider them carefully.

What happens if you outlive your retirement funds? With longer life expectancies, it's crucial to try to manage retirement-plan withdrawals, so you do not deplete all of your assets during your lifetime.

You could purchase an immediate annuity with some retirement money to ensure a guaranteed amount, for at least as long as you live. Some pension and retirement plans may allow you to stretch payments over single or joint life expectancies, rather than receive the proceeds as a lump sum.

If you expect to inherit assets from your parents, you may be in a better position financially than someone who doesn’t expect to receive an inheritance. Note that certain inherited assets, like stocks and mutual funds, are eligible for a favorable tax treatment called a step-up in basis. If you are leaving assets to others, this could mean significant savings for heirs.

You may also want to set up a trust to control distributions from the estate to the surviving spouse and children. If you or your spouse have children from previous relationships but don't have a prenuptial agreement, trusts can ensure that specific assets are passed to designated children.

You may share your wealth with others by gifting assets, creating a trust, deferring income or purchasing life insurance or tax-deferred variable annuities.

Talk to an estate planning attorney to determine the best options for your circumstances.

Reference: Investopedia (November 26, 2018) “Challenges in Leaving Inheritance to Children”

Taking Care of an Elderly Parent Can be a Full-time Undertaking

“Each year over 43 million Americans provide unpaid care to a family member, usually a parent.”

Adult children who care for an elderly parent will typically be asked to oversee and provide medical care and finances. However, sometimes the caregiving goes far beyond this.  As a result, many adult children caregivers fail to think about the financial impact that this can have on their own monthly budgets and retirement funds.

MarketWatch’s article, “Read this before becoming your parents’ caregiver,” reports that, in many instances, the adult child caregiver is still able to maintain a full career and family life. However, in certain situations, the family member who’s assumed the role of a full-time caregiver must reduce his or her work hours or forego a promotion because of the time commitment. In the majority of situations, we see adult children answer the call of caregiving in a crisis when there’s an imminent need. A short-term assignment can be doable for a professional with his or her other family and personal responsibilities, but when the duties last longer, he or she will realize there isn’t enough time or resources to do it all.

A caregiver needs to take the actions necessary to help without putting his or her own family’s financial future at issue. When there are siblings and other family members involved, it is necessary to communicate realistic expectations of what areas of care are needed, responsibilities, time commitments and whether there will be any financial compensation.

A Personal Care Agreement can be a good guideline.  It will help to detail which individuals are responsible for various aspects of care, the amount of time required and any compensation. The biggest question that people have about this agreement, is how to get paid to be a family caregiver.

A Personal Care Agreement can give an adult child caregiver the peace of mind and security that he or she won’t suffer undue financial consequences, as well as provide clear details for other family members as to the expectations when assuming these important caregiving responsibilities.

This agreement can help avoid some of the misunderstandings that can occur when many siblings and loved ones are trying to help (or fail to pitch in). It also can protect a family member who is losing his or her own income and time to provide caregiving. This is because reduced hours or an exit from the workforce to care for a loved one, can have a major personal financial impact. In addition, the time for a personal and immediate family life with one’s own spouse and children can nearly evaporate with caregiving demands.

You can work with an Elder Law attorney to draft a Personal Care Agreement. Having an attorney review your Personal Care Agreement can even help to confirm that care payments were a legitimate and necessary expense, rather than a way to conceal assets from Medicaid.

For more information, please visit our website at www.totalcounselor.com

Reference: MarketWatch (February 22, 2017) “Read this before becoming your parents’ caregiver”

It May Not Be Crazy to Say No to an Inheritance

“Sometimes a bequest can create more problems for beneficiaries than it solves.”

Your wildest dreams are coming true—a distant relative has died and named you in the will. However, once you consider the bequest, you decide to turn it down.

Have you lost your mind?

The Street’s article, “Why You Might Want to Refuse That Inheritance,” says, “Not necessarily.”

There are several reasons for an heir to disclaim or say “no” to an inheritance. In many cases, it’s to redirect the money within the family to a more tax-efficient recipient. For instance, a gift might bump your own estate over the federal estate tax limit of $5.45 million for an individual or $10.9 million for a couple. When you reach this threshold, estates are hit with a 40% tax. If a named beneficiary would expect to incur estate taxes on his or her death, a smart move would be to save on taxes and disclaim an inheritance to a child with a smaller estate.

Another use of disclaiming is to redirect assets to a member of the family who needs the money more than the original beneficiary. Children who are financially secure may want to disclaim assets they were to receive in a parent’s will to allow those assets to help support a surviving parent. When a person passes away without a will in many states, half the estate goes to the surviving spouse and half to children—but that may leave the surviving spouse short on funds. As a result, when it is time to settle the estate, a child can use a disclaimer to return a portion to the surviving parent.

In addition to disclaiming by wealthy families to reduce estate taxes, less-affluent families may also see its application when a beneficiary has creditors who might try to claim inherited assets. It may be smart to direct those assets elsewhere.

This can also help elderly family members who need nursing home care that Medicare doesn’t cover. Medicaid pays for long-term care—but only when recipients have exhausted all of their own assets. One idea is to spend down a nursing home resident’s assets so he or she can qualify for Medicaid. In addition, claiming an inheritance may delay the timing of when Medicaid starts paying for long-term care. Disclaiming could protect an inheritance from being consumed by nursing costs and keep it in the family. However, disclaiming may not always be possible—if an heir is already on Medicaid, the state-run health program might contest an attempt to disclaim an inheritance that—if claimed—would make the individual ineligible for Medicaid.

There’s a time limit: disclaimers have nine months after death to disclaim the inheritance; however, they can’t have benefited from the assets in that time. The beneficiary must notify the estate executor in writing about the intent to disclaim via registered or certified mail. Be sure that disclaiming your inheritance is what you want to do because there’s no do-over.

For more information on Estate Planning and Inheritance please visit our website here

Reference: The Street (August 30, 2016) “Why You Might Want to Refuse That Inheritance”

“SNF” Doesn’t Stand for “Sunday Night Football” When Talking About Medicaid and Medicare

“As the mythical movie boxer, Rocky Balboa, reminded us, ‘Time takes everybody out, time’s undefeated.’”

Can you believe the average cost for a one-bedroom unit in an assisted living facility is nearly $42,000 a year in our country?

These long-term-care costs could knock even Rocky out of the ring.

With many Americans hitting retirement age, they may be concerned about how to plan for future financial needs. While there’s a lot of literature available about retirement saving, many seniors don’t accurately measure the significant cost of post-retirement medical care. They simply expect Medicare to cover the costs. However, Medicare is very strict as to the types of long-term care it covers. The program only covers stays in skilled nursing facilities and hospice care under certain strict circumstances.

The Deseret News recently published the article, “How to cover the cost of long-term care,” which reported that for skilled nursing facility (“SNF”) coverage a beneficiary is required to be admitted to a hospital for at least three days, then discharged with a condition that requires skilled nursing level care.

Medicare will cover all of the expense for the first 20 days of the stay. The program then charges a $161 co-pay for every day up to 100 days. Once a patient reaches 100 days, he or she must cover the entire cost after the initially covered 100 days. But if he or she is out of an SNF for more than 60 days, the coverage resets and they can be admitted for another 100 days after a three-day hospital admission. Simple, right?

Medicare covers most types of hospice coverage when a patient has received a terminal illness diagnosis and is not projected to live more than six months. This will encompass the patient’s medication, support services, and services such as grief counseling. Medicare will also pay for short-term hospital stays and inpatient care for caregiver respite. In addition to Medicare, the federal government also provides some coverage through Veterans Affairs (VA). But unlike Medicare and the VA, Medicaid can assist those seniors who qualify with most types of long-term care.

Medicaid is administered by the states, so the benefits and eligibility will vary. However, most of these programs are given incentives for administering alternative programs that let seniors stay at home or with a family member. If the beneficiary qualifies, family members providing their care may be certified as providers and reimbursed for their efforts by Medicaid.

One option for the proactive is purchasing long-term care insurance to cover the costs. However, if that coverage is too expensive because you’re late in buying a policy or you have pre-existing health issues, you should look at other options like Medicaid. If you go that route, you may need to transfer assets and income to trusts or family members. Speak with a competent elder law attorney before you make any moves.

Without a doubt, long-term medical care costs may be an issue for many in retirement. Start to plan early so you’re prepared.

For more information on Elder Law and Elder Care please visit our website here

Reference: Deseret News (Sept. 27, 2016) “How to cover the cost of long-term care”

Medicare’s Observation Status Can Have You Seeing Extra Dollar Signs

“You are in the hospital for tests after experiencing dizziness. You are nervous about what the tests will show, but at least you do not have to worry about hospital bills–you have Medicare, so you can relax about healthcare coverage. Or can you?”

If you’re in the hospital under “observation status,” which is a Medicare designation applied to patients deemed insufficiently ill for formal admission, but still too sick to be allowed to go home, you need to take note. Observation status can mean thousands of dollars in higher costs, particularly if you require post-hospital nursing care.

As Money’s article “The Medicare Quirk That Can Cost You Thousands” explains, Medicare covers care in skilled nursing facilities. Unfortunately, that’s only for patients who are first admitted to a hospital for three consecutive days.

Hospitals have applied this status to avoid costly penalties from Medicare for improper admissions. The number of Medicare patients classified as under observation has skyrocketed and has created pushback from Medicare enrollees and advocacy groups.

A new law, “the Notice Act,” requires hospitals to notify patients if they stay in the hospital more than 24 hours without being formally admitted. Patients will begin to get this notice beginning in January 2017. Moreover, hospitals will be required to inform patients verbally and in writing if they are on observation status for more than 24 hours.

The written notification is called the Medicare Outpatient Observation Notice (“MOON”), and also explains the cost implications of receiving hospital services as an outpatient.

The costs of observation status can impact any enrollee on traditional fee-for-service Medicare. The program typically covers up to a maximum of 100 days of care in a skilled nursing facility following a hospital admission. It will pay 100% for the first 20 days; patients are responsible for a daily $161 co-pay for the next 80 days. However, patients who leave the hospital for a nursing facility after an observation will pay the full cost out of pocket. And skilled nursing care costs are substantial and continue to rise.

Observation status also has an impact on the coverage of drug usage in the hospital. Medicare Part B would cover drug usage for the specific problem related to the hospitalization, subject to the Part B 20% co-pay. For routine drugs taken at home, the practices vary. Some hospitals let patients bring their own drugs from home, others don’t, and charge much more than you’d pay at your pharmacy.

A broader solution to the observation status has had a lot of support, and bipartisan legislation was introduced in the U.S. House and Senate that would require time spent in observation to be counted towards meeting the three-day prior inpatient stay necessary to qualify for Medicare coverage. The bill counts the time in hospital, no matter what. If you are in the hospital for three midnights, you’ve met the requirement.

For more information on Medicare and Elder Care please visit our website here

Reference: Money (September 29, 2016) “The Medicare Quirk That Can Cost You Thousands”