Many people who own a life insurance policy are not familiar with the process that allows you to convert that policy into a long-term care benefit plan. This conversion process transfers ownership of the life insurance policy from the owner to an entity that acts as a benefits administrator. Since the owner no longer holds the policy in his or her name, the asset will not count against this person for the purposes of Medicaid qualification.
The new benefits administrator will assume the responsibility of paying the monthly premiums on the policy and then pay the previous policyholder a series of monthly payments based on the value of the policy. These payments may be used to pay for long-term care such as nursing home bills or hospice care.
For example, if you have an aging parent who has dementia and can no longer live in the home, the life insurance policy owned by that aging parent may be converted into a long-term care benefit plan that pays a certain amount monthly towards the cost of assisted living in a memory care unit. It is also possible to have a lump sum set aside from the policy to cover future funeral expenses.
The advantage of doing this conversion is that you are no longer paying monthly premiums and the payouts received do not count against the individual seeking to qualify for Medicaid coverage in the near future. A long-term care benefit plan is recognized by Medicaid as an acceptable spend-down during the five-year look-back period. Also, the payments received from a long-term care benefit plan can be used to pay for any kind of care-- in-home care, assisted living fees and hospice care.
The disadvantage would be that you must have an immediate need for some form of acceptable long-term care because the monthly payments are made directly to the long-term care provider not the individual who previously owned the policy.
If you are interested in evaluating your current life insurance policy to determine if this conversion to a long-term care benefit plan would be the best plan of action, contact Stouffer Legal in the Greater Baltimore area for a consultation with one of the experienced Elder Law attorneys.
Aging is the sign of a successful life. After all, when you think about the alternative to aging your perspective about getting older shifts. You should start seeking self-sufficiency for your retirement years well before the age of sixty-five. But, even if you have not done so, don’t shun the planning stages. You need to address planning no matter what your age. Some preparation is better than none at all. It can provide you with some peace of mind and can take pressure off of family members who would have to make their own income adjustments to be able to provide money to support your cost of living. No one wants to become a burden to their children or otherwise extended family. It feels good to be able to provide for oneself (and one’s spouse) no matter how lavishly or modestly. It is a relief to know that you have solid plans as well as contingency plans for the future. Although it can be hard work and tough to realize how much it will take to cover your future living expenses, putting off the planning stage does not lead to easier or better outcomes.
First of all, consider your location. Many seniors prefer the idea of living out their lives in their own home but there is much to consider about that approach. Are you close to family members or someone willing to help drive you to doctor appointments and grocery stores when you are no longer able? Can your home accommodate a wheel chair; is there a bedroom on the first floor or is there a way to get up and down the stairs? How expensive are the property taxes in your area? How mild is the weather? If you want to go to a retirement community, what locations are most affordable as well as most desirable? How would you transition to less independent living over time?
Once you know your location goals, do some worst-case planning. Adverse health and unforeseen life events can ravage your finances unless you are already managing a sizeable sum of assets or have incorporated proper planning. You might look for advice as to how to turn a nest egg into retirement income, or how to add to your long-term insurance care, or to establish some long-term insurance care. Think particularly about in-home care should your goal be to stay in your own home as you age.
You need to know if your state has approved the Long-Term Care Partnership Program, a joint federal-state policy initiative to encourage the purchase of private long-term care insurance. A professional can explain to you how it can protect some of your assets if you would require extensive care in the future, for instance for Alzheimer’s disease, which could potentially exhaust your private insurance policy benefits and require you to apply for Medicaid. A professional can also advise you if there are any federal or state tax incentives available to you for long-term care partnership insurance. You can also discuss implementing some additional life insurance that can remain in force until you are eighty. It can help a spouse with extra money should something happen to you. In the meantime, both of you could sleep better at night knowing the insurance policy is in place. The point is, you need to examine some potential worst case expenditure scenarios and how you would be able to meet the needs of your care should the moment arise.
Your aging is a success story. Embrace how you prepare for your senior years no matter what your age is, and the sooner the better! Retirement requires careful thought, planning and decision making for the best outcome possible for you and your loved ones.
Contact our office today and schedule an appointment to discuss how we can help you with your planning.
As you get older, qualifying for life insurance policies can become increasingly difficult and they also become more expensive. With that being said, there are still several options available for seniors. Let's look at the differences between these four different types of life insurance options to help you identify the right type of policy for you or your elderly loved one:
For more information on long-term care planning, estate planning or other Elder Law issues please contact Stouffer Legal in the Greater Baltimore area.
LIVE Webinar – Click Here to Register for October 27th at 6pm
How to Protect your "Stuff" in 3 Easy Steps (Estate Planning Workshop)
This webinar covers frequently asked questions and common misconceptions regarding: Wills & Trust, Asset Protection, Nursing Home Issues, Medicaid Qualification, and Estate Taxes.
Please click to register for our webinar:
LIVE Webinar – Click Here to Register for October 27th at 6pm
Our webinars are designed to be educational, interactive, informative and generate relevant discussion for attendees. Modern Estate Planning is more than just preparing a will and putting it in a safe. Find out how a comprehensive Estate Plan will protect your assets and your family. Our experienced attorney, Wilson McManus, will be sharing stories on how Estate Planning is beneficial and sometimes crucial. In an Estate Plan, you need to know the Rules: Who's "Rule-book" controls your Estate Plan? Yours? The Governments? Someone else? You need to know your Predators: Who's a Threat to Your Stuff? The Government? Long-term Care Costs? Your Family? You need to know your Options: What Plans are out there? Does a Will work? What about a Trust? Which kind of Trust?
Please click to register for our webinar:
LIVE Webinar – Click Here to Register for October 27th at 6pm
Our workshops fill up fast, so please call (443) 470-3599 today to RSVP.
Whether dealing with a trust or administering a will after a loved one has passed away, there are times when an executor or trustee may be inclined to liquidate assets and distribute cash to beneficiaries rather than transfer real property, stocks or other investment holdings. It is in the discretion of the trustee or executor to make this decision as long as they are able to get close to fair market value for the assets. The exception to this would be that there are specific restrictions imposed by the language in the will or the trust document.
It often makes sense to liquidate these types of holdings and distribute cash, especially in respect to real estate. Owning real estate jointly as a group of beneficiaries would require all of the beneficiaries to manage it together and that could become overly complicated. Liquidating assets during the administering of a will is often thought to be the simpler approach.
While the executor or trustee can sell property without getting all of the beneficiaries to approve; it is wise to consult with all heirs/beneficiaries and make decisions consistent with their wishes if possible.
To take it a step further, it is best practice, although not required, for the trustee/executor to advise all beneficiaries of the price for which the asset is being sold and confirm in writing that the beneficiaries are comfortable with that price. This avoids a future lawsuit alleging the trustee or executor “sold it under market value.” So does the trustee have the final say? Yes. But should the trustee sell the property without all beneficiaries approving? Not really because of the additional risk.
Getting a release from beneficiaries is especially crucial when the transaction in question involves the trustee personally. This may be the case when the transaction is between the estate and the trustee or the trustee derives some sort of benefit from the transaction. Transferring assets to yourself often triggers further inquiry from beneficiaries, so it is important to be transparent. It is important to demonstrate the trustee or executor fulfilled the fiduciary responsibilities to the beneficiaries.
The best release comes with an informal accounting, which provides a summary of what property went into the trust or estate inventory, what the expenses were, and what is the share for each beneficiary.
For more information dealing with selling property through estate administration or from a trust, contact the experienced estate planning attorneys at Stouffer Legal in the Greater Baltimore area.
This is definitely a year that will go down in history books for many reasons, especially the pandemic of covid-19. It is also an election year and if current projections ring true there could be a democratic sweep take place in November. If that happens there are some estate planning and tax issues that may need to be considered before the end of 2020.
Keeping in mind that historically the U.S. President and the makeup of Congress show very little bearing on the long-term returns of the capital markets. With that said, a democratic sweep will likely include significant policy changes that will impact estate planning and taxes. Let's take a look at a few opportunities that you may want to consider taking advantage of this year should this occur:
- Section 529 college saving plans allow annual gifts to be front-loaded for the equivalent of 5 years ($75,000 individually or $150,000 per couple). With escalating college costs, this kind of gift could be very beneficial for children or grandchildren who one day hope to pursue a college education.
- As we have discussed before, estate tax exemption thresholds have been relatively high for the last few years and were set to remain that way until 2025. A democratic sweep would likely change that so it may be a good time to maximize these exemption thresholds by the end of 2020. The exemption amount is currently $11,580,000 per individual and $23,160,000 per couple. We could see these amounts shrink considerably and sooner rather than later.
- Take advantage of low IRS lending rates and use intra-family loans as a tax efficient way to transfer wealth.
- Continue to take advantage of the $15,000 per year per person non-taxable gift to beneficiaries. Currently, you can still give an unlimited amount directly to healthcare or educational institutions on behalf of someone else.
- Take advantage of the low interest rate to establish trusts that will benefit beneficiaries or charitable organizations known as GRATs and CLATs.
Discuss any of these strategies with a knowledgeable estate planning attorney. Contact Stouffer Legal in the Greater Baltimore area to set up a consultation to discuss what you may need to do to take advantage of these types of strategies before the end of 2020.
As we age, simple things we took for granted as kids become more difficult -- and more expensive. That’s a truth all of us know. What you may not realize is that the aging middle class will face unique difficulties going forward. The private market offers options for assisted living, but at a price too high for the middle class; and those same people often have too much to qualify for Medicaid or subsidized housing. See Health Affairs article on the same.
Moreover, the adults stuck in this bind have fewer assets to fill the gap. They have more debt and less savings, are less likely to receive pensions, and are likely have smaller families to turn to for support as they age.
So what will fill the gap in the coming decade as more and more seniors require, but cannot afford, long-term care?
The government could seek to incentivize the private market by expanding tax credits to developers of low-income senior housing, as a New York Times article suggests. The United States, like many Western democracies, could turn to public programs to fund long-term care, or shift the boundaries of Medicaid to cover seniors above the current cut-off line, or to cover costs like housing instead of just health care. Given the increasing pressure on Medicaid and the difficulty of accruing political capital for such hot-button issues, those expansions seem unlikely.
Will the private market respond to demand, and start offering lower-cost options on its own? Long-term care insurance (LTCI) may be an avenue for growth, as discussed in this Commonwealth Fund article. Private LTCI options have become increasingly popular since their emergence in the 1970s, and despite some flaws, from underwriting and actuarial uncertainties to inflexible designs, LTCIs are overall a sound investment.
Planning for the possibility of needing long term care in the future is something we can assist with. We can also provide guidance in how that care will be paid for, without sacrificing all of your savings. If you are interested in discussing an asset protection plan that focuses on long term care, please give us a call.
An elder care plan is an organizational tool that compiles daily to-do lists, medical appointments, caregiver schedules and other vital information for ensuring that a senior has the necessary assistance for proper care and daily living.
Assess the Current Situation
Step one in the process of creating a senior care plan is to review the senior’s home environment, activities of daily living, health status and financial situation. While assessing the situation you will want to gather information and notice any gaps in care, areas that need to be addressed and list out step-by-step all daily activities needed.
You may come across some resistance from the elderly person who may see this as an intrusion into his or her personal life, but it is very important to think through every step of the daily routine. As part of the process you can also identify areas where the senior is still self-sufficient and incorporate independence in the care plan.
Set Goals
The second step in the process is to identify what objectives should be achieved with the care plan. After reviewing the assessment, make a list of all the shortcomings or concerns discovered and rank them by highest priority to resolve. Goals can be categorized by the following:
Health Objectives
Safer Living Environment
Caregiver Tasks
Financial Planning
Long-term Care Planning
Estate Planning
Funeral Planning
Create Your Care Team
The final step in this process is to assemble a care team that will help you reach the goals set. Enlisting family, friends, neighbors or volunteers in the community to assist with the senior’s day-to-day needs and personal care may be options. It may be necessary to hire a professional caregiver or apply to a long-term care facility depending upon the senior’s needs discovered. You will also need to include on the team benefits counselors, financial advisors and an experienced Elder Law attorney. For more information in creating a senior care plan, contact the Elder Law attorneys at Stouffer Legal in the Greater Baltimore area.
LIVE Webinar – Click Here to Register for October 21st at 10AM
How to Protect your "Stuff" in 3 Easy Steps (Estate Planning Workshop)
This webinar covers frequently asked questions and common misconceptions regarding: Wills & Trust, Asset Protection, Nursing Home Issues, Medicaid Qualification, and Estate Taxes.
Please click to register for our webinar:
LIVE Webinar – Click Here to Register for October 21st at 10AM
Our webinars are designed to be educational, interactive, informative and generate relevant discussion for attendees. Modern Estate Planning is more than just preparing a will and putting it in a safe. Find out how a comprehensive Estate Plan will protect your assets and your family. Our experienced attorney, Wilson McManus, will be sharing stories on how Estate Planning is beneficial and sometimes crucial. In an Estate Plan, you need to know the Rules: Who's "Rule-book" controls your Estate Plan? Yours? The Governments? Someone else? You need to know your Predators: Who's a Threat to Your Stuff? The Government? Long-term Care Costs? Your Family? You need to know your Options: What Plans are out there? Does a Will work? What about a Trust? Which kind of Trust?
Please click to register for our webinar:
LIVE Webinar – Click Here to Register for October 21st at 10AM
Our workshops fill up fast, so please call (443) 470-3599 today to RSVP.
There are many planning techniques that can benefit individuals seeking to find long-term care while also protecting a family home so it may be passed down to the next generation. The key is to plan ahead. Medicaid has a five-year look-back period where assets transferred during that window may be recaptured. The five-year period that precedes the date of your application for Medicaid is the time frame referred to as the look-back period.
In order for a patient to receive Medicaid assistance while in a nursing home they need only contribute to Medicaid the amount of their social security and other income. Medicaid will pick up the balance of the nursing home bill. The issue though is that upon the death of the patient, the state wants to be reimbursed for the entire amount it paid to the nursing home on their behalf. Effectively the government has made an interest-free loan and seeks repayment after death.
This can be very problematic if there is a home that the next generation wants to keep in the family. The elderly homeowner can still qualify for Medicaid since the home is considered exempt from being counted towards the assets considered on the Medicaid application. In order to qualify for Medicaid, a person can only have $2,000 of countable assets. The primary residence, regardless of value, is exempt and will not be counted. But as we mentioned before after the elderly person dies, the state will seek reimbursement from the deceased’s probate estate.
One asset protection strategy is to create a Life Estate Deed in which the owner retains a life estate and deeds the remainder interest to designated beneficiaries. This allows the senior to continue to own the house as long as he or she is alive and only at death will the heir(s) come into possession of the house. Since the ownership passes automatically to the beneficiaries it will not be probated so the state will not make a claim against the house. As the owner of a life estate, the individual continues to have full control over the property although it cannot be sold without the beneficiaries’ consent.
With this strategy, you still have to consider the five-year look-back. The signing of this deed will result in the senior making a gift to the beneficiary of the remainder interest in the house. An experienced Maryland probate attorney can help you calculate the amount of that remainder interest based on a pre-determined formula. If you are looking for a strategy to save a family home while still helping an elderly family member qualify for Medicaid, contact the attorneys at Stouffer Legal in the Greater Baltimore area.
