Elder law is another aspect of estate planning, focusing primarily on the needs of families and individuals as they age. Today clients face a variety of complex challenges as they age. Many clients and their families struggle to pay for rising healthcare costs. Some suffer disabilities or worsening health. Some have difficulties finding the proper care and living arrangements for their loved ones. Many get lost navigating the government benefit programs, trying to understand housing options, or fall prey to bad advice from the internet or well-meaning friends or staff at residential facilities.
Elder law addresses all of these types of concerns for clients. As clients age, it is important to work with an attorney who can address your planning in all stages of life.
The Long Term Care Planning is for Everyone
A major part of elder law is planning for senior housing options and especially long-term care stays. As our population ages, families are confronted with the choice of where to live and how to make that medically and financially possible. A major study suggested that almost 70% of individuals 65 or older would need a long-term care stay at some point in their lives, so this is an issue that affects everyone and property planning is critical.[i]
In 2017, the national median cost for a private room in a skilled nursing facility was $97,455, or about $8,000 per month.[ii]
The average stay is slightly more than two years. When faced with this obstacle, clients, or their loved ones, are stuck paying for care and rapidly spend their hard-earned assets.
How to Pay for Care?
Clients often struggle to privately pay for care. However, with proper planning, clients have several options to ensure they get the care they need while preserving their savings for themselves and as a legacy for their loved ones.
Long-Term Care Insurance
Some clients purchase long-term care insurance to pay for or supplement the cost of their care. This insurance pays usually some fixed benefit amount per day for care until the policy limits are reached. Unfortunately, many companies that offered this insurance either no longer do because of the costs of long-term care or no longer exist for the same reason. Some clients also wait to purchase it and find they are either medically ineligible for insurance or it has become cost prohibitive. For these reasons, long-term care insurance is a useful tool to pay for care, but often serves as a supplement for payment as opposed to paying the entire costs.
Medicare vs. Medicaid
Before going further, it helps to describe the difference between Medicare and Medicaid as it is very easy to confuse the two. Medicare in an entitled federal healthcare insurance program which most people enroll in when they reach age 65. Because it is an entitlement program, clients do not need to be financially eligible for it. Medicare has multiple parts which pay for things like extended hospital stays, hospice and some nursing homes for a limited time.
Medicaid on the other hand is a program that provides benefits to eligible participants. It is a joint federal and state program used to in the case of nursing home benefits, participants must be medically and financially eligible. In Texas, Medicaid is administered by the Human and Human Services Department (HHS). Whereas Medicare pays for limited long-term care, Medicaid pays for extensive long-term care and is the primary government benefit for nursing home care. The financial requirements for Medicaid are very strict, so in order to utilize benefits, clients must carefully follow the financial guidelines and properly plan.
Medicaid and Veterans Benefits
Many clients seek government benefits to help pay for long-term care. In these cases, the main option is Medicaid, and for some clients, Veterans benefits.
Medicaid Benefits: The “Maze”
Medicaid on the whole has myriad benefits ranging from low-income consumers to disabled children. For elder law purposes, Medicaid is the main benefit for the elderly and disabled as they explore whether and how to live in their home, assisted living and skilled nursing. In Texas, the elderly primarily utilize home care programs and nursing home care.
Home Care Programs
Medicaid has some care programs for individuals who live in their homes, and in very limited circumstances, assisted living, Home Care programs. These benefits generally have the same asset and income requirements as other Medicaid programs, but medical and personal requirements and program benefits very greatly. Most importantly, not all are guaranteed services and some have lengthy waiting lists that could be several months. However, these benefits may help those who need minimal assistance or as a stop gap to intensive care. It is important to consider this planning early and get onto the waiting list to ensure the benefit is available when needed.
Nursing Home Benefits
The major Medicaid benefit for clients is nursing home benefits because of its comprehensiveness and because of how costly nursing homes are. This benefits pays the nursing bill directly as well as for related services. To be eligible, clients have to meet health requirements and very strict financial requirements. The value of a single applicant’s total non-exempt assets cannot exceed a maximum of $2,000. Although such assets as one vehicle and a residence (up to a certain equity value in some cases) are exempt, this provides for very little money for the applicant, especially if they use Medicaid, and then return home after their health improves with no way to support themselves. For married couples, the non-applicant spouse can keep ½ of the countable community assets up to a value of $123,420. There are also income limits as restrictive as $2,313 per month for single applicants.
Despite these very rigid restrictions, it is important not to lose hope! This is only a brief overview of a few Medicaid rules, and it is important to have competent professionals guide you through the maze. Even if you don’t think this program is for you based upon these guidelines it is important to discuss with us. Through proper estate planning you can position your income and assets so that you will be Medicaid eligible while retained the maximum income and assets protected by law.
Veterans with qualifying service have access to many benefits based upon financial eligibility, medical eligibility and whether they are disabled based upon service history. For elder law purposes, many veterans have access to benefits for assisted living and to help pay for medical care if they met income and total asset guidelines. As of 2019 and depending on the exact program used, a single veteran with no dependents must have either less than $16,540 or $22,577 in annual income as well as have total net worth of less than $123,600. Obviously these are very strict guidelines but can be very useful to clients, especially for assisted living care where Medicaid is unavailable.
The Dreaded “Look Back”
Clients often ask about the “look back” or the “five years” associated with these benefits. They often hear of it as a horror story of failed planning. The “look back” occurs when you apply for Medicaid nursing home benefits. HHS “looks back” at all of the applicant’s financial transactions for the prior five years to determine whether any of the transfers were not for full value. Essentially, the rule is designed to prevent people from gifting what they own right before using government assistance, although there are some exceptions, such as permitting gifts to spouses. There is a three year look back for Veterans benefits. Many times clients wait too long to plan for this care and find they have made gifts within the look back period which affect eligibility. Even if that is the case, clients can still use benefits, but might have to wait before they do. In these situations, they are assessed a penalty period during which they have to private pay before Medicaid benefits will begin. For example, if a client gives away $5,000 to his daughter one year before applying for Medicaid, the gift is subject to the five year look back. The applicant’s gift of $5,000 is divided by $172.65, which is the transfer of assets penalty per day as published by the Texas Department of Health and Human services. This applicant would lose eligibility for 29 days starting on the first day of the month of eligibility, meaning they would have to private pay for about one month before benefits will begin. There are other strategies that can used to cure or avoid these issues, but the best strategy of all is to plan ahead to avoid making these mistakes.
Medicaid Estate Recovery
Many clients don’t pursue this type of planning because they think “the nursing home takes it all anyway.” In fact, the purpose of this planning is to utilize benefits exactly so that doesn’t happen.
When clients say this they really are thinking of Medicaid estate recovery. Federal law requires states to try to recover the money they provide individuals who use long-term benefits by making a creditor claim against their estate when they die.
For example, if an unmarried individual utilizes Medicaid benefits during their life time in the amount of $135,000, HHS will make a claim against the estate for that amount. If the decedent owned a home, that home may need to be sold to satisfy that claim. The family will lose the benefit of the home. With property planning, these scenarios can be avoided and estate recovery can be limited to protect your assets for your family.
If a client doesn’t plan until immediately before they go into a nursing home, they have to begin what is called “crisis planning.” At this point, clients often have to take quick steps to adjust their assets or income in order to become eligible for benefits. Due to the look back rules, a client’s options may be limited and will likely have to private pay until all of the planning for benefits can be implemented. In these situations, clients can still become eligible for benefits, but will often waste assets that otherwise could have been preserved. The key point is that if you or an elderly loved one needs medical care immediately it’s not too late to act! You may not be able to preserve all of your assets, but you can still obtain benefits with proper counsel.
So What to Do?
As you know by now, the key to elder law is plan ahead! Many clients believe they will never face a long-term care stay, but statistics show that isn’t true. If you wait until you or a loved one needs long-term care benefits, you lose the benefit of planning, and the cost of not planning of ahead far exceeds the cost of doing it right. By addressing these concerns in your estate planning we can help preserve your assets so that if you need long-term care assistance you have options to pay for it instead of wasting the legacy you built for yourself and your family.
Call Galligan & Manning today to schedule an appointment to ensure you and your family are protected.