Alternatives to Medicaid – A Short Primer on Long-Term Care Insurance – Annapolis and Towson Estate Planning

Medicaid is a state-run program that caters to those surviving on less than 125% of the official poverty level. Many elderly individuals forego purchasing long-term care insurance, in favor of relying on Medicaid to cover their expenses. Unfortunately, after bankrupting themselves to qualify for Medicaid nursing home coverage, many of these same individuals find themselves dismayed at the lack of choice and care options.

Qualifying for Medicaid Long-Term Care

To obtain long-term care benefits through Medicaid, you must meet the income and asset requirements. In addition, you must be unable to perform at least two of the following six activities of daily living:

  • Feeding
  • Bathing
  • Walking
  • Transferring
  • Toilet Use
  • Dressing

If you qualify, you may be able to get all or most of your care covered, but you don’t have as many options when it comes to choice of facility. Medicaid also doesn’t typically cover adult daycare, assisted living, respite care, or in-home care.

Alternatives for Medicaid Long-Term Care – Not Medicare

With Medicare covering about 1/5th of nursing home care in the U.S., elderly individuals are forced to look at alternative means to cover skilled nursing and other long-term care needs. As it stands, Medicare Part A covers up to 100 days of skilled nursing care. Requirements to qualify are stringent, and few people have the time or understanding to correctly navigate the Medicare system.

Long-Term Care Insurance

If you’re insurable and can afford the premiums, long-term care insurance may be the best option for your long-term care needs. Coverage will vary based on your insurance company and plan options. Be sure to get coverage for all you anticipate you’ll need.

In 2019, the average cost of a semi-private room in a nursing home was $7,513 per month. Private rooms average over $8,000 per month. Even if you don’t anticipate needing that level of care, you should be aware that a one-bedroom apartment in an assisted-living facility costs over $4,000 a month. With inflation, this will likely increase. You don’t want to come up short on coverage.

If long-term care insurance is an option for you, be sure to start planning early. Insurance companies are known to reject more applicants, the older they get. Review your plans each year to ensure your policy still meets your anticipated needs. Make changes if necessary, and never stop paying your premiums, unless you want your insurance to lapse.

Resources:

ElderLawAnswers. “Alternatives to Medicaid: A Long-Term Care Insurance Primer” (Accessed November 28, 2019)  https://www.elderlawanswers.com/elder-law-guides/5/a-long-term-care-insurance-primer

Investopedia. “Medicaid vs. Long-Term Care Insurance: What to Know” (Accessed November 28, 2019)  https://www.investopedia.com/articles/05/031005.asp

Investopedia. “Strategies to Help Pay for Eldercare” (Accessed November 28, 2019)  https://www.investopedia.com/articles/personal-finance/102014/top-5-elder-care-strategies.asp

Sims & Campbell, LLC – Annapolis and Towson Estate Planning Attorneys

Caring for Parents – 4 Alternatives to Nursing Home Care – Annapolis and Towson Estate Planning

As our parents continue to advance in years, questions about how best to care for them often come up, especially around the holidays. Maybe they’re slowing down a bit. Perhaps their memory is slipping. Is it time to shop for nursing homes? Maybe. However, there are alternatives to consider, when it comes to caring for aging parents.

Alternative #1 – In-Home Care

According to studies of aging Americans, this population prefers to remain in their own homes, if possible. They want to retain their personal autonomy, have familiar surroundings, and mostly—they don’t want to be filed away and forgotten. Most seniors that choose to remain in the home are cared for by family, and to a lesser extent, professional home healthcare workers.

While in-home care can be less expensive than a semi-or private-unit in a nursing home, it does have its downsides. This is particularly true, when it is a family member that is providing care. A sense of inequality often arises in the family dynamic, when one person is taking on all of the caregiving duties. When considering in-home care, it is critical to communicate with all family members and come up with an agreement, as to the division of labor for mom and dad.

Alternative #2 – Adult Daycare

Adult daycare may be used as an alternative to nursing home care, or in concert with in-home care. These types of centers enable elderly members to maintain a sense of community. These community centers are growing in popularity, due to the reduced cost of care, which is more than 50% less, according to the MetLife National Study of Adult Day Services. Studies have also shown that these types of facilities improve quality of life in older adults and their caregivers.

Adult daycare centers provide social activities, door-to-door transportation services, meals and snacks, assistance with activities of daily living and other therapeutic services, as needed. There are even specialized facilities for people with dementia or other developmental disabilities.

Alternative #3 – Assisted Living Communities

If the family home has become a hazardous environment for your aging parents, the next step could be an assisted living community. This type of facility offers some of the autonomy that the older “young-at-heart” family members still crave, while offering a scaled level of service onsite. These communities can provide:

  • Transportation
  • Medication Management
  • Healthcare monitoring
  • Entertainment
  • Community Activities
  • Help with Activities of Daily Living
  • Housekeeping
  • Laundry Services

These facilities are more affordable than nursing homes and offer active older people the assistance they need, while encouraging autonomy.

Alternative #4 – Accessory Dwelling Units

Bridging the gap between in-home care and other offsite care facilities, the accessory dwelling unit can be a viable option for those with property that will accommodate an extra unit. Also referred to as “granny flats,” these smaller dwellings provide privacy and autonomy for an aging parent, while also providing proximity of family and caregivers.

Depending on the layout of your property, units may be built over garages or adjacent to the family home. Costs vary by location, property and needs. However, in the long-run it may be less expensive than full-time nursing home care.

Before deciding to place family members in a nursing home, do your research. There are plenty of alternatives out there that may be more affordable and socially-preferable to nursing home life.

Resources:

ElderLawAnswers. “Alternatives to Nursing Home Care” (Accessed November 28, 2019) https://www.elderlawanswers.com/elder-law-guides/7/alternatives-to-nursing-home-care

National Adult Day Services Association. “Comparing Long Term Care Services” (Accessed November 28, 2019) https://www.nadsa.org/

Caring on Demand. “7 Alternatives to Nursing Homes” Accessed November 28, 2019) https://www.caringondemand.com/blog/alternatives-nursing-homes

Sims & Campbell, LLC – Annapolis and Towson Estate Planning Attorneys

How Do Special Needs Trusts Work? – Annapolis and Towson Estate Planning

This is only one of a million questions that parents of children with special needs or caregivers worry about every day,  it is always on their minds. Despite this worry, 72% of parents and caregivers have not yet named a trustee for their child or have not formally planned for their future care or guardianship. This is something that should be at the top of their to-do lists, says kake.com in the article “Special Needs Trusts are Always Available to those Who Need them.”

A Special Needs Trust, also known as an SNT, has many benefits for parents and caregivers, including peace of mind. Here’s what you need to know:

A special needs trust is a way to set aside money for a special needs child or individual. In 2016, President Obama signed the 21st Century Cures Act. This new law made a number of changes to existing laws about SNTs. It gave children with special needs and adults the ability to get funding through a trust. The assets are available to them, in addition to any existing government-funded programs they were receiving. With a SNT, the individual can receive their public help and the extra money also. That includes an inheritance or life insurance payment, after their parents or caregivers pass away.

There are a number of different types of SNTs, so it’s important to talk with an experienced estate planning or elder law attorney who is familiar with the SNT laws and applicable law in your state. The most commonly used SNTs are called ‘self-settled’ trusts and ‘pooled’ trusts.

For a self-settled trust, the individual is allowed to create the trust by themselves, from their own money. If the individual is a minor, a parent or guardian must establish the trust and determine when the individual may take funds from it. Those who are not minors, may create this type of trust without the approval of the court.

A pooled trust is typically created when the individual is older than 65 and establishes the trust on their own.

A trustee must be named for the trust. This should be someone in whom the parents have great faith and confidence.

The biggest benefit for parents or caregivers is the peace of mind of knowing that the disabled individual will have access to additional funds, if they need them. Speak with an estate planning or elder law attorney who can help create the type of trust appropriate for your situation.

Reference: kake.com (Nov. 16, 2019) “Special Needs Trusts are Always Available to those Who Need them”

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What is a Special Needs Trust? – Annapolis and Towson Estate Planning

Supplemental Security Income and Medicaid are critical sources of support for those with disabilities, both in benefits and services.

To be eligible, a disabled person must satisfy restrictive income and resource limitations.

That’s why many families ask elder law and estate planning attorneys about the two types of special needs trusts.

Moberly Monitor’s recent article, “Things to know, things to do when considering a special needs trust,” explains that with planning and opening a special needs trust, family members can hold assets for the benefit of a family member without risking critical benefits and services.

If properly thought out, families can continue to support their loved one with a disability long after they’ve passed away.

After meeting the needs of their disabled family member, the resources are kept for further distribution within the family. Distributions from a special needs trust can be made to help with living and health care needs.

To establish a special needs trust, meet with an attorney with experience in this area of law. They work with clients to set up individualized special needs trusts frequently.

Pooled trust organizations can provide another option, especially in serving lower to more moderate-income families, where assets may be less and yet still affect eligibility for vital governmental benefits and services.

Talk to an elder law attorney to discuss what public benefits are being received, how a special needs trust works and other tax and financial considerations. With your attorney’s counsel, you can make the best decision on whether a special needs trust is needed or if another option is better based on your family’s circumstances.

Reference: Moberly Monitor (October 27, 2019) “Things to know, things to do when considering a special needs trust”

Sims & Campbell, LLC – Annapolis and Towson Estate Planning Attorneys

Why Do Seniors Get Scammed by Family Members? – Annapolis and Towson Estate Planning

The Detroit Free Press’ recent article entitled “Elderly getting scammed by their own family members — and one group wants to stop it” says that the average victim can lose $120,000 to financial exploitation, according to AARP research. Repeated, out-of-the-ordinary cash withdrawals are a big sign of exploitation and scams.

“People are literally being robbed every day through scams or financial exploitation from members of their own family,” said Debra Whitman, executive vice president and chief public policy officer at AARP.

As part of the battle, AARP has launched a new online training module for bank and credit union employees who work with customers on the front lines as a way to prevent financial exploitation.

Instances of elder financial abuse can increase during the holidays because more family members and friends are around.

Financial exploitation has included abusing the relationship with an older relative or friend to force him or her into giving them a big portion of savings that’s in a bank or transferring property to someone else. It may begin with withdrawing just a few hundred dollars from a bank account and then build to repeated requests for more money. This type of exploitation may include misusing a power of attorney by denying an elderly person access to his or her own money and withdrawing money out of a senior’s bank account.

Many perpetrators are known to the victim, such as family members, caregivers, or other workers in the home. In addition to losing a life’s savings, seniors who are victims of scammers or loved ones can have a more rapid decline in health because of the emotional stress from being a victim of financial abuse.

According to a report called “Suspicious Activity Reports on Financial Exploitation: Issues and Trends” released in February by the Consumer Financial Protection Bureau, older adults lost an average of $48,300, when the activity involved a checking or savings account. This type of suspicious activity on average took place over a four-month period. Suspicious activity reports for elder financial exploitation quadrupled from 2013 to 2017. In 2017, this activity totaled 63,500 incidents. These reports may also be only a fraction of actual incidents, which may go unreported by victims.

AARP is promoting an online training effort called BankSafe that trains bank tellers and other front-line staff to take more direct action when they suspect a case of financial exploitation. They are encouraged to ask the customer probing questions when they see a possible red flag and even mention the situation to a supervisor who may be able to intervene.

AARP’s BankSafe pilot program was launched for six months at nearly 500 branches of banks and credit unions in 11 states. Nearly $1 million was protected when front line employees who participated in the pilot program intervened and stopped criminals from stealing money from the accounts of seniors. In some instances, the bank employee who stopped someone from being exploited refused or delayed a suspicious transaction, put a hold on the account, or explained concerns to the customer who was a potential victim.

The average victim was a woman between 70 and 79 with less than $20,000 in her bank account, according to the new AARP research. The estimated cost of financial exploitation varies but may be more than $2.9 billion a year.

Reference: Detroit Free Press (October 16, 2019) “Elderly getting scammed by their own family members — and one group wants to stop it”

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When Should I Start Looking into Long-Term Care? – Annapolis and Towson Estate Planning

You can bet that you won’t need long-term care in your lifetime, but it’s not a sure thing: about 70% of seniors 65 and older require long-term care at some point.

Long-term care could be just a few months with a home health aide or it could mean a year (or more) of nursing home care. You can’t know for sure. However, without long-term care insurance, you run the risk that you’ll be forced to cover a very large expense on your own.

The Motley Fool’s recent article, “75% of Older Americans Risk This Major Expense in the Future,” says many older workers are going into retirement without long-term care coverage in place. In a recent Nationwide survey, 75% of future retirees aged 50 and over said they that don’t have long-term care insurance. If that’s you, you should begin considering it, because the older you get, the more difficult it becomes to qualify, and the more expensive it becomes.

Long-term care insurance can be costly, which is why many people don’t buy it. However, the odds are that your policy won’t be anywhere near as expensive as the actual price for the care you could end up needing. That’s why it’s important to look at your options for long-term care insurance. The ideal time to apply is in your mid-50s. At that age, you’re more likely to be approved along with some discounts on your premiums. If you wait too long, you’ll risk being denied or seeing premiums that are prohibitively expensive.

Note that not all policies are not the same. Therefore, you should look at what items are outside of your premium costs. This may include things such as the maximum daily benefit the policy permits or the maximum time frame covered by your policy. It should really be two years at a minimum. There are policies written that have a waiting period for having your benefits kick in and others that either don’t have one or have shorter time frames. Compare your options and see what makes the most sense.

You don’t necessarily need the most expensive long-term care policy available. If you’ve saved a good amount for retirement, you’ll have the option of tapping your IRA or 401(k) to cover the cost of your care. The same is true if you own a home worth a lot of money because you can sell it or borrow against it.

It’s important to remember to explore your options for long-term care insurance before that window of opportunity shuts because of age or health problems. Failing to secure a policy could leave you to cover what could be a devastatingly expensive bill.

Reference: Motley Fool (September 23, 2019) “75% of Older Americans Risk This Major Expense in the Future”

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How Do I Find a Great Estate Planning Attorney? – Annapolis and Towson Estate Planning

Taking care of these important planning tasks will limit the potential for family fighting and possible legal battles in the event you become incapacitated, as well as after your death. An estate planning attorney can help you avoid mistakes and missteps and assist you in adjusting your plans as your individual situation and the laws change.

Next Avenue’s recent article “How to Find a Good Estate Planner” offers a few tips for finding one:

Go with a Specialist. Not every lawyer specializes in estate planning, so look for one whose primary focus is estate and trust law in your area. After you’ve found a few possibilities, ask him or her for references. Speak to those clients to get a feel for what it will be like to work with this attorney, as well as the quality of his or her work.

Ask About Experience.  Ask about the attorney’s trusts-and-estates experience. Be sure your attorney can handle your situation, whether it is a complex business estate or a small businesses and family situation. If you have an aging parent, work with an elder law attorney.

Be Clear on Prices. The cost of your estate plan will depend on the complexity of your needs, your location and your attorney’s experience level. When interviewing potential candidates, ask them what they’d charge you and how you’d be charged. Some estate planning attorneys charge a flat fee. If you meet with a flat-fee attorney, ask exactly what the cost includes and ask if it’s based on a set number of visits or just a certain time period. You should also see which documents are covered by the fee and whether the fee includes the cost of any future updates. There are some estate-planning attorneys who charge by the hour.

It’s an Ongoing Relationship. See if you’re comfortable with the person you choose because you’ll be sharing personal details of your life and concerns with them.

Reference: Next Avenue (September 10, 2019) “How to Find a Good Estate Planner”

Sims & Campbell, LLC – Annapolis and Towson Estate Planning Attorneys

How Can I Plan for Medical Expenses in Retirement? – Annapolis and Towson Estate Planning

Healthcare can be one of the biggest expenses in retirement.

Fidelity Investments found that a 65-year-old newly retired couple will need $285,000 for medical expenses in retirement. That doesn’t include the annual cost of long-term care. In 2018, that expense ran from $18,720 for adult day care services to $100,375 for a private room in a nursing home, according to Investopedia’s recent article, “How to Plan for Medical Expenses in Retirement.”

Despite saving and preparing for retirement their entire lives, many retirees aren’t mentally or financially prepared for these types of expenses. A survey by HSA Bank found that 67% of adults 65 and older thought that they’d need less than $100,000 for healthcare. However, Fidelity calculated that males 65 and older will need $133,000—and females, $147,000—to pay for healthcare in retirement.

There are two important numbers for healthcare expenses in retirement: how much money is coming in and how much is going out. A typical person in their 60s has an estimated median savings of $172,000. On average, those 65 and older spend $3,800 per month, but Social Security only replaces about 40% of their working-life income.

Medicare can pay for some healthcare spending in retirement. However, there are some limitations. If a senior doesn’t have a Part D prescription drug policy, Medicare won’t cover medications. Medicare Parts A and B won’t cover dental and vision care, but Medicare Advantage plans typically do. Medicare also doesn’t offer coverage for long-term care. Medicare Advantage plans are offered through private insurers.

There are two ways pre-retirees can create a safety net for healthcare spending when they retire. One way is with a Health Savings Account (HSA). HSAs are available with high-deductible health plans and offer three tax advantages: (i) deductible contributions; (ii) tax-deferred growth; and (iii) tax-free withdrawals for qualified medical expenses. HSA funds can be used to pay for certain medical premiums, like Medicare premiums and long-term care insurance premiums. If you’re in your 50s, you can still maximize these plans by taking advantage of catch-up contributions and employer contributions. However, those already enrolled in Medicare can’t make new contributions to an HSA.

You can also buy long-term care insurance to fill the gap left by Medicare. This policy can pay a monthly benefit toward long-term care for a two-to three-year period.

Healthcare spending can easily take a big bite out of a retirement budget. Estimate your costs and design a strategy for spending to help preserve more retirement assets for other expenses.

Reference: Investopedia (June 25, 2019) “How to Plan for Medical Expenses in Retirement”

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Are You Prepared to Age in Place? – Annapolis and Towson Estate Planning

If aging in place is your goal, then long-term planning needs to be considered, including how the house will function as you age, accommodations for the people who will care for you and how to pay for care, says the Record Online in the article “Start planning now so you can ‘age in place.’”

Many homes will need to be remodeled for aging in place and those changes may be big or small. Typical changes include installing ramps and adding a bathroom and bedroom on the first floor. Smaller changes include installing properly anchored grab bars in the shower, improving lighting and changing floor covering to avoid problems with walkers, wheelchairs or unsteady seniors.

Choosing a caregiver and paying for care are intertwined issues. Many adult children become caregivers for aging parents and for the most part they are unpaid. Family caregivers suffer enormous losses, including lost work, career advancement, income and savings. Stress and neglect of their own health and family is a common byproduct.

You’ll want to speak with an estate planning elder care attorney about how or if the parent may compensate the child for their caregiving. If the payment is deemed to be a gift, it will cause a penalty period when Medicaid won’t pay for care. A caregiver agreement drafted by an elder law estate planning attorney will allow the parents to pay without a penalty period. The child will need to report this income on their tax returns.

The best way to plan ahead for aging in place is with the purchase of a long-term care insurance policy. If you qualify for a policy and can afford to pay for it, it is good way to protect assets and income from going towards caregiver costs. You can also relieve the family caregiver from duties or pay them for caregiving out of the insurance proceeds.

Without long-term care insurance, the next option is to apply for community Medicaid to pay for care in the home if available in your state. To qualify, a single applicant can keep $15,450 in assets plus the house, up to an equity limit of $878,000 and only $878 per month of income. For a married couple, when one spouse applies for community Medicaid, the couple may keep $22,800 in assets plus the house and $1,287 per month of income. If the applicant or spouse are on a managed care plan, the couple may keep more assets and income.

Another option is spousal refusal, which may allow the couple to keep more assets and income. When an applicant has too much income, a pooled income trust may be used to shelter income from going towards the cost of care. This is a complicated process that requires working with an estate planning attorney to ensure that it is set up correctly.

Self-paying for home care is another option, but it is expensive. The average cost of home health care in some areas is $25 per hour, or $600 per day. When you get to these costs, they are the same as an expensive nursing home.

Planning in advance with careful analysis of the different choices will give the individual and the family the best picture of what may come with aging in place. A better decision can be made once all the information is clearly assessed.

Reference: Record Online (Aug. 31, 2019) “Start planning now so you can ‘age in place’”

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How Do I Discuss My Parents’ Long-Term Financial Goals With Them? – Annapolis and Towson Estate Planning

A recent study by Ameriprise Financial found that more than one-third of adult children say they haven’t had a conversation about their parents’ long-term financial goals. Even though discussing this delicate topic may seem uncomfortable, addressing it now can help avoid challenges and uncertainty in the future.

To that end, the Ameriprise Family Wealth Checkup study found that those who talk about money matters, feel more confident about their financial future.

The Enterprise’s recent article, “Four financial questions to ask your parents,” provides some questions that can help you start the dialogue.

“What do you want to achieve in the next five or 10 years?” Understand your parents’ aspirations for the next few years. This includes their personal and financial goals and when they plan to retire (if they haven’t already). Do they want to move closer to their grandchildren or to warmer weather? Getting an idea of how they want to spend their time, will help you know what to expect in the years ahead.

“Where is your financial information located in case of an emergency?” An incident can happen at any time, so it’s essential that you know how to access key personal, financial and estate planning documents. You should have the contact info for their financial adviser, tax professional and estate planning attorney, and be sure your parents have the right permissions set, so you can step in when the need arises. You should also ask your parents to share the passwords for their primary accounts or let you know where you can find a password list.

“How do you see your legacy?” Talk to your parents about how they want to be remembered and their plans for making that happen. These components can be essential to the discussion:

  • Ask them if they have an updated will or trust, and if there’s anything they’d like to disclose about how the assets will be distributed.
  • Health care choices and expenses are often a big source of stress for retirees. Talk to your parents about their current health priorities and the future and have them formalize their wishes in a health-care directive, which lets them name a loved one to make medical decisions, if they’re unable to do so.

“How can I help?” Proactively offering to help, may get rid of some of the frustrations or relieve stress for even the most independent and well-prepared parents. The assistance may be non-financial, like doing house projects or giving them more time with their grandchildren. You should also look into including an attorney in the discussion, if your parents have estate planning questions.

Retirement and legacy planning can be complex. However, taking the time to have frequent conversations with your parents, can help you all prepare for the future.

Reference: The Enterprise (August 19, 2019) “Four financial questions to ask your parents”

Sims & Campbell, LLC – Annapolis and Towson Estate Planning Attorneys