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Long-Term Care & Asset Protection Planning Options

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The greatest financial risk that most Americans will ever face is the high, and rising, costs associated with long-term care needs.  Middle Class Americans seeking to preserve their estates cannot afford to ignore the potentially devastating costs relating to nursing home and other long-term care costs.  Traditional Estate Planning does nothing to reduce this risk.

About 70% of those turning age 65 will have a long-term care need at some point in their lifetime.1  On average, a person age 65 will need 3 years of long-term care, and 20% are expected to need at least 5 years or more of care.1  The average cost of a semi-private room in a nursing home in 2008 was $185 per day.2  That is $5,550 per month, or $66,600 per year. The costs of a semi-private room in a nursing home has increased at an annual rate of 6.5% per year from 2004 through 2010.3  Thirty-six percent of Americans expect that Medicare or private health insurance will pay for their future long-term care needs.3  However, in most cases, they are mistaken – Medicare and private health insurance do not generally pay for long-term care costs.

The good news is with proactive planning the risk of loss due to long-term care costs can be significantly reduced.

Long-Term Care Insurance

One option is to consider purchasing long-term care insurance as a means to protect yourself and your family from this risk.  If you have not considered this option, you should obtain a quote so that you can make an informed decision.  Our firm can assist you in analyzing this option.  By restructuring some of your existing investments, it may be possible to generate the necessary income to pay the insurance premiums.  There are also hybrid products that combine life insurance and annuity products with long-term care benefits.  If you have an existing cash-value life insurance policy or annuity, you may be able to convert these existing policies to a plan that includes long-term care benefits with little or no out-of-pocket expense to you.

If you choose not to purchase long-term care insurance, you are choosing to rely on one of two means to pay for long-term care costs –- Self-insuring or Government assistance programs.  For a more detailed discussion on how pay for long-term care costs, read our article on “How to Pay for Long Term Care Costs”, which includes a discussion on the qualification requirements for Medicaid in Idaho.

“iMAP” Plan

The “Irrevocable Medicaid Asset Protection” Plan is an excellent tool to help protect yourself, your estate, and your heirs from the potentially devastating costs of Long-term care, as well as from other potential creditors.  This plan works in conjunction with one of our “Peace of Mind” Estate Plans to provide comprehensive estate and asset protection planning. Working with our firm and your other advisors, you will select specific assets to place in the “iMAP” Trust.  This trust works similar to a variable annuity.  You will receive all of the income from this trust for the rest of your life, or have the use of any real estate placed in the trust, and will direct and control the investment of the assets within the trust so that you can control the amount of income generated.  Upon your death, the corpus or principal of the trust is distributed to your designated heirs.  Once this trust is established and funded, the assets placed in the trust are protected from your creditors immediately and will be exempt from Medicaid (nursing home costs) after 5 years. This plan is usually a best fit for those who are in relatively good health but are concerned that they will require long-term care assistance at some point down the road, or those who desire to protect there assets from potential creditors. For more information, please contact our office to set an appointment to review your situation and see if this plan is right for you.

“Medicaid Qualification and Estate Preservation” Plan

The “Medicaid Qualification and Estate Preservation” Plan is for married couples who have applied, or anticipate applying soon, for Medicaid Assistance for one spouse.  The goal of this plan is to qualify the spouse in need of assistance as soon as possible while preserving as much of the estate as possible for the benefit of the at-home spouse and heirs.  This plan involves transferring assets to “impoverish” the spouse in need of care and restructuring assets to make them exempt for Medicaid Qualification and Estate Recovery. In most cases, we are able to protect nearly all of the assets.  For more information, please contact our office to schedule your review.

“iFAT” Plan

The “Irrevocable Family Asset Transfer” Plan is for single people who have applied, or anticipate applying soon, for Medicaid Assistance.  The goal of this plan is to qualify for Medicaid as soon as possible while preserving as much of the estate as possible for the children or other heirs.  This plan involves transferring assets to the “iFAT” Trust to make them exempt for Medicaid Estate Recovery. The transfer of assets to the “iFAT” will result in a “penalty period” of Medicaid disqualification.  Other assets will be restructured and used to pay for the cost of care during the “penalty period”.  At the end of the “penalty period”, you will be qualified for Medicaid and all remaining assets in the “iFAT” will be exempt from Medicaid and protected from estate recovery.  This In most cases, we are able to protect between 40% and 70% of the assets.  For more information, please contact our office to schedule your review.

Notes:
1. The Scan Foundation, Fact Sheet No. 4, September 2010.
2. The Scan Foundation, Fact Sheet No. 8, September 2010.
3.  Prudential Insurance Company, Long-Term Care Cost Study 2010.