Using Life Insurance To Pay For Senior Care
Is It Elder Law Or Estate Planning?
You've heard the words elder law and estate planning but are confused as to the difference. You're not alone. The question of what is elder law is asked frequently. Most people think they know what estate planning is. They are two separate areas of law, though there is some overlap.
Elder law involves the various legal, medical, and financial issues that occur as adults get elder. An elder law attorney assists clients in addressing and managing the legal, financial, and medical challenges of long-term care and the devastating costs associated with advanced age.
The focus of estate planning is to prepare a plan for what happens when a person dies. We will all leave certain assets and our obligations behind when we go, and it's important that they pass properly to the right parties with as little headache and heartache for the survivors as possible.
Estate planing clients span all ages from the elderly, to new parents, and even young adults. What is often overlooked though is the incredible impact that estate planning decisions can have on one's elder law concerns. For example, the way you dispose of assets estate plannings now could affect your eligibility for certain means PACED assistance in the future, and that fact raises a number of complex legal issues that demand responsible, professional attention as early as possible.
In fact, a whole host of legal issues can play out at the intersection of estate planning and elder law; Medicare, Medicaid, trusts, governmental and public benefits programs, long-term care insurance, healthcare directives. These are all factors that can totally change your approach to end-of-life care and the after death distribution of your assets.
Elder law and estate planning are both complex topics, and they are best considered together. It's so important that you not make mistakes in the course of your decision-making. It's all too easy to do so. The best attorney for your needs is one who has real insight into the profound implications that the decisions in one area can have on the other.
What Do You Do Every Day As An Elder Law Attorney?
I hug people every day. More seriously though, I help people answer two questions. The first question is what happens if they pass away? Where do they want their stuff to go? Who do they want to get it? How do they want them to get it? We spend a lot of time talking to our clients about those issues.
The second is question is what happens if they don't die? What happens if they get sick and need any kind of long-term care? What happens if they need a nursing home? What happens if they want to stay home? We want to make sure people plan ahead so they aren't financially devastated by a nursing home admission, or they end up in a nursing home when they could've stayed home. If they haven't planned ahead and now need a nursing home, we help them apply for MassHealth, also called Medicaid, so they aren't financially devastated by a nursing home admission.
You've spent a lifetime caring for each other, but how do you do that if one of you gets sick? We find solutions, dedicated to helping seniors like you, and that begins with a phone call to us.
Long Term Care: Top 5 Reasons To Plan Ahead
According to estimates, if you are sixty one years old now, the average annual cost of long term care when you're seventy nine years old is likely to be over a hundred and eighty thousand dollars a year for nursing home care, over ninety six thousand dollars a year for assisted living care and over seventy five thousand dollars a year for in home care. According to the US Government Administration on Aging, seventy percent of the people who turn sixty five can expect to use some form of long term care during their lifetimes and twenty percent will need it for longer than five years.
Should you plan ahead? Yes. Planning ahead means many things. Learning about the different long term care options and considering which of those options for receiving care would be your preference. Considering the impact that long term care costs can have on your lifestyle and quality of life as well as the impact that it can have on your spouse, your children and your retirement and financial goals. Investigating how the risk of long term care can be shifted from your pocket book to another source of payment like Medicare, Medicaid, Veterans Administration programs, health insurance or long term care insurance.
Meeting with a trusted advisor or team of advisors such as an elder law attorney, a financial advisor and an accountant to establish a comprehensive plan that is customized to meet your long term care goals including the legal tools that will help you achieve those goals and carrying out your plan and then reviewing it on a periodic basis with your attorney and other trusted advisors. The top five reasons to plan ahead are to protect you and your family from financial devastation. To preserve the right to choose the type of care you want.
To reduce the stress on you and your family when a medical crisis occurs, to give yourself peace of mind now and in the future and to allow for the quality of life you deserve. Few of us are fortunate enough to have the financial resources to self insure against the cost of long term care. Some of us do have the financial resources to shift the risk of long term care costs to insurancde companies by purchasing one of any number of long term care insurancde products. Others of us will decide to take steps to protect our savings utilizing legal tools like irrevocable trust perhaps in combination with long term care insurance and many of us will have to rely on government insurancde programs to assist with the cost of long term care.
Is doing no planning an option? Of course and if you're lucky enough to be one of those one third who never needs long term care, that may work well for you but the do nothing approach fails miserably if a medical crisis occurs and there is no plan or even no thought of what the plan should be. There's no one size fits all long term care plan however there is a plan to fit your goals and needs but I don't recommend trying to figure that plan out on your own. Rely on the knowledge of professionals who understand the legal, financial and psycho-social impact of long term care and who will give you the guidance you need. You'll be glad you did.
What Is A Durable Power Of Attorney?
A durable power of attorney is the most powerful and most used estate planning document. It allows another person to step into your shoes and make financial and contractual decisions for you. This person is referred to as the “agent” or “attorney-in-fact”. You want to name someone you can trust in this role and someone you believe has the highest integrity. This person will need to always act in your best interest no matter what other influences may be made on them. You need to make sure the person you select has common sense and knows how to ask questions and evaluate answers. If you are deciding on a child to be your agent it is not necessarily the “oldest” who can best fill this role. This document will allow the agent to hire any advisor, attorney, etc. to assist them with the skills that may not necessarily be their strong suit.
A durable power of attorney survives your disability or incapacity. The authorization does not end until you die or you revoke the authority. Often the durable power of attorney is used when you no longer have the ability to make decisions on your own. This is why the selection of a person with the highest integrity is most important. We ask many questions of you so we may tailor a custom durable power of attorney for you to insure we include any and all authority you may need for your agent in the future.
Have You Been Tempted To Or Have You Decided To Go Online For A “Free” Durable Power of Attorney?
Occasionally a client will call and ask about obtaining a power of attorney from the internet. Some come to see me and bring the power of attorney they have and I ask if they obtained it from the internet – I can tell immediately. Others will actually bring an unsigned power of attorney with them and ask me to notarize it – which I will not do. Let me explain why.
Durable powers of attorney are one of the most powerful documents in your estate plan – if you become incapacitated it allows someone you name to make financial decisions. They are making decisions concerning your assets. Each plan is unique and based on your individual needs. One size does not fit all. In Elder Law we are focusing on the second half of life when health and financial issues can spiral out of control. If this document is not done properly they, it can cause a great deal of hardship and heartache. A document that is missing the key elements necessary to ensure proper planning in a crisis situation may result in the inability to protect the spouse and family.
When using documents from the internet the client is not discussing their particular circumstances with a Massachusetts licensed attorney in real time, who with the proper questions and answers can build upon the client’s unique situation to make sure that the document has all the necessary provisions and protections.
When it is too late to make changes to accomplish goals an expensive court proceeding may become necessary to obtain the authority needed. I will review your durable power of attorney for you, sometimes no changes are needed. However, there have been changes in the law that may affect outdated and incomplete durable powers of attorney. If not drafted properly some nursing homes and MassHealth will require additional authority though the court system. Using a template drafted by a hospital, the internet or an attorney that does not focus their practice in Elder Law can lead to unfortunate results.
MassHealth And The Transfer/Gifting Rule
Have you, or are you, thinking about gifting or transferring money or your home to a family member or friend? Do you think in the near future you will require nursing home care? In Massachusetts there is a five (5) year “look-back)” period. If a person requires MassHealth for nursing home care and that person has gifted or transferred an asset to a third person, they are subject to a penalty period of ineligibility. MassHealth currently imposes a one day penalty for every $354 you “gifted away.” For example, if you gave your grandson $25,000 for college within the 5 years before you apply for MassHealth: $25,000 divided by $354 = 71 days of ineligibility. If the money cannot be returned then someone will have to pay privately for 71 days on your behalf. It is also important to note the penalty period does not start from the date you gave the money away – it starts on the day you filed the MassHealth (Medicaid) application. MassHealth takes the position if you can gift your money away, you can pay for yourself in a nursing home. If you are not successful in obtaining MassHealth approval the nursing home may discharge you for non-payment. Always speak with an experienced Elder Law Attorney before you begin any gifting program.
What Are Medicare And Medicaid? What Do They Pay For?
Should I Transfer My House To My Children?
Parents often ask their Elder Law attorney, if they can give their home to their children, in order to protect it from the nursing home. When that question comes up in my meetings, these are some of the questions and discussion that I have with them. First I ask them about their children, tell me about their relationship, and the relationship with their child's spouse. Do they know if the child has any debt, or creditors? How do they handle money?
How strong is the marriage? Any threat of divorce? Into the discussion we talk about, what happens if the child should die before the parent, and leave their share of house to their spouse? We then discuss how the house is not theirs. It belongs to the children, and without any protection for the parent, that child, or those children can sell the house without the parent's okay, and can throw the parent out, if there is a deterioration of the relationship over the years.
What if there's a single child who dies, and now his spouse owns the house? Or worse, he was divorced, and now it belongs to the three and five year old grandchildren? Another version of this question is, "Well, if I shouldn't transfer the house to my children, can I sell it to them for a dollar?" This topic frequently comes up at my workshops, and in my consultations. However, since the home is worth much more than a dollar, the house is a gift to your children.
That will create a period of ineligibility, if it is done during the five year look-back period. You have to think, that when you add a child's name to your house, or a bank account, you are also giving it to your daughter-in-law, or a son-in-law. There are all kinds of reasons to do effective trust planning, without just giving property and assets outright to a child.
Will The Nursing Home Take Our Home?
One of the most common questions I receive is, “Will we lose our home if I or my spouse needs a nursing home?” There is a lot of misinformation and misunderstanding about this topic. As a general rule, the nursing home will not take your home. However, if you have an outstanding bill at the nursing home and you have not qualified for MassHealth during that time, the nursing home has the right and ability to place a lien on the property. That is why it is very important to consult with a qualified Elder Law attorney.
If you want the Commonwealth of Massachusetts to pay for nursing home care, then you must comply with MassHealth rules. MassHealth does not want to take anyone’s home and generally you do not have to sell the home to qualify for MassHealth long term care. In most cases the home is exempt, and this is especially true if the spouse is living in the house. Some other exceptions are:
- If there is a disabled child, blind child or a child under the age of 20 living in the home;
- If there is a sibling who has lived in the home during the year prior to your entering a nursing home and the sibling is a part owner of the property;
- If there is an adult child living in the home for 2 years and that child has been providing care for his or her parents and this delayed the parent’s admission into a nursing home.
These are just a few examples of exceptions to the rule.
When a MassHealth application is needed sometimes people will consult with a Medicaid preparer recommended by a nursing home. Often times they will base their decision on the lower cost of a Medicaid preparer as compared to a qualified Elder Law attorney. We have had instances where on the recommendation of the Medicaid preparer, or the nursing home, the client was told to sell their home or the vacation home to pay for nursing home care prior to applying for MassHealth. Many times this can be avoided. A Medicaid preparer cannot give legal advice. If you have a concern regarding your primary residence or a second home, or disposing of any other asset, you should ALWAYS consult a qualified Elder Law attorney.
Advance planning is always the best but even at the last minute, we can often save the primary home or the value of the home. NEVER listen to anyone saying you must sell your home to qualify for MassHealth without seeking a second opinion from a qualified Elder Law attorney.
When applying for MassHealth, a qualified Elder Law attorney with the Law Office of Karol Bisbee, PC has only these goals: obtain approval for your loved one, preserve whatever assets are available for the individual who is applying, their spouse and, if appropriate, the family, and ensure your plan includes the highest quality of life and dignity for your loved one.
What Assets Will Be Used To Pay For Nursing Home Care?
Assets may be treated differently in other states, but in Massachusetts, all of a couple's assets are put in the same bucket and are considered available to pay for a nursing home, unless they are specifically exempt. In Massachusetts, you don't get to keep assets, such as your own retirement account, when you are married. The primary residents, if you're married and a spouse is living in it, is considered not countable up to an equity limit of $828,000. This amount changes every year. The primary residents is also not countable whether you are single or married if you have a qualified long-term care insurance policy. Countable assets available for nursing home care include cash, second homes, jointly held assets, retirement accounts, bank accounts, securities, insurance policies that have a cash value, a second car, any assets held in a revocable trust, and if you have gifted assets within five years of a Mass Health application, those assets will also be counted.
Many Times Assets Can Be Protected Even If Your Loved One Is Already In A Nursing Home
It happens too often that I get a family in who tells me that they've been told it's too late to plan now that a loved one is in a nursing home. We're doing a better job at educating the public and professionals about this, but there are still some trusted advisors who are unaware of the current regulations and who are telling their clients that it is too late and nothing can be done. Whenever you are told that it is too late or that you need to spend down your hard earned assets and sell your home, you should seek a second opinion. It is rarely too late to plan. We helped a family after they paid privately for nursing home care for a year. There are two situations where we can't do anything to help you. First, if you don't have anything left, there's nothing to protect. When you're out of money, you are out of options. The second situation where you lose options that you might have otherwise had is if a mass health application is filed at the wrong time. The timing for filing a mass health application is critical.
Caregiver Contracts / Personal Care Agreement / Family Caregiver Agreements
It's not unusual in elder law to have a client and their family with the following scenario. Mom's a widow in declining health, but still competent. The family wants to keep her at home when the time comes. Mom doesn't want to go to a nursing home and her two daughters want to be able to keep her at home, Joy and Martha. Joy is married, works, and has two kids, one nearing high school, so college is not far off. She can't stop working to help mom. Martha, not married, no children, is willing to move in with mom to take care of her when the time comes so she doesn't need to go to a nursing home.
The question that everyone asks is this. In this situation, is there anyway that mom can pay Martha since she can't work if she takes care of mom? The good news is that if drafted properly and followed through carefully with the terms of the agreement, a caregiver contract can work so that if mom needed to eventually move to a nursing home, the payments to Martha will not be treated as gifts.
Often, the family will come in after the child has already been providing care to the parent. In that situation, the child can't be paid for those services. The agreement can't be made retroactively for services already provided. Without a contractual agreement, Mass Health will consider that the child has taken care of the parent out of love or kindness, as this is what families do for each other. Any payments made without a written agreement will be considered gifts if a nursing home is needed and a penalty will be incurred, during which time mom will have to pay privately for her care.
Can an agreement be made for services provided going forward, even if mom lacks the capacity to contract? Yes, so long as mom has signed a durable power of attorney granting the appropriate authority to enter the contract. Having the care agreement is no guarantee that you will receive Mass Health approval because there are many traps for the unwary, both in drafting the agreement and then in the caregiver following the terms. Meticulous record keeping is required.
Although the personal care agreement is most often between a child and parent, it could be with any family member. The agreement itemizes the services or tasks to be provided and the compensation to be received. A lump sum payment made up front will typically not work. There are other programs to compensate an individual for caregiving. A personal care agreement has three basic requirements for a person to pay a family member for care. The agreement must be in writing, the payment must be for care provided in the future, not for services already performed, and compensation for the care must be reasonable. This means it should not be more than what would be paid to a third party for the same care in your state or geographic area. Tasks performed should match reasonable or customary fees typically charged for these services.
If the person receiving care needs to enter a facility or apply for other services that Medicaid might pay for, the personal care agreement can show that care payments were a legitimate expense and not an attempt to hide assets by giving cash to family members. The person receiving the care is paying for the value of personal care services.
What Is Special Needs Planning?
What Is A Letter Of Intent For Special Needs Families?
Parents with a special needs child should create a letter of intent. This is a document of all the parenting you do for your child or special things the child requires since some children with special needs are not able to verbally communicate. What are your aspirations for your child? What is the child's social and religious outlook? What types of strategies work well for caring for your child? Are there family or other resources that may not be obvious to someone coming in to contact with the child without background information? What are your child's habits? Favorite foods? Triggers for certain behaviors and how to bring them under control?
There should be a list of favorite belongings and clothing, a list of their doctors and contact information and medications and pharmacy and upcoming doctor's appointments. Include your child's family history and daily schedule and a list of family members and contact information. It is also very helpful to list the benefits they are on. Anything that will be helpful to future caregivers. The letter of intent can help with the natural disruption that will occur in your child's life when you become incapacitated or upon your death.
The letter of intent can serve as a guide to transition your child to other caregivers when you can no longer provide their care. The goal of the letter of intent is to memorialize your knowledge of your child's needs for future caregivers. You draft this letter and edit and add to it as needed. You do not need an attorney for this. No one knows your child as well as you do. A letter will help others with your insights.
Provide For Vulnerable Loved Ones
Many of us have a loved one we want to provide for that will never be able to handle money. I can't tell you how often I hear a client tell me that if their child receives any money, it just slips through their fingers. If that client left their estate to their vulnerable child or even a part of it, they would burn through the assets in a very short time.
Addictions and mental disorders can be one reason for that, but sometimes it's just a matter of that particular child's personality. They've never been able to handle money and they never will be. Concern for this child who may make destructive life choices or be vulnerable to predators and creditors, keeps them awake at night. Many attorneys will tell you to disinherit that child. In my experience, that's not usually the best way to go about things. What's more, with the proper legal tools in place, it's not necessary.
You can continue to provide for a vulnerable child after you're gone without the concern that your estate will be lost. You can make sure that your child always has what they need, a warm bed, enough to eat, and support that will last. Let us bring you peace of mind so you no longer worry about your child's future. It will bring relief to your other children who are concerned about their responsibility in making sure their sibling stays well.