It Takes Two to Protect Your Financial Future When Working With Couples
by: Begley Admin
Studies show that almost half of the individuals in this country require long-term care at some point in their lives. In fact, many couples find themselves in a situation where one spouse requires nursing home care while the other spouse remains in the marital residence.
With the cost of nursing homes now averaging approximately $9,500 a month for a semi-private room in New Jersey, this situation could be financially catastrophic. Because Medicare covers only an extremely limited amount of nursing home care, the cost of such care can devastate an estate, leave a spouse with inadequate assets to maintain the marital residence, or eliminate the chance of leaving an inheritance to one’s children.
Moreover, the stress of having a spouse in a facility and paying the bills for such care can ultimately impact the health of the spouse living at home. Those concerned about long-term care owe themselves the opportunity to investigate all options to protect their savings and current family financial situation.
All too often, couples who are seeking long-term care insurance find out they have begun their planning a little late when one of them learns that they can qualify for the insurance, but the other cannot. In the event that the spouse who is not covered by the insurance requires long-term care, both spouses’ estates will be dramatically impacted.
While being turned down by the insurance company is a disappointment and may encourage the spouses to consider how they can improve their health, the rejection in itself should not be allowed to lead the couple down a path of financial devastation. By being informed and proactive, couples can protect their savings even when one becomes sick. To maximize control over your financial future, keep the following in mind:
1. Begin early. When researching legal protection planning options and especially long-term care insurance, everyone must begin early. Generally, once an individual acquires a long-term illness, the person can no longer acquire long-term care insurance. This by no means suggests that the individual is unable to save substantial assets by engaging in legal planning, however. In fact, even after an individual enters a nursing home, the individual can still save substantial assets for his or her family through asset protection planning. Such legal planning is most effective when it is done early, usually before the prospective long-term care resident enters a facility. Every Medicaid application is also subject to a five-year lookback as established by federal law. Therefore, just as insurance premiums will be much lower the earlier one purchases the insurance, the savings through planning will be substantially greater. In addition, early planning gives families peace of mind and the security that generally comes from being proactive.
2. Select your advisor carefully. When purchasing insurance or considering legal planning, it is important to carefully select a provider. Increasingly, professionals are amassing more knowledge of Medicaid. However, the Medicaid asset transfer rules are complex, so partial knowledge of the subject is likely to place the client in a worse situation than if no planning had been done at all. Because many seniors discuss long-term care planning amongst themselves and with their trusted advisors, many myths abound. In New Jersey, for example, many professionals still try to sell annuities under the guise that these products will expedite Medicaid eligibility. While such claims may be true in limited cases, an annuity purchase by a senior citizen who is contemplating Medicaid eligibility is more likely to benefit the financial advisor than the purchaser. The most seasoned legal advisors to the elderly are likely to be members of the National Academy of Elder Law Attorneys (NAELA) or Certified Elder Law Attorneys (CELAs), accredited by the National Elder Law Foundation. Those seeking elder law advice should refer to www.naela.org.
Likewise, when choosing a long-term care insurance company, the selection must be done carefully. It is critical to choose a stable company that will be in existence for many more decades to come. Many insurance brokers agree that even a slight increase in premiums is worth the stability and security that a large company offers. Purchasers are best advised to select a broker who represents several companies so that they can review and compare different prices and features. Any long-term care insurance discussion should include a comparison of home care benefits to be paid out, including whether the policy has an inflation rider and a comparison of “elimination periods,” which show how long it will take before the policy begins to pay once the individual is incapacitated enough to trigger the benefit.
3. If one spouse is rejected from insurance coverage, consider both legal planning and insurance. In situations where one spouse is sick, the couple can plan for each of their care by purchasing long-term care insurance for the healthy spouse and engaging in asset protection planning for the ill spouse. This is commonly done, but couples are well advised to remember that Medicaid does look at the assets of the healthy spouse as well as the ill spouse when an application is filed. Therefore, while adequate insurance coverage will guarantee that the healthy spouse can retain assets and property in his or her name and still pay for long-term care if it is needed for him or her, a comprehensive asset protection plan is still necessary. Without legal planning, if the spouse without the insurance required institutionalization, the couple could be faced with an estimate of $9,500 of nursing home bills. On the other hand, through legal planning, the couple could convey the marital residence to the spouse who is covered by insurance and protect it if the other spouse ever requires Medicaid. They could also transfer certain other assets as consistent with state and federal law to the covered spouse, and in some cases to other family members, to minimize the financial impact of privately paying for care. Ideally, the spouse living at home can protect his or her standard of living, including being able to afford long-term care insurance premiums.