For all but the very wealthy, prudent retirement and estate planning includes legal measures to protect against the cost of financially ruinous long-term care. Nursing homes in Pennsylvania cost $150,000 – $180,00 a year. Medicare and private health insurance don’t pay for this. Medicaid does, without any dollar caps or time limits. But poverty is the price of admission into the Medicaid program.

George Vasiliadis, an attorney with the law firm of Vasiliadis Pappas Associates, points out, however, that elder law attorneys knowledgeable and experienced in Medicaid planning can help seniors avoid impoverishment.  “We use legal measures that enable seniors to qualify for Medicaid benefits to pay for their long-term care while preserving for their loved ones the fruits of their labor, accumulated over a lifetime of hard work.”

What about financial products such as long-term care insurance and certain types of life insurance policies, called “hybrids”, that can be converted from a death benefit into one that pays for long-term care?  These can and should be considered. But in many, perhaps most cases, the monthly payout is too little and of only limited duration. And that’s assuming these are obtained before it becomes apparent that long-term care may be needed. You can’t buy fire insurance when your house is on fire. And you won’t meet the underwriting criteria for these financial products with pre-existing medical conditions that are red-flags indicating possible future need for long-term care.

But financial products and Medicaid planning need not – and should not – be mutually exclusive. Hybrids and long-term care insurance provide an elder law attorney with leverage that substantially enhances the amount of gifting to loved ones that can safely be made without jeopardizing Medicaid eligibility. A few examples of this integration include:

  • Funding of a Medicaid Asset Protection Trust concurrently with purchase of a hybrid or long-term care insurance (“5 and out” strategy”)
  • Purchase of “partnership” long-term care insurance that enables the insured applying for Medicaid to protect, dollar for dollar, excess non-exempt assets equal to the amount of insurance paid out.
  • Assignment, that is, transfer, of an insured’s long-term care benefit to the insured’s community spouse. This effectively preserves for a Medicaid recipient’s spouse an amount of money equal to the Medicaid recipient’s fixed monthly income. Medicaid requires recipients to pay over their income to the nursing home as a “patient pay” obligation.

To learn more about how to integrate financial products and Medicaid planning, and more generally, how to incorporate long-term care protections as part of your retirement and estate planning, contact us. We can help!