Mar 30

Have you made plans for long-term care? Part 3

This is the third and final part on how to pay for long-term care for an individual. As discussed in the prior posts, there are three ways to pay for long-term care: 1. Self-pay, 2. Long-term care insurance, 3. Medicaid. We have discussed the first two previously. Today we will look at Medicaid.

What is Medicaid? Medicaid is a program implemented by the states, but essentially mandated by the federal goevernment. Medicaid is different than Medicare. The main difference with Medicaid is that you have to meet certain qualifications to be able to receive Medicaid. Medicare will not cover long-term care costs, but may cover certain expenses if less than 90 days and the care “rehabilitative” rather than just sustaining your standard of living.

What are the qualifications for Medicaid? To qualify for Medicaid, an individual has to meet three tests: 1. Medical qualification test, 2. Income qualification test, and 3. Resource qualification test. If the individual does not meet all three tests, he will not be qualified for any assistance through Medicaid.

The Medical Qualification Test is usually the simpliest to meet. To qualify a person must be at least 65 years of age, or blind or disabled and have a medical necessity to be in a nursing home. If you are not able to do the ordinary tasks of daily living (dressing yourself, preparing meals, etc.) without assistance, then you meet the medical qualification test. This usually isn’t an issue, because if someone is going into a nursing home, then they usually are going becuase of the need, rather than a “want”.

The Income Qualification Test is different for each state. For Oklahoma in 2012, the income qualification is $2,094 per month (or up to $3,000 if a special supplemental trust is created). The income that is considered is gross income, so deductions for Medicare or other health insurance and taxes from income are not considered. There are methods to legally avoid this cap, but you should seek advise from knowledgeable counsel about them.

The Resource Qualification Test is usually the toughest to meet for people seeking to voluntarily qualify for Medicaid. In Oklahoma, the nursing home resident must have less than $2,000 of countable assets. Some assets are exempt, but the exemption may only be temporary.

So, what are countable assets? About anything that can be accessed by the individual for his/her own use, like checking accounts, CDs, stocks, bonds, annuities, land, minerals, and notes recievable. As stated before, all of these assets, combined, must have a value less than $2,000 when the individual applies for assistance.

What qualifies as an exempt asset? If there is a spouse that can stay in the personal residence, then the home is usually exempt. If there is no spouse, then the residence will lose its exemption after one year. One automobile used for medical transportation is usually exempt. A life insurance policy with a face value less than $1,500 is exempt. A burial policy worth less than $10,000 is exempt. You can see, there are not many exempt assets.

In addition to having most assets as countable, there is also a transfer penalty for any asset that is transferred. This penalty, for Oklahoma, is $132.85 per day, meaning that for every $132.85 an individual transfers, her or she loses one day of Medicaid eligibility. The time for losing the elegibility starts at the time of the application for Medicaid and applies to any transfer within the previous five years.

Summary All of this is just to let you know that there is a governmental program that can cover an individual’s long-term care costs, but qualification is not something that is easy to obtain. But, you also should know that you may not need to deplete your life savings unnecessarily. If you seek advice from a qualified estate planning and elderlaw attorney, you can start planning to ensure a legacy will pass down generations. As with any planning, the sooner the better, because you do not know what tomorrow will hold.

Mar 29

Mega Millions lottery is now largest ever in United States history

The revised estimate on the Mega Millions lottery drawing scheduled for tomorrow, March 30, 2012 is now $540,000,000 (with a cash payout of about $390 Million). So what would you do if you suddenly became the owner of half a billion dollars?

I would hope that you would contact your local tax/estate planning attorney. If you took the cash payout, you would be subject to roughly $136,500,000 in U.S. income taxes, and if you’re an Oklahoma resident, an additional $21,450,000 in Oklahoma income taxes. I’m not claiming your tax attorney can reduce these taxes, but he could sure have a fun time trying some strategies.

However, if you look at the estate tax laws next year, then your net $232,050,000 would be subject to an additional tax of up to 55%. A qualified estate planning attorney definately could lower this amount due.

All of this is just to say, “Good luck, and good planning.”

Mar 28

Have you made plans for long-term care? Part 2

This is the second part on what may be needed to provide for long-term care for an individual. As discussed in the prior post, there are three ways to pay for long-term care in the U.S.A.: 1. Self-Pay, 2. Long-term care insurance, 3. Medicaid. We discussed self-pay previously. Today, we will look at long-term care insurance.

Long-Term Care Insurance. If you were to need full-time nursing home care, the costs for southwest Oklahoma tend to run between $3,500 and $5,000 per month. If you have purchased a long-term care insurance contract, the provider of the insurance will typically cover most of this cost. I say “most” because the specific contract will dictate the amount that the insurance provider will pay and I typically do not see contracts that will cover all costs for as long as the individual is in the nursing home.

Long Term Care insurance is a great way to cover expenses should you need nursing home care, but there are two main things to consider when you look to purchase (or if already purchased, when you review your coverage) a long-term care insurance policy.

First, the policies are issued by companies that seek to make a profit on the sale of the policy, so one of the main things they consider when underwriting it is if you are healthy and what your family history is with these type of expenses. The main thing to learn here is that you should apply early for the policy and you should be aware that you may not get accepted for a policy. If you are accepted, then premiums will vary greatly depending upon when you purchased and what coverage you get.

Second, you need to review what the coverage will be of your policy. When many of these policies first came out, they were great deals (meaning an individual often paid way less in premiums than he ultimately got out in payments). However, the insurance companies have learned to manage their risks much better since then, so most policies now have lifetime benefit limits or maximum montly payments that will be made. These are just part of the business, but if you have a policy that you may depend on, it is best to look thoroughly at the policy to see if one of these limits will affect you.

What should you learn from this? I highly recommend long-term care insurance, but you need to be aware that you have to first qualify for it to be issued to you and even after qualification, it may not cover all expenses of a nursing home, especially if you need the care for an extended period of years.

If you already have a policy, or if you are interested in a policy, then come by and meet with me and we can look at all aspects of your estate plan and we can ensure you get the policy your and your family need.

Mar 27

Update on oral arguments on Obamacare hearing

Today is the second day of oral arguments on the Constitutionality of the Patient Protection and Affordable Care Act (Obamacare). While the first day’s arguments mainly focused on the ability of the Supreme Court to hear the case, or if it should be deferred until a date when someone actually pays the penalty for not complying with the individual mandate, today’s arguments actually go to the heart of the individual mandate case.

Although most people that know me, know where I stand on this issue, there are some good writings out there. My favorite analysis comes from Legal Insurrection at http://legalinsurrection.com/2012/03/obamacare-oral-argument-day-2-the-mandate/ .

One of the main things to consider is that if the government can force you to enter into a contract with any private company, what will be limit on its powers? How will this decision affect your ability to plan your own estate and assess the taxes that you will have to pay? And, lastly, do you, a citizen of Altus and southwest Oklahoma, want your health care decisions made by someone appointed in Washington, D.C.?

Mar 27

Have you made a plan for nursing home costs? Part 1

A recent survey of costs for nursing homes in southwest Oklahoma shows that typical costs for full-time care in a nursing home will cost between $3,500 and $5,000 per month. When it comes to these nursing home costs, there are generally considered only three ways to have it paid: 1. Self-pay, which is where you or someone you love pays the full cost; 2. Insurance pay, where a long-term care insurance provider pays for either the full or partial costs; or 3. Medicaid pays for the cost of the care. I will summarize each of these options so you can assess where your coverage would be, should you need long-term care.

Self Pay. This is where most individuals who need nursing home care now usually are. They have to use their own assets to pay for their own costs. This is considered the American way, and generally it is thought that if one can afford it, one should have to pay those expenses. The issue that arises is when you look at the costs ($5,000 per month) and you look at most people’s estates, the whole estate is used very quickly and there is nothing of a legacy to pass on to the children of the individual in the nursing home. The main issue I want to address and the assets I want to protect for the children come when the children depend upon an asset that may have to be sold to cover mom or dad’s nursing home expense.

The case that I think of is where a farm has to be sold. Dad was the owner of the farm, but Son had been farming it for years. When Dad had to go into the nursing home, he was in the Self-Pay category and had to cover the $5,000 per month expenses. Because rental on the farm was only about $7,000 per year, the Son had to give up farming because Dad was forced to sell the land. This not only caused Dad to incur taxes on the sale, but also caused Son to lose part of his livelihood because of the sale.

Where does this leave you as an individual? As I said, self-pay is the American way, but that may not be the way it will have to be. With proper planning, you can look at one of the other ways to pay for long-term care expenses. We will look at them later and what you can do to get that proper estate and elderlaw planning.

The main thing to think about, though, is if your children rely upon your assets (or business) for their livelihood, have you taken steps to ensure that their ability to use that asset will not be placed in jeopardy if you are no longer able to care fro yourself?