1. Welcome! Thank you for joining today’s webinar.
We will be starting shortly.

2. Veterans Benefits Planning for the Married Couple
Dale M. Krause, J.D., LL.M.
President and CEO
March 9th, 2017
medicaidannuity.com | Enterprise Drive | De Pere, WI | (866)

3. For more than 26 years, Krause Financial Services and it’s team of planners has helped thousands of elder law attorneys throughout the United States to qualify their clients for Medicaid and Veterans benefits to pay for long-term care services – home health, assisted living, or nursing home care.

4. The Goal of Today’s Presentation
Educate you on the Veterans Administration’s (“VA”) programs, known as Housebound and Aid & Attendance (“A&A”), which help veterans and surviving spouses of veterans to pay for existing long-term care expenses,
Highlight the types of annuities used in VA planning, and
Illustrate, by way of a case study, how a married couple can accelerate their eligibility for the A&A benefit by way of a properly structured VA compliant immediate annuity.

5. The Long-Term Care Transition
Family
Home Health Care
Assisted Living
Nursing Home
The Long-Term Care Transition

6. One bedroom Single Occupant
What Does this Cost?
Family
Home Health Care
Assisted Living
Nursing Home
No compensation
$46,372/Yr.
$3,861/Mo.
22 hrs./week
$43,536/Yr.
$3,628/Mo.
One bedroom Single Occupant
$82,128/Yr.
$6,844/Mo.
Semi-Private Room
Care costs taken from the 2016 Genworth Cost of Care Survey and represent the national averages.

7. Who will Pay for it? Veterans Benefit Pays a Portion of Costs
Family
Home Health Care
Assisted Living
Nursing Home
No Compensation
$46,372/Year
$3,861/Mo.
22 hrs./week
$43,536/Year
$3,628/Mo.
One bedroom Single Occupant
$82,128/Year
$6,844/Mo.
Semi-Private Room
Veterans Benefit Pays a Portion of Costs
Medicaid Pay up to 100%

8. Is the Disability Service Connected or Non-Service Connected?
Two LTC benefits are available:
Non-service Connected
Disease or injury was incurred in the line of duty
Not from misconduct, or drug/alcohol abuse
Assets and income NOT a factor of eligibility
The higher the disability rating, the higher the VA compensation
Housebound
Aid & Attendance
OUR FOCUS TODAY

9. Who is a Non-Service Connected Qualified Veteran
Who is a Non-Service Connected Qualified Veteran? Active Service Requirement
The veteran must have served 90 days active duty, with one day during a wartime
War Periods Are:
WWI: 04/06/1917 – 11/11/1918
WWII: 12/07/1941 – 12/31/1946
Merchant Marines ending date 08/15/1945
Korean Conflict: 6/27/1950 – 1/31/1955
Vietnam War: 2/28/1961 – 5/7/1975
For those who served in Vietnam during that period /5/1964 – 5/7/1975
Gulf War: /02/ Ongoing

10. Who is a Non-Service Connected Qualified Veteran? Proper Discharge
Acceptable:
Honorable discharge – most common
General discharge
Other Than Honorable discharge
Not acceptable:
Dishonorable discharge
Note: To determine the dates of service and type of discharge, the veteran’s discharge papers (DD 214) should be reviewed.

11. Who is the Surviving Spouse of a Non-Service Connected Qualified Veteran?
Must have been married for at least one year at time of death OR had a child together – prevents benefits in the event of a death-bed marriage
Common law marriage and same sex marriage may be valid depending on state law
Must have been living together at time of death
Remarriage typically disqualifies

12. Non-Financial Requirement: Permanent and Total Disability
A claimant is permanently and totally disabled if:
He or she cannot engage in any substantial gainful activity because of a physical or mental condition;
A physician determines that the condition has lasted or can be expected to last continuously for at least a year or can lead to death.
At age 65+, the claimant is presumed to be disabled – The VA will require a physician’s affidavit regarding health See VA Form
-OR-

13. Permanent and Total Disability = Inability to Preform ADL’s
ADL’s = Activities of Daily Living include:
Medication management
Meal Preparations
Assistance with eating, bathing, dressing, walking, toileting and transferring

14. VA Benefit – Housebound
When a veteran or the surviving spouse of a veteran is:
Permanently confined to his or her home
Does not require assistance with ADL’s on a daily basis to remain in a safe environment – home health care agency comes in only twice a week
Only leaves the home, with the assistance of another, to attend doctor’s appointments …
The “Housebound” VA benefit can provide the claimant with a monthly check to pay for the long-term care services.

15. What Does Housebound Pension Pay?
Veteran
Married Veteran
Veteran Needs Care
Surviving Spouse
$1,314/month
$15,768/year
$1,647/month
$19,764/year
$881/month
$10,572/year
2016 Genworth Cost of Care Survey
Average Monthly Cost of a Home Health Aid is $3,861.

16. VA Benefit – Aid & Attendance
When a veteran or the surviving spouse of a veteran is:
Permanently confined to his or her home or an assisted living facility
Require assistance with 2 or more ADL’s on a daily basis to remain in a safe environment
The A&A VA benefit can provide the claimant with a monthly check to pay for the long-term care services.

17. What Does Aid & Attendance Pension Pay?
Veteran
Married Veteran
Veteran Needs Care
Surviving
Spouse
$1,794/month
$21,528/year
$2,127/month
$25,524/year
$1,153/month
$13,836/year
2016 Genworth Cost of Care Survey
Average Monthly Cost of a Assisted Living Facility $3,628.

18. Financial Requirement: “Low Monthly Income”
Generally, in order to satisfy the low monthly income test to qualify for the VA benefit, the recurring, unreimbursed, monthly, medical expenses must exceed total monthly income
When totaling monthly income, do not include the anticipated VA benefit
In the case of married veteran, you have to pool their monthly income and expenses

19. Recurring Unreimbursed Monthly Medical Expenses
Generally, they include charges for:
Home health care
Assisted living
Medicare and health insurance
Medicare co-pays and deductibles
Transportation
Medical equipment and supplies
Personal services

20. Non Recurring Unreimbursed Monthly Medical Expenses
Generally, they include charges
Prescription glasses
Hearing aids
Dentures
Doctor & dentist bills
Skilled care treatments
Short-term prescriptions

21. Financial Requirement: “Low Net Worth”
Official VA website states “there is no set limit on how much net worth a veteran can have, but net worth cannot be excessive”
Most websites suggest $50,000 for a single claimant and $80,000 for a married claimant.
The older the claimant = less, less, less
If an A&A plan is developed, it is my opinion that a single claimant should retain no more than $15,000 in cash assets and married claimant should retain no more than $25,000 in cash assets.

22. What Assets are Excluded from the Net Worth?
Residence
One Motor Vehicle
Immediate Annuities
Personal Property
Prepaid Burial Plan

23. What Assets are Included in the Net Worth?
Property that can be readily converted to cash at no substantial sacrifice
Second Automobiles, Boats, & RVs
Retirement Accounts
Checking and Savings Accounts
Certificates of Deposit
Cash
Tax-deferred annuities
Cash Value of Life Insurance

24. When Should You Consider VA Planning?
They have excess net worth.
They have a condition that is not expected to improve; and
They are receiving home health care or are a resident of an assisted living facility;
Your client is a qualified veteran or surviving spouse of a qualified veteran;

25. Case Study: MEET CLARENCE AND MARY

26. The monthly cost of his care is $3,950
Clarence and Mary
Clarence, age 79, is a Korean War veteran, with failing health
Mary, age 75, and in great health
Clarence permanently entered an assisted living facility after Mary was unable to care for him at home
The monthly cost of his care is $3,950

27. Clarence and Mary’s Assets Include:
- Home: $175, Newer Car: $26, Household Furnishings: $35, Savings: $220,000
Clarence receives $1,600 per month from social security and $400 from a pension
Mary receives $800 per month from social security
Together, their total monthly income is $2,800
Excluded from Net Worth

28. What Worries Mary?
That the assisted living expense will consume their life savings in less than 55 months. ($220,000/$3,950).
Mary is also worried that if their life savings is consumed by Clarence’s assisted living expenses, her financial future will be in grave jeopardy.
Rather than sustain an uncertain financial future, Mary met with an elder law attorney certified in VA benefits and her financial planner to develop a VA plan for Clarence.

29. Their Financial Situation
Recurring Unreimbursed Monthly Medical Expenses (RUMME)
$4,558
Assisted living facility $3,950
Medicare Part B $ x 2 = $268
Medicare Supplemental Insurance $170 x 2 = $340
Other Monthly Expenses
$1,800
Mary’s monthly out-of-pocket expenses for real estate taxes, homeowners and car insurance, utilities, cable, internet, food, car expenses, home repairs, clothing, laundry, clothing, entertainment, other miscellaneous expenses= $1,800.00
Low Monthly Income
($1,758)
$2,800/Monthly Household Income - $4,558/RUMME =($1,758)/ Low Monthly Income
If positive, VA benefit is reduced dollar-for-dollar

30. What Does the VA Plan Look Like?
Total Assets $220,000
Estate Planning Legal Fees $5,500
Two Prepaid Funeral Plans $16,000
Outstanding Bills
$15,000
Savings $25,000
VA Compliant Immediate Annuity $158,500
Mary Needs a VA Compliant Immediate Annuity

31. Educational Slides: VA COMPLIANT IMMEDIATE ANNUITIES

32. Annuities and VA Benefits
Excess new worth can be immediately eliminated by converting it into immediate annuity – monthly income stream
NOT a tax-deferred annuity – they always have cash surrender value (net worth)
Once annuitized – it has no cash surrender value

33. Immediate Annuity: Level Payout
Most common in VA planning
Typically structured with a term not exceeding claimant’s Medicaid life expectancy
Not a VA requirement
If Medicaid is needed in the future (nursing home stay) – the product can be easily converted to a Medicaid compliant immediate annuity

34. Immediate Annuity: Balloon Payout
This product is used when a level payout immediate annuity would create too much monthly income if structured over the longest possible term – claimant’s Medicaid life expectancy.
Example: 75 Year Old Female – Medicaid Life Expectancy: Years/ Months
$100,000 Level Pay
1-153 Months $679.01
Total Payout $103,888.53
$100,000 Balloon Pay
1-152 Months $59.10
153 Month Final Monthly Payment $98,529.10
Total Payout $107,512.30

35. Deciding Which Annuity to Use
The annuity plan for each claimant will be dictated by the following factors:
Age
Gender
Monthly income need
Excess net worth
Getting back to our discussion about Mary

36. Mary’s Level-Pay Immediate Annuity
Single Premium
Period
Certain
Monthly
Payment
Total
Payout
$158,500
100 Months
$1,625.24
$162,524
Note: The period certain was based on their monthly income need.
Mary’s Medicaid life expectancy of years/ months.

37. How does Mary’s Annuity Impact Their Financial Situation
Total Monthly Income $4,425.24
Monthly Medical Expenses $4,558
Low Monthly Income ($132.76)
VA Benefits $2,127
Monthly Surplus $1,994.24
Total Monthly Income
Clarence’s SS $1,600.00
Clarence’s pension $400.00
Mary SS $800.00
Annuity $1,625.24
Total Monthly Income $4,425.24

38. Why is there a Monthly Surplus?
The $1, monthly surplus allows Mary to pay all of her monthly household expenses, estimated at $1,
The net positive result will keep Mary from invading her $25,000 savings account.

39. What is their Monthly Cash Flow?
Total Monthly Cash Flow $6,552.24
Total Monthly Expenses $6,358.00
Monthly Excess Cash Flow $194.24
What is their Monthly Cash Flow?
Total Monthly Cash Flow
Total Monthly Income $4,425.00
VA Benefits of $2,127.00
Total Monthly Cash Flow $6,552.24
Total Monthly Expenses
Mary’s Monthly Expenses $1,800.00
Monthly Medical Expenses + $4,558.00
Total Monthly Expenses $6,358.00

40. Assume after 36 months in assisted living, Clarence passed away.
Clarence Dies After 36 Months of Care in Assisted Living – Economic Results
Assume after 36 months in assisted living, Clarence passed away.
He received $76,572 of VA benefits ($2,127 per month)
Clarence received the care that he needed
Mary maintained control of their finances, and
Mary’s monthly income after Clarence’s death is $3, The annuity ends when Mary’s 83.3 years of age.
Note: After Clarence’s death Mary is giving up her S.S. of $800; her monthly income comes from Clarence’s S.S check $1,800 and his $400 pension, she will also continue to receive the annuity payment — $1, for 64 additional months.

41. Available for Savings $2,025.24
Was it a Good Result?
Absolutely!
Monthly Income $3,825.24
Monthly Expenses $1,800
Available for Savings $2,025.24
Mary has all of her original assets, $25,000 in saving, and enough monthly income to meet all of her monthly expenses.

42. Change in the Original Case Facts – Mary had an IRA Account!
What if in the original case facts included a $35,000 IRA in Mary’s name?
What happens to her IRA?
Do things change if the IRA was owned by Clarence?

43. IRA Results
If the $220,000 in savings included a $35,000 IRA in the name of Mary, how does the economic result change?
Answer: It does not.
Instead of $25,000 in a savings account, Mary would have been advised to retain $25,000 in her IRA account and annuitize the $10,000 surplus over 100 months. The same would have been true if Clarence owned the IRA account.
The IRA annuitization would not have been a taxable event.
However, as Mary received the IRA annuity payments, she would have been taxed in the year of receipt.
Stay Tuned: Q&A Next

44. QUESTIONS ? ? ? ? ?

45. Who Will You Be Working With?
Amy Beacham
Benefits Planner
Aaron Kempen
Benefits Planner
Stuart Otto
Benefits Planner
Alex Thompson
Benefits Planner

46. Thank you for attending our session!
Next webinar March 16 Intro to Medicaid Planning with Thomas R. Krause, J.D.
Dale M. Krause, J.D. LL.M. P