Fleming & Curti, P.L.C. - How Can You (Still) Plan For Your Long-Term Care Costs?

SEPTEMBER 10, 2007 VOLUME 15, NUMBER 11

How Can You (Still) Plan For Your Long-Term Care Costs?

You have probably heard or read that eligibility rules for assistance with long-term care costs were made considerably more restrictive early in 2006. What you may be having a harder time finding is solid information about what the changes mean for you, your family and your future.

The “Deficit Reduction Act of 2005” was actually adopted and became effective in February, 2006. The new law made changes across a number of government programs, but for long-term care purposes the most important changes were made to the eligibility rules for Medicaid. In Arizona the long-term care part of the state-run Medicaid program is called ALTCS (the Arizona Long Term Care System).

Because of the changes in federal law, ALTCS eligibility can now be denied for five years after a gift is made (Arizona has decided to ignore gifts of less than $500 in any month during that look-back period). The penalty for having made a gift within that five years: automatic ineligibility for a number of months, with the period not beginning until the applicant is (1) medically eligible for nursing home care, and (2) already out of money to pay for that care.

With that new approach to calculating ineligibility periods, one of the most effective planning techniques for securing government assistance with long-term care costs was eliminated. That doesn’t mean there is nothing to be done, however. Among the remaining options for those facing possible nursing care, whether at home or in a facility:

Long Term Care Insurance. Although it may seem expensive, most younger seniors (those in their mid-fifties, for example) should seriously consider such insurance. The average age of new policy purchasers is higher than it should be, and too few people purchase the coverage. Those already diagnosed with dementia or other illnesses increasing the likelihood of placement, and those already being considered for long-term care placement, will, not surprisingly, find that it is too late to purchase insurance at any price.

“Reverse” Gifting. The strategy is complicated, but in some cases it may be possible for a concerned senior to give away all of his or her assets, and rely on children or others to pay for care until the ineligibility period expires. Do not try this at home. The rules are complex and the possibilities for failure are myriad. You need professional assistance with the plan.

Annuities. In this context, we are not talking about the kind of annuities sold by insurance companies along with living trust packages, or by bank tellers trying to persuade depositors not to remove their certificates of deposit from the institution. Get good legal and insurance advice before embarking on this strategy, but it can help get eligibility established earlier, especially for married couples.

Your Home. Worried about losing your home, or about having the nursing home (or the government) take it away? While that concern is not completely far-fetched, it is far less likely than most people think. First of all, neither the government nor the nursing home can (or will try to) force sale of your home while you are in a nursing home or assisted living facility. Furthermore, if your spouse survives you neither the government nor the nursing home can or will try to "take" the home or even force its sale. Protection of the home is primarily a concern for single individuals who hope to leave the family homestead to their children, and even then there are often techniques to protect against the forced sale of the residence.

Early Transfers. Are you completely comfortable with your children owning all of your assets? Are you abolutely certain that they will not get divorced or sued, or have business setbacks, or change their view of what care you require? Are you pretty sure you won't need long-term care for at least five years? Are you prepared to gamble that the government rules won't change before those five years are over? If you are able to answer an unequivocal "yes" to every one of those questions, you could consider giving everything you own to your children right now. Ready to give it all away? We didn't think so—we aren't, either.

Different States. We are Arizona lawyers, and our thoughts reflect Arizona law and practice. If you live in another state, some or all of these ideas might still be available to you. Other options not available in Arizona might be perfect for you. You should seek advice from a qualified elder law attorney in your state. Don't know how to find one? Look to the National Academy of Elder Law Attorneys, the largest and most important national organization of practitioners in the field. A few of those practitioners, but only a few, have undergone a grueling certification process, including a one-day written examination, to secure the "Certified Elder Law Attorney" designation. Please do not try to get professional legal advice from non-lawyers with impressive-sounding credentials indicating that they are senior insurance counselors, or similar titles..

Do you want to know more about paying for long-term care costs? Look for our “white papers” on long-term care costs and insurance, or call for an appointment to review your personal circumstances. The "new" ALTCS/Medicaid rules continue to evolve, and there is no doubt that both federal and state governments are moving toward requiring people to use more of their own resources to pay for care before governmental assistance will be made available. That doesn't mean there is nothing to talk about, however, and the range of planning choices is still wide, with many highly individualized possibilities to consider.