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In addition to having essential estate planning documents such as a will, power of attorney, healthcare power of attorney, and advance directive, you may become more concerned about ensuring that you will have enough money to live on after you retire. You have consistently saved part of your income over the years, perhaps you have opened one or more retirement accounts, and you may even have purchased life insurance.
Long-term care is the kind of care that you need when you are unable to independently perform the daily activities of life. Think eating, drinking, dressing, or bathing. While most of us think of the elderly needing this kind of care, a number of younger, working-age adults will need this care due to an accident, illness, or injury.
Long term care can be provided in your home, in an assisted living facility, or in a nursing home. While all of these can be expensive, typically nursing home care is the most expensive.
Long term care costs vary greatly, depending on the type of care you need, the agency providing care, and the number of hours per day in which you need care. According to the Genworth Cost of Care Survey for 2021, the average cost of care in the Raleigh-Durham area is:
and these numbers are expected to continue to rise.
Who pays for this level of care? Many people think that Medicare will take care of these costs; however, that assumption is wrong.
Medicare. Medicare is designed for short-term care. If you require care in an assisted living facility or nursing home, you can expect Medicare to pay the full cost of such care for the first 20 days. From days 21 to 100, Medicare will require you to pay approximately $194.50/day, or $5,835.00/month in copays. On the 101st day and beyond, you are on your own to pay for the care.
What are your options since Medicare is not available to pay for long-term care?
Long-Term Care Insurance. Many people may consider purchasing long-term care insurance to cover the costs for long-term care and protect their assets and income. This insurance will allow you to have the option of receiving care in your home or in a facility. If you are considering this option, it is important that you purchase the insurance while you are younger and in good health. Unfortunately, by the time many people think about obtaining this insurance, it is too expensive and they find out that they do not even qualify for the insurance.
Private Pay. Under the private pay option, you will be forced to pay for your or your loved one's long-term care using the assets that you have spent your life accumulating, and at the rates quoted above, it likely won't take you long to deplete everything that you have spent your life acquiring.
Medicaid. Medicaid is a joint federal-state government program. States receive funding for the program from the federal government and must follow specific federal Medicaid rules. Despite this, each state administers its own Medicaid program. As a result, the rules for Medicaid can vary greatly from state to state. Unlike Medicare, Medicaid covers all types of medical care, including long-term care regardless of whether that care is provided in the home, through an assisted living facility, or a nursing home.
However, Medicaid is a needs-based program, and the rules for qualifying are very stringent. To qualify for Medicaid for yourself, your monthly income must be below a certain amount. In 2022, that amount is $2,000.00. If you are trying to qualify for Medicaid to cover long-term care, in addition to the income limit, your total assets must be below a stated maximum amount. The actual maximum allowable asset amount will vary depending on your living situation at the time you apply for Medicaid.
Planning ahead is your best option, because it allows you to consider more alternatives and provides you with the opportunity to potentially protect more of your assets. With advance planning, you can put some protections in place now to make it easier should your or your spouse need long term care in the future.
Many people think that because their spouse or loved one is getting ready to transfer into a nursing home from the hospital or is already in a nursing home, there is nothing they can do to protect their assets from the costs of care. They think it is too late to obtain Medicaid coverage until all of their assets are depleted. But this is not true.
While the options are more limited when a spouse or loved one is in this situation, there are still some strategies that we can implement that may allow your loved one to obtain Medicaid benefits faster while still preserving some assets.
As nursing home costs continue to rise, it is important to work with an elder law attorney who can help you design a long term plan to protect your assets. Our attorneys will help guide you through what is sometimes a complicated legal process to place you and your family on the path to reach your goals.
Over the last 30 years as an estate planning and probate practice, we have become increasingly aware of the many clients who are concerned about the potential need for long-term care in the future. In addition to the estate planning services we provide for our clients., we can discuss how to protect your assets during your life and preserving your assets for your children's benefit after your death should you need long-term care in the future.
What is Asset Protection?
Basically, asset protection is the preservation of your assets from the high cost of long-term care should you need it. It can also protect your assets from creditors, taxes, lawsuit judgments, or other risks. You may choose to protect your assets during your lifetime from long-term care costs or you may choose to protect your child's inheritance from future creditor claims and other risks.
Before you determine the strategy that you should use to protect your assets, you should think about WHY you want to protect your assets. Are you concerned about:
There are some strategies that you can take to protect your assets. Not every strategy will work for every situation, which is why it is so important to determine your goals before implementing a strategy.
Potential Strategies for Protecting Assets:
Create a Limited Liability Company –
Many people choose to own a company as a sole proprietorship, but this will not protect your personal assets if a customer chooses to file a suit against you. If you have significant personal assets and also own a business, creating an LLC may be a good strategy for you. An LLC can protect your personal assets from your business customers' reach. In addition, an LLC can protect the business's assets from your personal creditors. However, to be effective, you must observe the LLC formalities to properly protect the assets.
Create an Irrevocable Trust
The use of a trust is an option that most people should consider when doing estate planning. There are different types of trusts that you can create, depending on your protection goals. Generally, trusts can be revocable or irrevocable. A revocable trust allows you to maintain control over your assets during your lifetime, but these trusts will not protect your assets from your creditors. However, they can offer protection for your children against your children's creditors and can offer some protection for your spouse against both your and your spouse's creditors. While irrevocable trusts may offer protection against your personal creditors, they are irrevocable, meaning that once you place assets into the trust, you no longer own or have the right to control those assets. If you are considering a trust as part of your estate planning strategy, it is important that the terms of the trust are carefully drafted to ensure that the trust meets your goals.
Transfer Ownership of Assets to your Spouse
If you are married, you can transfer the ownership of some assets to your spouse. This is often a good strategy for individuals who are in a profession with a higher risk of being sued. However, once assets are transferred to the spouse, that spouse then owns the assets, which could impact the division of assets in the event of a future divorce.
Purchase Liability Insurance
Proper liability insurance may be a strong option. You should review the insurance policy carefully to make sure your coverage is adequate for your particular situation. If you are in a high risk profession, you may consider purchasing an umbrella policy to cover any future potential lawsuits and help protect your personal assets from professional lawsuits. Note that an umbrella policy can be costly. In addition, it is important that you carefully review the policy because often these policies will not cover every possible scenario, and those gaps in coverage can be costly if you are faced with a claim that the insurance policy does not cover.
If you are interested in learning more about protecting your assets, give us a call at (919) 384-8000 to schedule a free consultation or click the button below to send us an email:
If you have a loved one who is affected by a disability such as an autism spectrum disorder, birth defect, cognitive disability, Alzheimer's or other dementia-related illness, that loved one may be receiving government benefits now or may need to apply for those benefits in the future. Special needs planning is crucial to ensure that your loved one will qualify for those benefits or will not lose existing benefits should your loved one inherit from you.
There are many nuances and complexities associated with special needs planning, so it is critical to speak with a special needs planning attorney to ensure your loved one can qualify or maintain government benefits in the future.
If you want to provide for a loved one with a disability who is currently or likely to receive government benefits in the future, consider creating a trust naming that individual as the beneficiary of the trust.
To learn more about special needs planning for your loved one, please call us at (919) 384-8000 or use the contact button below to schedule your initial consultation to discuss how we can help you protect your child or family member.
This type of trust is often the most beneficial trust for protecting a child or adult with special needs. A Supplemental or Special Needs trust allows the trustee to manage the adult or child's resources while still allowing them to receive government benefits such as Medicaid, Social Security Disability Income, or Social Security Supplemental Income.
Money from this trust cannot be used to cover the child or adult's basic needs such as food, rent, or utilities when that person is receiving government benefits. Instead, this money is used to supplement government benefits; it allows your child to participate in things that government benefits will not cover, such as vacations, meals in restaurants, attendance at sporting or social events, and the purchase of other non-covered goods and services.
Anyone who is competent and over the age of 18 can set up a special needs trust, including the individual with disabilities. Typically the parents or relatives of the individual with special needs will set up the trust to benefit that individual. That trust can be created under a will or as a separate trust that is funded with assets that the parents or family member contributes.
A person with disabilities can set up their own special needs trust to protect their assets if that person is competent to do so. Often, the individual has assets due to a large settlement for a personal injury and that person requires long term care. While the assets are protected during the individual's lifetime, the state will require that the balance of the assets be applied to pay back the state for funds the state expended on behalf of the individual for their care. However, the amount the state can recover cannot exceed the amount that the state actually paid out for the individual's care.
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