1. Long Term Care and How To Fund It.
Daniel Timins, Esq., CFP®
on behalf of the Financial Planning Association of Metro New York
February 5, 2019
In partnership with The New York Public Library
Science, Industry and Business Library

2. Disclaimer
All information contained herein is for informational purposes only. It should not be considered legal advice. Please consult an attorney or appropriate financial professional before taking any steps based on this information.
The information provided herein is subject to change on an annual basis or more frequently.
Any tax information provided herein is strictly incidental and not provided from a tax preparation professional.
Any references to investment gains are based on past results, and are not a guarantee as to the future.
All viewpoints and opinions are those of the speak and not any sponsor or institution where the speaker is presenting or sharing information.

3. What Are We Talking About?
Providing for personal care as we or our family members age
Providing an opportunity to stay in our homes while receiving care
Preserving family wealth
Preparing for many years of care

4. Who Are the Central Players?
Individual in Need
Family Members (sometimes)
Health Care Agent
“Attorney in Fact” on Power of Attorney
Professional Caregivers
Geriatric Care Manager / Social Worker
Estate / Elder Law Attorney
Financial Planner

5. Congratulations! You have lived to a ripe age!
You have had many experiences
You may have substantial assets
You may (or may not) have family

6. The Need: Activities of Daily Living
ACTIVITIES OF DAILY LIVING (“ADLs”)
Transferring (Ie. Walking)
Bathing
Dressing
Eating
Continence
Toileting

7. LTC versus Medicaid LTC Medicaid Oversight Insurance Company
Government (DSS)
Who Gets It?
People who can afford it
Impoverished people
Costs
Insurance Premiums
Legal Fees
Quality Care
Typically Quite Good
Varies
Asset Transfers
No problem
Heavily regulated
Asset / Income Limits
None
Both Apply, and “Payer of Last Resort
Can family members get paid for care?
Sometime, and at a decent rate
Rarely (but possible), but not much

8. LTC Insurance to the Rescue!
Long Term Care Insurance = Private Pay
Pays for Home Care:
a certified caregiver comes to your home to assist you with your ADLs OR
Pays for Nursing Home Care
A need for more constant care
Trained staff on-site (such as nurses)

9. LTC is NOT… Medicare Medicaid Health Insurance Disability Insurance
Life Insurance

10. LTC: How the Benefit Works
Example: $250 per day for 5 years
$250 x 365 days x 5 years = $456,250
$456,250 is usually your guaranteed amount
This is your “Insurance Pool”
If you use it slower = lasts longer
If you use it faster = lasts less time

11. Other Optional Aspects
Cost of Living Adjustment
$150 per 2014 levels; increases 5% per year
Life Insurance / LTC Hybrid Policies
Home Care % lower than Institutional Care

12. Coverage Caveats
Some policies pay less for home care than nursing home care
Example:
$250 per day for Nursing Home
$125 Per day for Home Care

13. LTC: What Effects Premiums?
Age
Health
Coverage / Policy Options
Waiting Period
$ Amount per day
Amount of years of care
Is Home Care % same as Nursing Home Coverage?
Cost of Living adjustments

14. Old-School LTC Policy Problems
These were “stand alone” policies (I.e. no life insurance coverage)
Very few lapsed policies!
Lapsed policies were built into premium prices
Insurance companies losing money!!!
Insurance Company “Fixes” – for new AND existing policies:
Premiums raised
Coverage Terms decreased

15. Most New Policies are LTC / Life Insurance Hybrids
You buy a life insurance policy with a “rider” that pays for LTC
Any money used on LTC decreases your eventual life insurance payment
Prices tend to be higher than old stand-alone policies, but allows insurance companies to have a larger pool of participants
These are “Permanent” life insurance policies with cash value

16. Types of Medicaid Community Care Institutional
The type of Medicaid benefit you receive determines “look back” periods (I.e. the penalty for transferring assets)
Community Care
Personal care, physical therapy, home health care and home health aid services; clinical or out-patient basis; includes physicians, dentists, pharmaceutical, nursery
Institutional
Hospitals, medical facilities, nursing homes

17. Medicaid: What does “Home care” cover?
A paid caregiver to assist with ADLs
No guarantee as to how many hours you will receive daily
No cleaning or fancy cooking (warming up food okay)
A caregiver must be qualified individually or by a Medicaid- compliant agency
EVERYONE prefers home care to nursing home care…
…but it is hard to get 24 hour home care
And if you need a nurse during any 24 hour period, you may be required to go to a nursing home to get benefits

18. Medicaid: “But I don’t want to go to a Nursing Home!!”
NO ONE wants you to be in the nursing home while on Medicaid: Not you, not your family, not even the nursing home!
You probably have to be there because you need nursing staff available during a 24 hour period
“Okay, I feel better now…how do I get out of here?”
Nursing facility will want to see their suggested amount of homecare employees in place before you are released
Anyone with mental competency can “release” themselves voluntarily
Nursing home can’t force you out once admitted

19. Financial Eligibility Requirements for an Individual
Eligibility is based on people who are “Medically Needy,” “Categorically Needy” and “Legal US Residents”
Medicaid is “Means Tested,” meaning the recipient must have limited financial means
ASSETS
$15,450 in the recipient’s name
EXCEPTIONS:
“Burial Allowance” in Irrevocable Burial Trust
Life Insurance: $1,500 cash value
Personal Property (unlimited)
Your House (ONLY for Home & Community care)
Supplemental Needs Trusts
Medicaid Trusts
Retirement Plans (IRAs) are exempted from assets if they are in “payout status” (Required Minimum Distributions or Separate and Equal Periodic Payments if recipient is under age 59 ½), in which case payments are included in Income
MONTHLY INCOME
HOME CARE: $859 per month
Any excess income must go to the recipient’s “SPEND DOWN”
INSTITUTIONAL (at a Nursing Home): ALL of the recipient’s monthly income in excess fo $50 must be paid to the NH to offset Medicaid payments

20. Transfer Penalties Home & Community Care Nursing Home
Department of Social Services and Medicaid impose a “Look Back Period” for transferring assets outside of the proposed recipient’s name
Home & Community Care
1 MONTH Lookback
One Strategy:
Transfer all financial assets (except $15,450) to a non-spouse, wait one month for bank statements to be updated, then apply for Home Care.
DOWNSIDE: If the recipient needs Nursing Home care the 5 Year Look back rule applies
Nursing Home
5 Year Lookback Period, and the Homestead can be attached by Medicaid  Its ALL OR NONE
EXAMPLE: In January, 2016 Mary transfers her Coop and most of her assets to her son Joe (total of $280,000), and applies for Home Care. In March 2014 Mary goes to a Nursing Home. She failed to make the 5 year Look back (4 years & 2 months). Nursing Home Care in Manhattan equals approximately $12,000 per month.
$280,000 (amount gifted) = MONTH
$12,000 (monthly benefit) “Penalty Period”
Medicaid will not pay Mary’s Nursing Home benefits for 23 months. ..and Joe is liable. Joe should have paid for Mary’s care for 10 more months to get through Mary’s Look Back Period.

21. Some Exceptions Exist Homestead Exemptions: Well Spouse
Home Care  No lien on house if <$858,000
Child caregiver who has lived in home for 2+ years
Sibling co-owner who has lived in home for 1+ year
Disabled Children (in fact, they receive many exemptions)
Retirement Plans: as long as RMDs are coming out, the asset is protected / excluded
Medicaid Trusts
Spousal Refusal

22. Retirement Plan “RMDs”
Includes: IRAs, 401(k)s, 403(b)s, certain pensions, etc.
Owner must begin taking Required Minimum Distributions [“RMDs”] the year after he/she turns 70 ½ (most people do it at 70 ½)
 This is called a “Required Begin Date”
***If you are taking RMDs your retirement plan’s value is excluded from Asset testing, and only applies to Income testing

23. RMDs for You Age % to Distribute 70 3.65 % 80 5.35 % 90 8.77 % 71
3.77 % 81
5.59 % 91
9.26 % 72
3.91 % 82
5.85 % 92
9.80 % 73
4.05 % 83
6.13 % 93
10.42 % 74
4.20 % 84
6.45 % 94
10.99 % 75
4.37 % 85
6.76 % 95
11.63 % 76
4.55 % 86
7.09 % 96
12.35 % 77
4.72 % 87
7.46 % 97
13.16 % 78
4.93 % 88
7.87 % 98
14.08 % 79
5.13 % 89
8.33 % 99
14.93 %

24. Income Only Trusts (a “Medicaid Qualifying Trust”)
These Trusts distribute income or hold property (including a primary residence) in Trust to avoid Medicaid from placing a lien on the assets
The Creator and his/her spouse can ONLY receive income (NO principal) from the Trust
The Creator chooses the residuary beneficiaries
The Creator can be the recipient, spouse, the recipient’s Power of Attorney or an Administrative body
The 5 Year Lookback DOES apply if the recipient needs nursing home care, so not be a good idea if Nursing Home care is imminent
The Trust is Irrevocable / cannot be amended

25. What About the “Well” Spouse?
The “Community Spouse” is entitled to some assets and income, but they are limited
$3,140 of income per month
$75,000 - $123,600 of resources
During the Medicaid Application process the well spouse may exercise a “Spousal Refusal” to avoid inclusion of his/her assets and income
Medicaid may accept this, but will have a claim against the well spouse when he/she dies, and can still ask for a portion of excess income

26. What are “good” investments for Medicaid purposes?
Retirement plans that are Defined Contribution plans (IRAs, 401k, 403b)
Primary residence owned by a “well spouse”
Liquid investment assets with minimal capital gains

27. What are bad investment, and what can I do now to correct them?
Non-qualified annuities (b/c they generate income)
Permanent life insurance policy with large cash value
Roth Conversions (from IRAs)
Any time you turn a liquid asset into income
Multiple homes

28. Differing types & Levels of care
LTC usually covers Assisted Living Facility
Medicaid does not cover assisted living costs
LTC gives you higher-level care givers you can easily replace
Medicaid-eligible workers tend to be lower quality
You CAN sometimes pay a family caregiver from an LTC policy, but NOT from Medicaid

29. How can Medicaid work with LTC?
Medicaid is best looked at as the end game of the caregiving process
Use LTC for initial care needs and transfer assets immediately upon LTC being initiated
That way the best care is given early in the process when recipient’s quality of life is still best

30. How to Use LTC & Medicaid Together
When the need for care arises and you have a LTC policy:
Inform LTC agent / Financial Planner
Hire a Social Worker & Attorney
Get the LTC policy to start paying benefits
Transfer assets EXCEPT what is needed for 5 years; HOLD THESE FUNDS IN RESERVE!
Apply for Medicaid when policy coverage nears its end after 5 years

31. Investing in Health Care Using Income vs. Assets
Locked-in Income is good for healthy retirement, but is often not good for health care
Example: Annuitizing a $200,000 annuity may create $3,000 income per month, but the asset is now GONE for health care and insignificant for personal care
Assets can be easily-utilized for immediate needs, and can be transferred (and preserved for inter-generational wealth)

32. Planning Favors assets over income!!!
Complete control over our assets
We can trade or give our existing stuff to other people, change its nature
Medicaid allows more exceptions & exemptions for Assets
INCOME
Not much control over it - Income is typically on-going (Social Security, Pension)
Can only (sometimes) leave you income to one person: Your Spouse (and usually only after you die)
Medicaid tends to punish high income earners than people with large assets

33. Slide Title/Presentation Title

34. See a financial planner who knows about insurance, and hire lawyer who focuses on Elder Law

35. Long Term Care and How To Fund It.
Thank you! Daniel Timins, Esq., CFP® Financial Planning Association of Metro New York To search for a CFP® professional, please visit or call FPA at