When Should You Purchase a Long Term Care Insurance Product

The younger you purchase a policy, the lower the premiums will be. But if you are in your 40s, do you want to purchase insurance that you are unlikely to need for 40 years? Given the changes in the long-term care market place and in long-term care insurance itself over the past 10 to 15 years, it is hard to imagine what the world will look like in 40 years.

But if you wait until you are in your 70s, the premiums will be extremely high and you may be uninsurable due to health reasons. In 2005, a policy offering a $143 per day long-term care benefit for 5.5 years, with an inflation rider, cost a 55-year-old a national average of $1,877 a year, while the same policy had an annual premium of $2,003 for a 65-year-old and $2,604 for a 79-year-old.

So, the ideal time is probably in your 50s and 60s. One approach is to see how the premiums fit into your life and other obligations. If you have children who have not yet graduated from college, they will be your major concern. You should carry enough life insurance to see them through. But after your children, if any, are on their own, you might take the funds you were using to pay for life insurance premiums and use them to long-term care insurance premiums.

As with every insurance purchase, if you are considering long-term care insurance, you need to consult with a qualified professional to determine whether you can afford this type of coverage and whether the policy you are considering meets necessary standards. Long-term care insurance has attracted much media attention, and many insurance agents are now selling it. However, long-term care insurance is a complex product that should be approached with caution.

Insurance agents and brokers selling long-term care insurance should be highly trained and know how to recommend the right coverage based on a client's finances and objectives. One factor to consider is whether the agent has a professional designation in providing advice about long-term care. However, recommendations from friends and other advisors are also very important because they will have personal knowledge of the experience and integrity of the people they recommend.

One professional designation is that offered by the Corporation for Long-Term Care Certification, Certified in Long-Term Care (CLTC). The Corporation for Long-Term Care was established by a founding member of the National Academy of Elder Law Attorneys, the country's premier legal organization addressing elder law issues, and is dedicated to training agents to solve clients' long-term care needs. Moreover, the Corporation for Long-Term Care Certification's program is third party, meaning that it is not affiliated with any insurance company or supported financially by the long-term care insurance industry. This is important because you will want an agent who represents a number of insurance carriers so you can choose from a variety of policies.

If you need assistance with Medicaid Planning, Estate Planning or other elder law matters call the offices of Fabisch Law, L.L.C. to set up a consultation with Rhode Island Elder Law Attorney Matthew Fabisch at 401-324-9344.

The Tax Deductibility of Long-Term Care Insurance Premiums

Qualified long-term care insurance policies receive special tax treatment. To be "qualified," policies must adhere to regulations established by the National Association of Insurance Commissioners. Among the requirements are that the policy must offer the consumer the options of "inflation" and "nonforfeiture" protection, although the consumer can choose not to purchase these features.
The policies must also offer both activities of daily living (ADL) and cognitive impairment triggers, but may not offer a medical necessity trigger. "Triggers" are conditions that must be present for a policy to be activated. Under the ADL trigger, benefits may begin only when the beneficiary needs assistance with at least two of six ADLs. The ADLs are: eating, toileting, transferring, bathing, dressing or continence. In addition, a licensed health care practitioner must certify that the need for assistance with the ADLs is reasonably expected to continue for at least 90 days. Under a cognitive impairment trigger, coverage begins when the individual has been certified to require substantial supervision to protect him or her from threats to health and safety due to cognitive impairment.

Policies purchased before January 1, 1997, are grandfathered and treated as "qualified" as long as they have been approved by the insurance commissioner of the state in which they are sold. Most individual policies must receive approval from the insurance commission in the state in which they are sold, while most group policies do not require this approval. To determine whether a particular policy will be grandfathered, policyholders should check with their insurance broker or with their state's insurance commission.

Premiums for "qualified" long-term care policies will be treated as a medical expense and will be deductible to the extent that they, along with other unreimbursed medical expenses (including "Medigap" insurance premiums), exceed 7.5 percent of the insured's adjusted gross income. If you are self-employed, the rules are a little different. You can take the amount of the premium as a deduction as long as you made a net profit--your medical expenses do not have to exceed 7.5 percent of your income.

The deductibility of premiums is limited by the age of the taxpayer at the end of the year, as follows (the limits will be adjusted annually with inflation):

Age attained before the end of the taxable year	Amount allowed as a medical expense in
	2011	2012
40 or under	$340	$350
41-50	$640	$660
51-60	$1,270	$1,310
61-70	$3,390	$3,500
71 or older	$4,240	$4,370

 

If you need assistance with Medicaid Planning, Estate Planning or other elder law matters call the offices of Fabisch Law, L.L.C. to set up a consultation with Rhode Island Elder Law Attorney Matthew Fabisch at 401-324-9344.

Five Tips For Providing For Children Disabilities

Over at the Fabisch Law Education Rights Blawg we have a post that readers of this blog, particularly those who are parents and grandparents of special needs children, should find informative.

10 Reasons to Create an Estate Plan Today

Many people think that estate plans are for someone else, not them. They may rationalize that they are too young or don't have enough money to reap the tax benefits of a plan. But as the following list makes clear, estate planning is for everyone, regardless of age or net worth.

1. Loss of capacity. What if you become incompetent and unable to manage your own affairs? Without a plan the courts will select the person to manage your affairs. With a plan, you pick that person (through a power of attorney).

2. Minor children. Who will raise your children if you die? Without a plan, a court will make that decision. With a plan, you are able to nominate the guardian of your choice.

3. Dying without a will. Who will inherit your assets? Without a plan, your assets pass to your heirs according to your state's laws of intestacy (dying without a will). Your family members (and perhaps not the ones you would choose) will receive your assets without benefit of your direction or of trust protection. With a plan, you decide who gets your assets, and when and how they receive them.

4. Blended families. What if your family is the result of multiple marriages? Without a plan, children from different marriages may not be treated as you would wish. With a plan, you determine what goes to your current spouse and to the children from a prior marriage or marriages.

5. Children with special needs. Without a plan, a child with special needs risks being disqualified from receiving Medicaid or SSI benefits, and may have to use his or her inheritance to pay for care. With a plan, you can set up a Supplemental Needs Trust that will allow the child to remain eligible for government benefits while using the trust assets to pay for non-covered expenses.

6. Keeping assets in the family. Would you prefer that your assets stay in your own family? Without a plan, your child's spouse may wind up with your money if your child passes away prematurely. If your child divorces his or her current spouse, half of your assets could go to the spouse. With a plan, you can set up a trust that ensures that your assets will stay in your family and, for example, pass to your grandchildren.

7. Financial security. Will your spouse and children be able to survive financially? Without a plan and the income replacement provided by life insurance, your family may be unable to maintain its current living standard. With a plan, life insurance can mean that your family will enjoy financial security.

8. Retirement accounts. Do you have an IRA or similar retirement account? Without a plan, your designated beneficiary for the retirement account funds may not reflect your current wishes and may result in burdensome tax consequences for your heirs (although the rules regarding the designation of a beneficiary have been eased considerably). With a plan, you can choose the optimal beneficiary.

9. Business ownership. Do you own a business? Without a plan, you don't name a successor, thus risking that your family could lose control of the business. With a plan, you choose who will own and control the business after you are gone.

10. Avoiding probate. Without a plan, your estate may be subject to delays and excess fees (depending on the state), and your assets will be a matter of public record. With a plan, you can structure things so that probate can be avoided entirely.

If you need assistance with Medicaid Planning, Estate Planning or other elder law matters call the offices of Fabisch Law, L.L.C. to set up a consultation with Rhode Island Elder Law Attorney Matthew Fabisch at 401-324-9344.

Five Components of a Good Estate Plan

Many people believe that if they have a will, their estate planning is complete, but there is much more to a solid estate plan. A good plan should be designed to avoid probate, save on estate taxes, protect assets if you need to move into a nursing home, and appoint someone to act for you if you become disabled.

All estate plans should include, at minimum, two important estate planning instruments: a durable power of attorney and a will. A trust can also be useful to avoid probate and to manage your estate both during your life and after you are gone. In addition, medical directives allow you to appoint someone to make medical decisions on your behalf.

Will

A will is a legally-binding statement directing who will receive your property at your death. If you do not have a will, the state will determine how your property is distributed. A will also appoints a legal representative (called an executor or a personal representative) to carry out your wishes. A will is especially important if you have minor children because it allows you to name a guardian for the children. However, a will covers only probate property. Many types of property or forms of ownership pass outside of probate. Jointly-owned property, property in trust, life insurance proceeds and property with a named beneficiary, such as IRAs or 401(k) plans, all pass outside of probate and aren't covered under a will.  

Trust

A trust is a legal arrangement through which one person (or an institution, such as a bank or law firm), called a "trustee," holds legal title to property for another person, called a "beneficiary." Trusts have one set of beneficiaries during those beneficiaries' lives and another set -- often their children -- who begin to benefit only after the first group has died. There are several different reasons for setting up a trust. The most common reason is to avoid probate. If you establish a revocable living trust that terminates when you die, any property in the trust passes immediately to the beneficiaries. This can save time and money for the beneficiaries.

Certain trusts can also result in tax advantages both for the donor and the beneficiary. These could be "credit shelter" or "life insurance" trusts. Other trusts may be used to protect property from creditors or to help the donor qualify for Medicaid. Unlike wills, trusts are private documents and only those individuals with a direct interest in the trust need know of trust assets and distribution. Provided they are well-drafted, another advantage of trusts is their continuing effectiveness even if the donor dies or becomes incapacitated. 

Power of Attorney

A power of attorney allows a person you appoint -- your "attorney-in-fact" -- to act in your place for financial purposes when and if you ever become incapacitated. In that case, the person you choose will be able to step in and take care of your financial affairs. Without a durable power of attorney, no one can represent you unless a court appoints a conservator or guardian. That court process takes time, costs money, and the judge may not choose the person you would prefer. In addition, under a guardianship or conservatorship, your representative may have to seek court permission to take planning steps that she could implement immediately under a simple durable power of attorney.  

Medical Directives

A medical directive may encompass a number of different documents, including a health care proxy, a durable power of attorney for health care, a living will, and medical instructions. The exact document or documents will depend on your state's laws and the choices you make.

Both a health care proxy and a durable power of attorney for health care designate someone you choose to make health care decisions for you if you are unable to do so yourself. A living will instructs your health care provider to withdraw life support if you are terminally ill or in a vegetative state. A broader medical directive may include the terms of a living will, but will also provide instructions if you are in a less serious state of health, but are still unable to direct your health care yourself. 

Beneficiary Designations

Although not necessarily a part of your estate plan, at the same time you create an estate plan, you should make sure your retirement plan beneficiary designations are up to date. If you don't name a beneficiary, the distribution of benefits may be controlled by state or federal law or according to your particular retirement plan. Some plans automatically distribute money to a spouse or children. Although others may leave it to the retirement plan holder's estate, this could have negative tax consequences. The only way to control where the money goes is to name a beneficiary. 

If you need assistance with Medicaid Planning, Estate Planning or other elder law matters call the offices of Fabisch Law, L.L.C. to set up a consultation with Rhode Island Elder Law Attorney Matthew Fabisch at 401-324-9344.

What is a Minimum Monthly Needs Allowance (MMMNA)?

When a spouse needs long term skilled nursing care and is covered by medicaid, the income of the community spouse (i.e. the spouse who does not require skilled nursing care and continues to live in the broader "community") will continue undisturbed; he or she will not have to use his or her income to support the nursing home spouse receiving Medicaid benefits. But what if most of the couple's income is in the name of the institutionalized spouse, and the community spouse's income is not enough to live on? In such cases, the community spouse is entitled to some or all of the monthly income of the institutionalized spouse. How much the community spouse is entitled to depends on what the Medicaid agency determines to be a minimum income level for the community spouse. This figure, known as the minimum monthly maintenance needs allowance or MMMNA, is calculated for each community spouse according to a complicated formula based on his or her housing costs. The MMMNA may range from a low of $1,838.75 to a high of $2,841 a month (in 2012). If the community spouse's own income falls below his or her MMMNA, the shortfall is made up from the nursing home spouse's income.

Example: Mr. and Mrs. Smith have a joint income of $3,000 a month, $1,700 of which is in Mr. Smith's name and $700 is in Mrs. Smith's name. Mr. Smith enters a nursing home and applies for Medicaid. The Medicaid agency determines that Mrs. Smith's MMMNA is $2,000 (based on her housing costs). Since Mrs. Smith's own income is only $700 a month, the Medicaid agency allocates $1,300 of Mr. Smith's income to her support. Since Mr. Smith also may keep a $60 a month personal needs allowance, his obligation to pay the nursing home is only $340 a month ($1,700 - $1,300 - $60 = $340).

In exceptional circumstances, community spouses may seek an increase in their MMMNAs either by appealing to the state Medicaid agency or by obtaining a court order of spousal support.

If you need assistance with Medicaid Planning, Estate Planning or other elder law matters call the offices of Fabisch Law, L.L.C. to set up a consultation with Rhode Island Elder Law Attorney Matthew Fabisch at 401-324-9344.

What is the Community Spouse Resource Allowance?

Community Spouse's Resource Allowance (CSRA)/Medicaid 

The CSRA is an amount of resources that states must protect for the spouse of an institutionalized person seeking Medicaid coverage. It is determined by application of a formula, or, as explained below, through a fair hearing, or by court order. The CSRA may not be counted in determining the eligibility of an individual seeking Medicaid. 

The CSRA is determined as follows:

(1) All nonexempt resources belonging to either member of the married couple will be pooled together regardless of who owns them, and regardless of marital property laws (e.g., equitable distribution laws, community property laws).
(2) The community spouse is entitled to an amount (community resource allowance), subject to paragraph 3 below, equal to the greater of:

• $19,824 (2000), as adjusted annually for inflation, or more, if a greater minimum amount is set by the state, or
• one-half the total resources of the couple to a maximum of $16,824 (2000), as adjusted annually for inflation.

(3) A state may establish a dollar amount which is both the minimum and maximum resource amount. Under the foregoing formula, $84,120 represents a maximum and $16,392 represents a minimum on the CSRA. A state, by opting to use the maximum resource amount, can establish $84,120 as both a maximum and minimum. A state may opt to select a spousal share amount which, in the alternative, is that sum (e.g., New York, $74,820) or a greater figure equal to one-half of the couple's resources, but not to exceed the maximum figure of $84,120.
(4) The CSRA amount is determined according to resources owned by the couple on the first day of a continuous period of institutionalization regardless of whether the institutionalized spouse applied for Medicaid at the time. (See also Snapshot rule/Medicaid.) Either spouse may ask the Medicaid agency to complete an assessment of their resources as of that time. The CSRA can be increased above the formula amount in two ways:

• Either spouse can request a fair hearing in which to demonstrate that a larger amount of resources must be protected (i.e., transferred to the community spouse from the institutionalized spouse) to generate income needed to bring the community spouse's income up to the minimum monthly maintenance needs allowance.
• A court order granting a larger amount of resources for the community spouse; the order must be honored by the Medicaid agency.  

If you need assistance with Medicaid Planning, Estate Planning or other elder law matters call the offices of Fabisch Law, L.L.C. to set up a consultation with Rhode Island Elder Law Attorney Matthew Fabisch at 401-324-9344.

Key Medicaid Figures for Rhode Island for 2012

Community Spouse Resource Allowance (CSRA): Minimum: $22,728 Maximum: $113,640 Increased CSRA: Not permitted. Annuities: Actuarially sound annuities are permitted. Monthly Maintenance Needs Allowance: Minimum: $1,839 Maximum: $2,841

If you need assistance with Medicaid Planning, Estate Planning or other elder law matters call the offices of Fabisch Law, L.L.C. to set up a consultation with Rhode Island Elder Law Attorney Matthew Fabisch at 401-324-9344.