How Important Is It to have Long-Term Care Insurance?

It becomes especially important to plan for the future when the world around us seems so volatile and unpredictable. We can’t control future health care costs, but we can plan for them, says a recent article titled “Economic instability and the need to plan for long-term care” from The Indiana Lawyer. Failing to plan could mean lost assets and a lost legacy.

According to Genworth’s Cost of Care survey, from 2004 to 2021, the cost of long-term care has outpaced inflation by a large margin. Many of the increases were driven by supply and demand issues. There aren’t enough people to care for the growing population of people needing services, which will continue to be the case for at least the next decade. A total of 10,000 boomers turn 65 every day and 70% will require care and support services in their lifetimes.

How can assets be protected from long-term costs?

One of the most frequently used tools is an asset protection trust or an irrevocable trust. The irrevocable trust cannot be modified, amended, or terminated without permission of the grantor’s beneficiary or beneficiaries. Once the grantor transfers assets into the trust, the grantor no longer has the rights of ownership. The trust can be designed to minimize taxation, maximize access to long-term benefits and protect assets.

The trust must be drafted properly, so trust income and principal, if needed, can be accessed.

The timing is critical. Asset protection trusts must be created when there is no immediate health care crisis, and the grantor has no need for long-term care. The best trust is created when the person is in good health and of sound mind.

Those who are nearing retirement, passed retirement age or who may have health issues in the distant future and expect to need Medicaid in the future are best candidates for an asset protection trust.

Medicaid’s Five Year Look Back Period

Planning needs to be done at least five years in advance, as Medicaid looks at the applicant’s past five year’s finances to see if any assets were sold or gifted for under market value. Transferring assets to an irrevocable trust is treated as a gift and violates the five-year look back, making the person ineligible for Medicaid coverage. Nursing home care will have to be paid out-of-pocket until the person becomes eligible.

Asset protection strategies are available for those who need immediate protection of assets. However, they have to done quickly and correctly with an estate planning elder law attorney. People who have suffered a fall and have significant injuries or who have received a diagnosis of a difficult disease should speak with an elder law attorney in a timely manner. They’ll need to discuss preparing for a Medicaid application, what assets can be protected and steps they need to take. The earlier the plan is put into place, the better.

Reference: The Indiana Lawyer (Aug. 3, 2022) “Economic instability and the need to plan for long-term care”

What Is the Main Purpose of a Trust?

There are advantages and disadvantages of an irrevocable trust, and you’ll want to be fully informed before taking steps that may be costly to undo, explains the article “Understanding your trust” from The Sentinel. Once your home is deeded to an irrevocable trust, you won’t be able to make any changes without getting permission from the beneficiary or beneficiaries named in the trust. Your rights of ownership are transferred to the trust, when you deed it to the trust.

A separate legal agreement with the trustee, the person in charge of the trust, will be needed to give you a legal right to occupy the home also. Any changes could be made but will take time and could be costly. Changes can also only be made, if the beneficiaries agree.

There was a time when lenders inserted clauses into mortgages that any time a sale or transfer of the deed occurred, full payment of the mortgage would be due. This changed, and today the mortgage is not due just because of a change in the deed. However, it may be a challenge to refinance, if the home is held in an irrevocable trust.

For most people, the reason to put a home into an irrevocable trust is to prevent the home from being lost to a creditor, including protecting the home’s equity from the cost of nursing home care, during life or after death. In some states, like Pennsylvania, the state will initiate a collection action against the estate to recover the amount paid for the deceased homeowner’s nursing care costs.

The move to put a home into an irrevocable trust can work as long as the trust remains intact, and the homeowner does not apply for financial assistance for nursing home care for at least five years from the date that the deed was transferred as recorded in the courthouse.

If long-term care needs arise before that time, putting the home into an irrevocable trust may not serve its intended purpose.

There are some tax benefits from an irrevocable trust. If the homeowner lives at least one year after the home is deeded to the trust, in some states no inheritance taxes will be due on the home. Check with a local estate planning attorney to learn what the rules are in your state.

If the trust is prepared by an experienced elder law attorney, it is likely that the capital gain on the sale of the home by the trust after the homeowner’s death will be taxed based on the home’s value at the time of sale, rather than the value at the time it is placed into the trust or on the day of death.

If the home is the only asset in the trust, the taxpayer ID of the trust will be the homeowner’s Social Security number, and no annual tax return is required. If, however, other assets, particularly income-producing assets, are placed in the trust, then the trust needs to have its own EIN (a federal tax identification number) and annual tax returns will need to be paid. Taxes on a trust are normally at a higher rate than individual income rates.

Your estate planning attorney will explain the numerous strategies that can be used to protect your assets and your home from the high cost of long-term care. There are many Medicaid compliant techniques and tools, depending upon the situation of the individual and the family.

Reference: The Sentinel (April 23, 2021) “Understanding your trust”

Elder Financial Abuse Risk Increasing for Seniors Isolated by Pandemic

The extended isolation and loneliness during the coronavirus pandemic is creating the perfect storm for financial exploitation of seniors, who are unable to visit with family members and friends, reports Fredericksburg Today in the article “SCC urges awareness of investment fraud among seniors due to increased pandemic isolation.” The unprecedented need to forgo socializing makes seniors who are already at risk, even more vulnerable.

In the past, scammers would deliberately strike during a health crisis or after the death of a loved one. By gathering data from obituaries and social media, even establishing relationships with support and social groups, scammers can work their way into seniors’ lives.

Social distancing and the isolation necessary to protect against the spread of the coronavirus has left many seniors vulnerable to people posing as their new friends. The perpetrators may not just be strangers: family members are often the ones who exploit the elderly. The pandemic has also led to changes in procedures in care facilities, which can lead to increased confusion and dependence for the elderly, who do not always do well with changes.

Here are a few key markers for senior financial abuse:

  • A new friend or caregiver who is overly protective and has gotten the person to surrender control of various aspects of their life, including but not limited to finances.
  • Fear or a sudden change in how they feel towards family members and/or friends.
  • A reluctance to discuss financial matters, especially if they say the new friend told them not to talk about their money with others.
  • Sudden changes in spending habits, or unexplained changes to wills, new trustees, or changes to beneficiary designations.
  • Large checks made out to cash, or the disappearance of assets.
  • Signatures on checks or estate planning documents that appear different than past signatures.

Not being able to visit in person makes it harder for family members to discern what is happening.  However, there are a few steps that can be taken by concerned family members. Stay in touch with the family member, by phone, video calls, texts or any means possible. Remind loved ones that scammers are always looking for an opportunity and may try to exploit them during the pandemic.

Every community has resources that can help, if elder financial abuse is a concern. An elder law estate planning attorney will be able to direct concerned family members or friends to local resources to protect their loved ones.

Reference: Fredericksburg Today (June 20, 2020) “SCC urges awareness of investment fraud among seniors due to increased pandemic isolation”

The Symptoms of Early-Onset Alzheimer’s Disease
Puzzled Confused Lost Signpost Shows Puzzling Problem

The Symptoms of Early-Onset Alzheimer’s Disease

Considerable’s article entitled “7 surprising early signs of Alzheimer’s” provides us with some signs of early-onset Alzheimer’s disease.

Theft or other law-breaking. Any behavioral change as people age is of concern, but this can be a sign of Frontotemporal Dementia (FTD), another progressively damaging, age-related brain disorder. FTD usually hits adults aged 45-65. People’s executive function—their ability to make decisions—can be impacted by FTD, which may explain why they become unable to discern right from wrong.

Frequent falls. A study of 125 older adults asked them to record how frequently in an eight-month period that they fell or tripped. Researchers examined the brain scans of those who fell most frequently and saw a correlation between falls and the early onset of Alzheimer’s Disease.

Forgetting an object’s function. We all forget where we put the keys. However, if you can’t remember what a key is for, or where dirty dishes are supposed to go, then it may be the first signs of Alzheimer’s Disease or dementia.

Inappropriate diet. Prior to the onset of Alzheimer’s, patients typically to eat more (roughly 500 calories more a day) than their aging counterparts but they still tend to lose weight. Doctors think this is a metabolic change. Some elderly actually eat inanimate objects prior to their diagnosis, but researchers don’t know the reason. Because Alzheimer’s and dementia affect the brain’s memory, it may be because their brain receives hunger signals but is unable to discern how to react to them. Some patients eat paper or other inedible objects.

Inability to recognize sarcasm. If you fail to recognize sarcasm or take it very literally and seriously, it may be a sign of atrophy in your brain. A study at the University of California – San Francisco found that Alzheimer’s patients and those with Frontotemporal Disease were among those who couldn’t recognize sarcasm in face-to-face encounters. The brain’s posterior hippocampus is impacted, which is where short-term memory is stored and where a person sorts out such things, like sarcasm.

Depression. If someone has never suffered from clinical depression but develops it after age 50, it could be an early sign of Alzheimer’s. It doesn’t mean if you’re diagnosed with depression in older age that you will develop Alzheimer’s or other cognitive decline. However, you might, so get treatment sooner because some researchers believe that hormones released in the depressed brain may damage certain areas of it, leading to the development of Alzheimer’s or other dementia.

Unfocused Staring. Alzheimer’s Disease is a change in cognitive and executive functioning in the brain. This means that your ability to recall facts, memories and information is compromised, as well as the ability to make decisions. The brain becomes unfocused and staring in a detached way may be an early sign of so-called “tangles” in your brain.

These symptoms may be signs of Alzheimer’s Disease, or they may be the signs of other underlying issues. See your doctor if you have any of these signs. This may be a sign of something else but talk to your doctor to be safe.

Reference: Considerable (December 8, 2020) “7 surprising early signs of Alzheimer’s”

What Is a ‘Survivorship’ Period?

A survivorship clause in a will or a trust says that beneficiaries can inherit, only if they live a certain number of days after the person who made the will or trust dies. The goal is to avoid situations where assets pass under your beneficiary’s estate plan, and not yours, if they outlive you only by a short period of time. While these situations are rare, they do occur, according to the article “How Survivorship Periods Work” from kake.com.

Many wills and trusts contain a survivorship period. Most estates won’t rise to the level of today’s very high federal estate tax exemption ($11.58 million for an individual), so a long survivorship period is not necessary. However, if the surviving spouse must wait too long to receive property under the will—six months or more—it might harm their eligibility for the marital deduction, even if they are made in a qualifying trust or an outright gift.

Even if a will does not contain a survivorship clause, many states require one. Some states require at least a five-day or 120-hour survivorship period. That law might apply to beneficiaries who inherit property under a will, trust or, if there is no will, under state law. This usually does not apply to those who are beneficiaries of an insurance policy, a POD bank account (Payable on Death), or a surviving co-owner of property held in joint tenancy. To learn what states have a set of laws, known as the Uniform Probate Code or the revised version of the Uniform Simultaneous Death Act, speak with a local estate planning lawyer.

Survivorship requirements are put into place in case of simultaneous or close to simultaneous deaths of the estate owners and the estate beneficiaries. This is to avoid having the distribution of assets from an estate owner’s estate distributed according to the beneficiary’s estate plan, and not the estate owner’s plan.

For an example, let’s say Jeff dies and leaves his estate to his sister Judy. Jeff has named his favorite charity as an alternative beneficiary. Jeff’s assets would normally go to his sister Judy. They would only go to his favorite charity, if Judy were not alive at the time of his death. However, if Jeff dies and then Judy dies 14 days later, Jeff’s assets could go to Judy’s beneficiaries under the terms of her will. The charity, Jeff’s intended beneficiary, would receive nothing.

The family would also have the burden of dealing with not one but two probate proceedings at the same time.

However, if a 30-day survivorship clause was in place, the assets would pass to his favorite charity, as originally intended. Jeff’s estate plan would be carried out, according to his wishes.

These are the types of details that make estate planning succeed as the estate owner wishes. Having a complete and secure—and properly prepared—estate plan in place is worth the effort.

Reference: kake.com (March 31, 2020) “How Survivorship Periods Work”

What Should I Know About Medicaid?

Medicaid is the federal program that gives healthcare benefits to those who cannot afford them. Many people who end up requiring long-term care can pay for it out of their own their own assets, at least initially.

However, because long-term care expenses are so astronomical, many people end up accessing Medicaid benefits, after their own assets have been depleted.

The Medicaid program can help with paying for home care, assisted living, and nursing home care, explains Insurance News Net’s recent article, “Medicaid planning.”

It would be great if people would plan to qualify for Medicaid before they become completely broke, which would preserve their children’s inheritance.

For those who are thinking of transferring all of their assets to their children to qualify for Medicaid, the government has already thought of that. If you gift any assets to your children, you must wait 60 months from the date you gave the gift before becoming Medicaid eligible. However, there are perfectly legal strategies that a senior can use to become eligible for Medicaid, while still keeping considerable assets.

That’s why you should talk to an elder law or Medicaid planning attorney. These practitioners specialize in helping people qualify for Medicaid benefits far in advance of their assets becoming depleted.

Assets may be freely transferred between spouses to help gain eligibility for a spouse that needs care.

There are also many assets that are exempt for purposes of gaining eligibility. This includes a primary residence, rental property, certain IRAs and most vehicles.

It’s also important to remember that a person can enter into contracts with family members to provide care in exchange for a fee, without a 60-month look back.

With the guidance and planning from qualified legal counsel, seniors who require long-term care can get free government healthcare, while preserving assets for their heirs.

Please contact an experienced Medicaid planning or elder law attorney for additional information.

Reference: Insurance News Net (September 29, 2019) “Medicaid planning”

When Should I Start Looking into Long-Term Care?

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. That 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”

What Changes Will Be Made to Social Security This Year?

While Social Security now delivers benefit checks to more than 63 million people every month, the program is primarily designed to provide a financial foundation for our nation’s retired workers. Nearly 45 million retired workers (70% of all beneficiaries) receive a benefit check monthly, with more than 60% of these seniors expecting their payout to make up at least half of their income.

Motley Fool’s recent article, “5 Social Security Changes in 2020 That Could Affect Your Take-Home Income” explains that with the relative importance of Social Security, it should come as no shock that the second week of October holds considerable importance to these tens of millions of Americans. That’s because it’s when the Social Security Administration (SSA) announces changes to the program for the upcoming year. Any changes could directly affect what beneficiaries are paid on a monthly basis. These changes can also affect non-retirees who aren’t getting a Social Security benefit Let’s look at some of these changes.

  1. COLA. The most important figure in the October announcement from the Social Security Administration is the cost-of-living adjustment (COLA). Social Security’s COLA is measured by the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W). The average monthly CPI-W reading from the third quarter of the current year (July through September) is compared to the average monthly CPI-W reading from the third quarter of the previous year. If the average figure has risen from the previous year, then beneficiaries receive a “raise” that’s commensurate with the percentage increase year over year, rounded to the nearest 0.1%.
  2. Withholding thresholds. Early claimants who haven’t hit their full retirement age but are currently (or expected to begin) taking benefits, will be subject to the retirement earnings test. This test allows early filers to earn up to a certain amount of money, before the SSA is allowed to withhold a portion, or all, of their benefit. For those who won’t reach their full retirement age in 2019, $1 in benefits can be withheld for every $2 in earnings above $17,640 ($1,470 a month). For those who’ll reach their full retirement age this year but have yet to do so, are allowed to earn $46,920 before the SSA begins withholding $1 in benefits for every $3 in earnings above the limit. Note that these withheld benefits aren’t lost forever, because you get them back in the form of a higher monthly payout when you reach your full retirement age.
  3. Maximum monthly payout. If you’re currently claiming a retired worker benefit and have made a good deal of money on an annual basis over your working career, there’s a chance that you’ll be able to net more in monthly payouts in 2020. There’s a cap on the maximum monthly payout at full retirement age. In 2019, no individual at their full retirement age can take home more than $2,861 per month, even if they made millions of dollars each year throughout their working career.
  4. Disability income thresholds. Even though 7 of 10 program recipients are retired workers, about 10 million people each month also get a check from Social Security Disability Insurance (SSDI). Approximately 8½ million are disabled workers, and the rest are spouses or children of these disabled workers. If the average CPI-W reading does increase on a year-over-year basis from the previous year (which appears likely), these SSDI income thresholds for the disabled and legally blind should go up a little in 2020.
  5. A warning to the wealthy. Lastly, Social Security’s changes for 2020 won’t just impact those receiving a benefit. Wealthy workers can also anticipate paying more into the program, provided that inflation rises on a year-over-year basis, as measured by the CPI-W.

Reference: Motley Fool (July 28, 2019) “5 Social Security Changes in 2020 That Could Affect Your Take-Home Income”

How Will Baby Boomers Handle “Long-Term Caregiving?

Think Advisor’s article, “Long-Term Caregiving Realities Hit Home for Boomers” says that study participants responded that they’d be willing to do these things to provide care for a loved one:

  • Cut spending: 66%
  • Travel less frequently: 41%
  • Move to a new home: 27%
  • Work less: 27%
  • Stop working: 19%

The study also found that boomers are becoming more aware of the likelihood they’ll require retirement care, and are willing to discuss the issue. This group believed that an adult would start to need physical care or assistance at age 70 or older.

About 45% of study participants thought they’d need long-term care at some point. That number is an increase from 36% in 2013. A total of 66% of them reported that they’d had detailed conversations about how they wanted to receive long-term care. Slightly more than half said they’d had detailed conversations about how to pay for care.

Even so, about 30% of boomers in the study who were caregivers said they still had to use some retirement savings to pay for health care expenses, compared with 19% of those without caregiving responsibilities.

The U.S. Census Bureau says that older Americans are projected to outnumber children for the first time in U.S. history by 2035. This raises the question of who’ll care for the aging population.

It was no surprise that the study found that women were likelier than men to have caregiving experience. 62% of current or former caregivers among study participants were women and 38% were men. A total of 68% of those with caregiving experience said they knew about long-term care insurance, compared with 59% without such experience.

Experienced caregivers were also more likely than inexperienced boomers to have made preparations for their death. This includes communicating funeral preferences (49% vs. 41%), identifying where they wanted to be buried or cremated (51% vs. 37%) and maintaining an up-to-date estate plan (45% vs. 38%).

Reference: Think Advisor (August 8, 2019) “Long-Term Caregiving Realities Hit Home for Boomers”