Caution: The following applies to residents of Connecticut and reflects the law as it exists on January 1, 2010. The law relating to long term care frequently changes. Before any planning decisions are made and implemented, it is important to consult with a professional who keeps current on changes in the law and policies of the agencies that administer long term care programs.
Delegating Authority to Caregivers
If you become incapable without the necessary documents in place, the court will have to become involved and appoint someone to act on your behalf. Three documents can minimize the need for court involvement when you are no longer able to make decisions for yourself.
1. Durable Power of Attorney
The durable power of attorney is a document in which you designate one or more people to act as your agent (to pay your bills, manage your finances, etc.) if you become incapacitated. It is important to note that even if you already have a durable power of attorney in place, banks and financial institutions may be hesitant to accept old documents. Therefore, you should re-execute your power of attorney every couple of years to ensure it will be effective when you need it.
2. Health Care Instructions (“Living Will”)
Your Health Care Instructions (frequently called an Advance Directive or “Living Will”) is a document in which you designate someone to make health care decisions on your behalf if you become incapacitated. It can include instructions about life support, end of life decisions, and organ donation.
3. Designation of Conservator
If, for any reason, the previous two documents are deemed invalid, the court will look at your Designation of Conservator to see whom you have chosen to be the agent of your property and your person when you are incapacitated.
Planning for Long Term Care Costs
Most U.S. residents will need home care or nursing home care (or both) during the course of life. Many people, however, are unaware of the actual cost of long term care services. For instance, the average monthly cost for nursing home care today is $9,959 ($119,508 annually). The actual costs of more desirable nursing homes will be quite a bit more. Without proper planning, you may find yourself in a difficult situation when you or your spouse need long term care.
1. Medicare (Not a Solution)
A common misconception is that Medicare will cover the cost of long term care. While Medicare will cover some nursing home care (up to 100 days only) and home care for acute needs, it will not cover you indefinitely. After 100 days in a nursing home or after your acute needs are met through home care, you will have to find another way to pay for your long term care needs.
2. Medicaid (Provider When Assets Exhausted)
Another common misconception is that when you need long term care you can qualify for Medicaid (sometimes referred to as Title XIX) relatively easily. However, it is not easy to become eligible for Medicaid. The Department of Social Services (“DSS”) has strict asset and income guidelines that an applicant must meet before qualifying for benefits.
For example, a single individual applying for Medicaid home care benefits can have a maximum of $1,600 in assets (DSS excludes certain assets such as the value of the home) and a monthly income of $2,022 and still be eligible. If both spouses are applying for Medicaid home care benefits, they can each keep $1,600 in assets ($3,200 total plus the home) and a combined monthly income of $4,044. If the actual income exceeds the income limits, trust arrangements can be made to assure eligibility while protecting the interests of the state.
If an unmarried individual needs long term care in a facility, the monthly income maximum drops to $69 (with certain exceptions). For married couples, if only one spouse is applying for benefits, the other spouse (the “community spouse”) may be able to keep additional assets of up to $109,560 plus the home and a monthly income of at least $1,821.25 and as much as $2,739 (adjustments may be obtained through the Fair Hearing process). If the actual income exceeds the income limits, excess income will be applied to the cost of nursing home care.
DSS not only looks at your assets as of the date of your application, but it also looks at any transfers you have made for less than fair market value within the last five years. This includes transfers to a trust (with some exceptions), the purchase of certain annuities, and gifts to your children. Any such transfer will result in a period of disqualification (a “penalty”) from Medicaid eligibility, based on the value of the property you transferred. The penalty period does not begin to run until you have met the asset and income requirements, at which time you will be required to cover the cost of care until the penalty period ends.
Anyone who may need Medicaid to cover long term care services within the next five years should be aware of these transfer rules before making any gifts. Certain transfers, if well-planned, can be made without causing a penalty.
Keep in mind, if you or your spouse may need Medicaid to cover your long term care needs you should re-examine your Wills and any beneficiary designations you may have on life insurance policies or other accounts. Once you have qualified for Medicaid, any assets you receive (through inheritance or otherwise) could disqualify you.
3. Long Term Care Insurance
Many people think that long term care insurance is unnecessary or not worth the expense. However, long term care insurance, while not suitable for everyone, can be extremely beneficial. People with middle-incomes, who might otherwise spend down their assets to apply for Medicaid, may find long term care insurance is a worthwhile alternative.
Connecticut has created the Connecticut Partnership for Long Term Care whereby private insurance companies sell state-approved insurance policies that cover long term care costs (both home care and nursing home care). A key feature of this program is the built-in Medicaid asset protection that applies if you ever need state assistance. The Medicaid asset protection allows you to qualify for Medicaid benefits without meeting the usual asset limitations (stated above). DSS allows you to keep one extra dollar of assets for every dollar that your policy has paid for your long term care. This can protect a large portion of your assets that you would have otherwise spent down to become eligible.
Posted on 1/4/2010 by Kasey S. Galner, Associate, Chipman, Mazzucco, Land & Pennarola, LLC.
Posted on 11/12/2011 by Richard S. Land, Member, Chipman, Mazzucco, Land & Pennarola, LLC.
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