Long-term Care Planning.

Click here for common questions regarding Long-term Care Planning

Oast & Hook can help protect your assets if you need to pay for long-term care in your home or an assisted living facility, or other costs associated with long-term care, while providing security for your spouse and a legacy for children. The rules for Medicaid eligibility and other public benefit programs can be difficult to understand and change from year to year.  Our Elder Law attorneys will help you determine your legal rights, and assist you in applying for Medicaid or other assistance for which you may be eligible.

According to the New England Journal of Medicine, nearly half of all Americans will spend some time in a nursing home. The average cost of a nursing home in Virginia and elsewhere in the United States is approximately $5,000 per month, and can be more than $10,000 per month.

Only about 5% of Americans have long-term care insurance. Many are uninsurable or cannot afford such insurance. At most, Medicare only pays part of the first 100 days of your stay in a long-term care facility.

For all practical purposes the only plan available to most citizens for long-term care is Medicaid. Medicare only pays for about 2% of skilled nursing care in the United States. Private insurance pays for even less. The result is that most people pay out of their own pockets for long-term care unless or until they become eligible for Medicaid. To be eligible, you must become financially eligible under the program's guidelines.

The Medicaid program is a partnership between the federal government and the state. Each state submits its Medicaid program to the federal government for approval and once approved, the federal government assists with the funding. The programs of other states differ from Virginia's program and the differences between the programs are significant.

A person receiving Medicaid is usually allowed to retain a small amount of ‘countable’ assets including but limited to bank and brokerage accounts; Certificates of Deposit, certain real estate property; the cash value of any life insurance policies in excess of $1,500; IRA's; stocks;  and bonds. If the person is married, the Community Spouse is allowed to retain a portion of the couple's assets. For calendar year 2012 the Community Spouse is allowed to retain one-half of the assets between $22,728 and a maximum of $113,640.

Certain assets are not counted, such as a home (under certain circumstances), an automobile, personal effects, wedding and engagement rings, medical equipment, and certain types of burial funds.  For married couples, the assets of both the husband and wife are combined. This is true even if a prenuptial agreement was signed.

When determining eligibility, Medicaid ‘looks back’ over a 36-month period prior to application to see if any assets were transferred to an individual (other than a spouse), or a trust for all transfers made prior to February 8, 2006. For transfers made after February 8, 2006, there is a 60-month lookback for all transfers whether to individuals or trusts. If the transfers were made during the lookback period, they are penalized.

The penalty, which is a period of ineligibility for Medicaid, can be longer than 36 or 60 months or it may be shorter. In addition, transfers made by a Community or Institutionalized Spouse to third parties, related or otherwise, are also penalized. Transfers between spouses and transfers to certain disabled persons are exempt from the transfer penalty. Under the Deficit Reduction Act of 2005 (DRA), even small innocent gifts made for any purpose can result in a period of ineligibility, which will not begin until you are "impoverished" and in the nursing home. Therefore, early planning is even more critical than prior to the DRA.

Long-term care also involves careful tax planning. Failure to comply with tax laws, including income tax, gift tax, and, possibly, federal estate taxes usually results in the payment of significant extra taxes.

The key to long-term care planning is to act quickly, in order to avoid unnecessary and significant costs. If a nursing home costs $6,000 per month, then each month of delay in planning is an additional $6,000 you will never recover. Even in cases where a person is already in a nursing home, assets can still be protected but the earlier the planning occurs, the more money can be saved, the security of a spouse maintained and a legacy preserved for the children.

Learn more about the importance of Long-term Care Planning.