Jim Morgan 00:00:05
Good afternoon. I'd like to welcome everybody joining us today and to thank you for participating in this our third webinar on estate planning. Today's topic is how to pay for long-term care and how to protect assets for families with Parkinson's disease. Our webinar today is again sponsored by the Parkinson's Foundation.
My name is Jim Morgan and I'm a member of the National Board of Directors of the Parkinson's Foundation and a co-chair of the Development Committee. I personally have been living with Parkinson's disease for the last sixteen years. It was an early introduction to the Parkinson's Foundation and their vast resources of information and support, as well as an incredible community of like-minded people, that really attracted me to the Parkinson's Foundation. While there are many great organizations serving the Parkinson's community,
It's the Parkinson's Foundation's mission to make life better today for people living with Parkinson's while still advancing research toward a cure that really resonates with me. The Parkinson's Foundation indeed makes life better every day for people living with Parkinson's disease and those who love and care for them.
Today I have the pleasure of introducing our presenter, Lauren Fink. A shareholder at Maser, Amundson & Boggio, PA, Lauren practices in the areas of elder law and estate planning, helping clients to establish estate plans as well as with long-term care planning and asset preservation strategies. Lauren's practice also includes planning with government benefits such as medical assistance and veterans benefits, as well as special needs planning and probate and trust administration.
Lauren chose to become an attorney because her parents were caretakers for many elders in her own family. She saw how difficult their job was and wanted the tools to be able to act as a valued guide for others who care for elders. Lauren's warm approach puts her clients at ease as she helps them develop a plan, making sure they're confident about their situation.
Lauren obtained her BA in English Literature from the University of Wisconsin at Madison and her Juris Doctor from William Mitchell College of Law. Lauren is Vice Chair of the Elder Law Governing Council and the Chair of the Elder Law Section of the Minnesota State Bar Association.
Lauren is also a member of the National Academy of Elder Law Attorneys and is a past president of the advisory board of the Minnesota Chapter of the Parkinson's Foundation. With that, I'm pleased to turn it over to Lauren.
Lauren Fink 00:03:07
Thanks, Jim.
Welcome everyone. My name is Lauren Fink, and as Jim mentioned, I'm an elder law attorney. Today I'd like to talk with you about how to pay for long-term care and how to protect assets for families with Parkinson's disease. First, I want to go through some of our learning objectives today. One of those first learning objectives would be to just generally familiarize the people in the audience with what elder law is and the role of an elder law attorney.
Then I want to talk through the benefits of asset protection strategies for long-term care, review some of the eligibility criteria for Medicaid programs, and identify long-term care planning options and recommendations for program recipients and their spouses.
When we're talking about these long-term care planning considerations today, I want to be really clear with everyone that I'm an attorney who is licensed in the state of Minnesota. And some of the things that we're going to be talking about, while they are based on federal programs, have very different state-specific rules. And so if you are looking at doing long-term care planning for yourself, I really recommend that you seek the assistance of an experienced elder law attorney in your own jurisdiction.
I've given a resource on this slide, which is to naela.org/findlawyer. NAELA is a nationwide group of elder law attorneys. It stands for the National Academy of Elder Law Attorneys. Elder law attorneys register on that site to make it easier for them to be found and so that you can connect with them and make sure that you're connecting with an attorney that has the experience to advise you not only on estate planning but also on long-term care planning and planning around government benefits and paying for care.
Long-term care planning goes way beyond just having essential legal documents in order. So it's more than just having a trust or a will or a power of attorney or health care directive. It's about making sure that we have thought across the board of the things that are going to come up as long-term care needs arise and ensure that you're going to be able to pay for that care and live the quality of life that you have come to expect.
Planning early gives you the most options available. So I applaud anyone who's attending this seminar to get a little bit more information, because the earlier that you start planning, the more planning opportunities that there are for you to preserve and protect your assets.
Planning is about a couple of different things. We want to make sure that you have the ability to live well to the very end. The goal is not only am I going to receive the type of care that I want to, but also am I going to live in a place that I want to live? Am I going to have the autonomy to make decisions in the way that I want to make decisions? That I'm going to have a team that I've built around me that might consist of an elder law attorney, a CPA, a financial advisor, a social worker, my care team, my doctor team, so that everything is kind of working together toward my goals in long-term care planning. And it's also about giving back to the ones that you love. Many people are interested in making sure that they can provide a legacy. It's looking at all of those different pieces together to achieve those goals.
Lauren Fink 00:06:59
The role of an elder law attorney, and this is from that group. This is the mission statement of the National Academy of Elder Law Attorneys. Not only do we handle general estate planning, but we also work with clients to plan for incapacity. So if you're alive but you're either physically or mentally not able to make your own decisions, we plan ahead for that and make sure that we have a contingency plan so that we have people in place who are going to be able to step in and act as alternate decision makers. And we have documents that are going to allow them to do that. It's planning for long-term care needs.
If you have to go to a nursing home, if you have to go to an assisted living facility, if you want in-home care services: where do we want to receive that care, and also how are we going to pay for it? And what's the appropriate level of care and how do we coordinate your private and public resources in paying for that care? How do we also ensure your right to quality care? How do we make sure that you're receiving the best quality care that you can based on the resources that you have and what your goals are?
When it comes to planning for long-term care, it can seem like a big maze. If you've done any research into paying for long-term care or planning around it, and you look online, you get a lot of conflicting information. And so the slide that I have up now kind of goes through how we like to try to put the puzzle pieces together for clients that we're working with.
It goes through from where you're living to what your functional ability is, to costs of care, to resources and benefits, sort of what the continuum looks like. So you can see on this listing, in terms of where one lives, there are varying degrees of living situations that provide more and more services. from anywhere from living independently at home all the way up to being at a skilled nursing facility. And tying in with that increased care goes the decline of your functional ability.
Typically, when people have a diagnosis, they don't go straight from living independently at home to needing care at a skilled nursing facility and needing full assistance. There's a gradual decline in that functional assistance. With that too comes a gradual increase in costs for that long-term care. What we do in long-term care planning and in elder law is identify resources and benefits that are available to help defray some of that cost and again, ensure that you're receiving that quality care in the manner that you want to receive it in the place that you want to receive it while hopefully preserving some assets.
When we talk about care, it's very important to consider cost of care. And cost of care is something that a lot of people are not familiar with unless they've had a health event or have looked into care costs.
Lauren Fink 00:10:10
Nationwide care costs, the average rates for 2021, and this is according to a Genworth cost of care study. Care costs are very expensive.
Nationally for a skilled nursing facility, and if we go back to our care continuum, that's your highest level of care, the average cost of care at a skilled nursing facility per month is about $9,000 per month. And I want to outline that that's the nationwide average. So if you look on this slide, you can also see that because I'm in Minnesota, I did a comparison for what the costs are in Minneapolis. And in Minneapolis, our costs for skilled nursing are actually much higher for the average cost. We have $13,000 per month as about the average cost for a skilled nursing facility.
Assisted living is much more affordable. Average cost that they have listed on here is $4,500. For Minnesota, it's a little bit higher at $5,163. But one thing that I want to point out with assisted living is that this number does not include rent. With assisted living facilities, there's a care package and then there's a rent portion. Really what you'd be looking at for a more accurate number of what you would pay at an assisted living facility would be about $2,000 or more than that base number that's listed on there, which I believe represents the care package.
For home health care and if you have someone coming in and providing you with services, a PCA or an LPN, those different types of workers, you're looking at between $5,000 nationwide or $7,000 in Minnesota. Then there's costs for adult day as well. And why we look at this is because as anybody can see when looking at this, this isn't often something that people can afford independently for a very long time. So how do we pay for long-term care if we have long-term care needs that have to be taken care of?
What I want to talk about next is a couple of different resources for doing that.
The first pay source that we look at for paying for long-term care is always private payment. When we look at private payment, we're looking at income, we're looking at your assets, and we're looking at any other insurance policies that you may have purchased independently in order to cover that cost of care.
Income comes from fixed income sources.
Commonly we're looking at Social Security benefits, we're looking at pension benefits. Again, when we go back to that cost of care for a skilled nursing facility, if we're looking at $13,000 per month, most people aren't realizing that much income from their fixed income sources where they have the ability to independently finance that. Beyond that, then we're looking at assets in order to hit that shortfall between whatever your income is and what that cost of care is at the facility.
One thing that I want to mention when it comes to assets is that more and more often, we're experiencing a shift in where investments are as people get older and older. And where that shift is coming in is that more frequently we're seeing people that have larger and larger retirement accounts, such as IRAs, 401(k)s or 403(b)s — accounts that are tax deferred, where contributions were made into that account with pre-tax dollars, and when you take a distribution from that account, you recognize income taxes on it.
Lauren Fink 00:14:01
One point that I want to make everyone aware of is that for paying for long-term care for medical services, there is a qualifying medical expense deduction that's available from the IRS. So when you're filing your taxes every year, if your qualifying medical expenses are over 7.5% of your adjusted gross income, then you can deduct those expenses on your tax return.
This can be pretty important to know when you're looking at privately paying for care and trying to decide what resources you want to use. If you have after-tax dollars sitting in a money market account where you have already paid the taxes on it and you can take the money and you don't pay taxes for taking a distribution out of it, that's probably not the best source of assets. If you have a corresponding IRA where you do have to take money out of it, and you have a qualified medical expense deduction, you can use some of the IRA money to pay for your medical expenses, and you have the effect of netting some of your tax consequences because while you're creating income taxes on one side, you're creating a medical expense deduction on the other side. That is one consideration if you're privately paying for care.
The reason why that's important to be aware of too is that within estate planning, IRAs that are subject to taxation, on your death, that taxation remains. And that asset that you have that has those taxes built into it passes on to your heirs, and then they have that money and similarly anytime that they take a distribution, they also have to pay taxes on that as well. So it's a good resource to use to pay for long-term care if you have the assets to pay for your long-term care.
Then it maximizes the tax effect of the assets that you're passing on to your heirs after your death.
Long-term care insurance is another private resource that you can use to pay for cost of care. Long-term care insurance is a type of insurance that pays for long-term care costs.
Qualifying for long-term care insurance can be very similar to qualifying for life insurance. And so, the reason that that's important to be aware of is because they do a health evaluation of the people that they're trying to insure for that long-term care service.
If you are someone with Parkinson's disease, then you may not qualify for that long-term care insurance because you have that pre-existing condition. Or even if you do qualify, the premium that you have to pay for that insurance policy might just not be affordable. And your money might be better invested elsewhere.
If you are lucky enough to have a long-term care insurance policy already, it's really important to understand how that policy works to pay for care. And how long-term care insurance works is that there's specific criteria that's set within the policy that shows when, where, why, and how you can receive benefits from that policy. Typically, what the long-term care insurance policies will say is that they can provide coverage in an assisted living facility, they can provide coverage in a skilled nursing facility, and they can provide coverage for in-home care services. It's important to look at your policy and determine what coverage you have because I've seen some policies where it's just skilled nursing facility only, and I've seen other policies where it has no coverage for home care. If that's your goal, then you will just need to be aware that that's not something that your long-term care insurance policy would cover.
Lauren Fink 00:18:08
Within the individual policies in order to qualify, typically the policies require that you need assistance with activities of daily living. And most commonly I see that they require that you need assistance with two activities of daily living. And then they'll usually provide a definition of what they consider activities of daily living. But generally it's things like feeding yourself, bathing, toileting, transferring, dressing, those types of things.
Beyond that, there's usually a qualification for individuals that have cognitive impairment. So what it will usually say is that if you require substantial supervision due to cognitive impairment, then you can qualify under that policy. That can be a little bit tricky though, because often, well, not often, but sometimes, individuals need to live in assisted living or congregate living communities, but don't meet that level of care quite yet.
They don't have the need to get assistance with two activities of daily living; they might just have one. That can be tricky because then they still have to privately pay for their care until they reach that higher level in order to qualify under their long-term care insurance policy.
Once someone does qualify for a long-term care insurance policy under those criteria, then there's usually an elimination period, which is a period of time that has to go by before the benefits on the policy are going to start to pay out. Typically, you'll see that somewhere between 60 to 90 days. And usually that will coincide with a Medicare payment period if someone had a preceding hospital stay.
Once the policy starts to pay out, usually what you'll see for them is that they have a daily rate and a lifetime coverage benefit. The daily rate would be the amount per day that hits the maximum that the policy will pay out. For example, you might see a policy that has a maximum daily rate of $200 per day. More recently, I saw a very old policy that a client of mine had that had a maximum payout for skilled nursing of $80 per day. which
For the total payout of the policy, sometimes you'll see total payments of three years or five years. Or for the example that I was bringing up of the client that I had the other day, her policy paid out a maximum of $80 per day and the total maximum payout was $100,000. There might be a dollar amount that it will show for the maximum amount that it will pay out.
It's important to know what those terms are because then it tells you how much coverage and protection you have for paying for long-term care. Some policies when they first started to make these long-term care insurance policies had unlimited or lifetime payment amounts, which was something that once they started to have people actually use the long-term care insurance policies and once long-term care costs started to go up and increase exponentially, the actuaries for those life insurance companies figured out that they couldn't underwrite those types of policies anymore. So you rarely see them.
Lauren Fink 00:21:55
There are more recent or newer types of long-term care insurance policies which are more of a hybrid option as well, where it's a long-term care insurance policy that's tied in with life insurance. And that can be very nice to have because with an old-style or a classic-style long-term care insurance policy, you pay the money into the policy for the premiums and if you never use it, you don't get that money back. These new hybrid policies create a death benefit for your family.
To the extent that you don't use the funds that are in the long-term care insurance policy, there are funds that can go back to your heirs after your death. So a lot of times that's a nice option for people to use.
Another thing to be aware of on long-term care insurance policies is inflation riders too.
They're most commonly the inflation rider support that I'll see on a long-term care insurance policy would be to provide 5% inflation on that policy. This means every year the benefit on that policy, the daily rate and then the total lifetime benefit increases by 5%. That's a really good thing to have, with the increasing costs that we have for long-term care to ensure that you're protected.
If there has not been planning ahead or if you don't have the resources to pay privately, the next option for paying for care would be to look at what government benefits are available. The first one that I'll mention is Medicare. Medicare, I want to be really clear on, Medicare does not pay for lifelong long-term care.
Medicare pays under certain circumstances. One of those circumstances for Medicare to pay for long-term care is for skilled nursing facility coverage. And a skilled nursing facility is more colloquially referred to as a nursing home.
If you are admitted to a hospital, you have an inpatient hospital stay of three midnights or more, so you're there for three overnights, and then you're directly discharged into a skilled nursing facility, then Medicare will pay for up to 100 days. Days one through 20 will have no copay. Days 21 through 100 would be at a copay of $200 or something different depending on whether you have a Medicare supplemental policy or Advantage policy and what your coverage is under that. But that can be the limit for skilled nursing of what Medicare will cover. There are a couple of things to be aware of with that. If you directly go into a skilled nursing facility, so potentially you were living at home, you had an in-home caregiver and something happened and they were no longer able to provide care for you and your next move was straight into a skilled nursing facility or if you moved into an assisted living, Medicare doesn't cover that. It has to have that preceding hospital stay in order to have Medicare coverage. There are also some hurdles to Medicare coverage.
One of those is observation status. So in that preceding hospital stay, often or more frequently than we like, when someone goes into a hospital, you'll be put on observation status, which means that you're not admitted, and you're not inpatient at the hospital. That can be a real problem if after the time that you're at the hospital, you're discharged into a skilled nursing facility for rehab or for transitional care.
Lauren Fink 00:25:58
The reason for that is because if you're on observation status, Medicare doesn't cover you for those times after the discharge from the hospital. So it's important to understand, am I an inpatient or can I become an inpatient? If you have a health event that puts you into the hospital that you know is going to require rehabilitative care thereafter, the improvement standard is also another thing to be aware of. And what the improvement standard refers to is those zero through 100 days for Medicare.
Often the person who has the Medicare days doesn't get through that whole full 100-day period. That might be because they no longer are in need of anything other than custodial care. What we see often, less and less fortunately, is that a reason for denial of Medicare coverage would be because the person is not improving with the care they're receiving. There was a court case a few years ago, called Jimmo v. Sebelius, that found that Medicare coverage could not be denied based solely on this improvement standard.
What you should be aware of is that while that's the law, there's also what hospitals and what people do. Often, they may not be aware of that and you're still receiving that denial of Medicare coverage because of that failure-to-improve standard anyway. It's just a thing I want to call out for your attention.
The other barriers to Medicare coverage would be that benefit period. So that 100-day period does not cover beyond that. After that time frame, it's private pay. If you still require that long-term care.
One underused benefit through Medicare is home health care coverage. Home health care coverage is something that can be paid for by Medicare, but there are a couple of different qualifications that you have to hit for it. The services have to be ordered by a physician, they have to be reasonable and necessary, and you have to be homebound, meaning you're not able to independently leave your home by yourself. There has to be a need for skilled care, and the delineation is between skilled care and custodial care.
Custodial care is care where you are receiving assistance with your activities of daily living, feeding yourself, bathing, dressing, that type of thing. But you don't need assistance with anything beyond that. For the home health care coverage, you have to have some additional types of services, such as physical therapy, occupational therapy, or other types of services requiring an RN to provide you with that care.
You can get between 28 to 35 hours per week of skilled nursing and home health care under Medicare. What's great about it is that it's not limited in duration. There's no copays or deductibles for it. You don't have to be hospitalized first, and there's little or no cost sharing. So it can be a very great benefit. The Center for Medicare Advocacy is a group that provides a lot of great information. They were the ones who did the litigation on that Jimmo v. Sebelius case for the improvement standard. And they have this nice handout that I've included in the slides for “How Do You Get This Home Health Care?” So just referencing this to you. And what I want to point out to you here is what's covered. And you can see there's skilled services that you have to need in order to get additional services of home health aide or medical social services or medical supplies.
It's intermittent skilled nursing, physical therapy, speech therapy or occupational therapy in order to qualify for that home health care.
Lauren Fink 0:30:06
The other benefit that's available through Medicare would be hospice coverage. With hospice, hospice is when you have had a physician who's certified that you have six months or less to live. That doesn't mean that you have six months or less to live, it just means that you've had a physician who has evaluated you and has made that guess. But we have had many clients who have been on hospice for over six months up to two years. I can think of clients that I've had who've been on hospice.
The services have to be reasonable and necessary and you are reevaluated every six months to see if you still qualify for those hospice services. And what hospice is, is it's palliative care, meaning it's care that is providing you with comfort, but it's not curative care. So we're no longer trying to treat or cure the condition that you have. We are just trying to make you comfortable. Something to be aware of with hospice care is that it does not generally pay for room and board. So if you are a resident at an assisted living facility, if you are at a skilled nursing facility, there are still costs that are associated with that hospice care, where you're still paying that assisted living bill, you're still paying the skilled nursing facility bill, but you're getting those additional services on top of the services that you're already receiving that are being covered by Medicare.
Lauren Fink 0:31:42
Beyond those programs, the big one or the safety net, that I want to talk about is Medicaid. And Medicaid is the program where I want to give you a really big disclaimer. This is a jointly funded program by states and the federal government, but it is administered by the states, and each state has different rules for administering. The rules can be very different state to state.
As much as possible when we're talking today, I'm going to try to give broad information that would cover all states, but realize that there are very specific things for each state of residence, and it's really important to check with a qualified elder law attorney in your jurisdiction if you are looking at Medicaid planning for your state. The other caveat that I'll give you is that when I'm talking about Medicaid, I might use the word Medical Assistance, and that is because in Minnesota, that's what we call the Medicaid program. So if you hear me say Medical Assistance, I'm meaning Medicaid.
I'm just very used to using the other word.
To qualify for Medicaid, Medicaid is a poverty program. So Medicaid is a program that in order for you to access it, you have to meet certain eligibility requirements. Some of the basic eligibility requirements that I have listed on here would be that you're a resident of the state or you intend to remain in that state, that you are blind, disabled, or you're over the age of 65, and this is for receiving long-term care services, that you require a skilled nursing facility level of care, and then that you meet certain financial eligibility rules.
For Medicaid services, you can receive long-term care services, which would include care at a skilled nursing facility, nursing facility care at an inpatient medical hospital, or intermediate care facility. There are also what are called waiver programs. Waiver programs are created under Section 1915(c) of the Social Security Act, and what those waiver programs do is allow people to receive government benefits to receive home and community-based care as an alternative to being in a skilled nursing facility.
Lauren Fink 0:34:09
These are basically developed recognizing that most people, when they have long-term care needs, do not want to live in a skilled nursing facility. It has a very hospital, clean setting where it doesn't feel like home, it doesn't feel comfortable. The goal is to promote as much as possible people's independence and give them decision-making and choices as to where they can receive care.
These waiver programs, there are 47 states and the District of Columbia that are operating at least one 1915(c) waiver program. Again, this is where it can be very different for how to qualify in each state because the states specifically get to choose what their waiver programs look like, what portions they implement.
Waiver programs consist of 53%, or at least back in 2014, which is the most recent statistic I could find from Medicaid.gov. 53% of all long-term care spending through Medicaid is on home and community-based services. So these are really the big programs. This is where people are receiving the majority of their services. Other services in the program got $71.2 billion. Home and community-based services got $80.6 billion. So it's a lot of money that's being used to pay for these programs.
I wanted to share with you, too, from a national perspective. This is a map from Medicaid.gov that shows where these 1915(c) waiver programs are being used. This shows, in green, states that have the 1915(c) waiver programs. There are also Section 1115 demonstration programs, which are pilot programs that states are allowed to use for providing different types of Medicaid programs. And so if it's a yellow state, it's a combination of a pilot program and a 1915(c) home and community-based waiver. But again, it's pretty widespread as to where you can see that these are being utilized.
Lauren Fink 0:36:34
The types of services that can be provided by these home and community-based waivers are, again, things that are designed to keep you in the community. Customized living on this list is typically what we refer to as assisted living. but there are adult day services, adult day services baths, case management, chore service, foster care, delivered meals, homemaking services, personal emergency response systems. So lots of different things to enable people to live, at home or in the community.
How do we qualify to receive these services? When I talk about Medicaid, I use a couple of different terms that I want to clarify for you. Those terms are community spouse or well spouse, which would be, if we have a married couple, that is the spouse who's living in the community and who's not receiving Medical Assistance benefits. The institutionalized spouse, which would be the spouse who has the diagnosis and needs long-term care services and may be residing in a facility and applying for Medical Assistance. Spousal impoverishment rules for married couples are something that's important to be aware of.
Spousal impoverishment rules are federal rules that set minimum amounts of assets and types of assets that if a couple is married and an institutionalized spouse has to apply for Medicaid benefits, these are assets that are protected and kept for the community spouse for their life.
Lauren Fink 0:38:15
For eligibility limits, if we have a single person who's trying to qualify for Medicaid, the amount of available assets, and we'll talk about what an available asset is, that they can keep is $2,000 or less. The state has the ability through those 1915(c) waiver or the Section 1115 pilot programs to increase these numbers.
The institutionalized spouse, similarly, if we have a married couple, can have $2,000 or less or the state limit. And the community spouse can have somewhere between the minimum statutory and maximum limits of $29,724 or $148,620.
To show you how this can be different state by state, I want to show you what it looks like in Minnesota.
In Minnesota, we've increased our base limit for single individuals or for institutionalized spouses, where they are allowed to have $3,000 or less. And for the community spouse, the way that our state sets their limit is that they can have the maximum amount of the available asset resource allowance, which is $148,620.
Other states are going to be different, but this is what Minnesota looks like. What’s an available asset?
An available asset is an asset that a person has legal authority and actual ability to use the assets or convert them to cash. So if you can reach into the account, take the money out, and have access to it, then that's a resource that the state counts toward your eligibility and they say you have to use that to pay for your care or to apply against your eligibility limits.
Examples of available assets include non-homestead real property, bank accounts, CDs, cash accounts, retirement accounts. I have that italicized because it depends on the state. Investment accounts, cash surrender value of life insurance policies, annuities, pensions, and personal property that's held for investment purposes.
Lauren Fink 0:40:44
Assets that are excluded or that are not counted include the homestead. So if you are a single person and you reside in your home, then your homestead is not counted if you need to apply for Medical Assistance benefits, as long as your home equity limit, depending on the state, falls where it needs to.
So in Minnesota, our home equity limit is $688,000. In other states, it could be up as high as $1,033,000.
If you're married and the community spouse lives there, then the homestead is similarly excluded if the institutionalized spouse has to be in a facility. It's not counted.
I want to be clear, it's not counted for eligibility purposes, but it may be counted for other purposes. So that's important to be aware of. You usually will get one vehicle excluded. Personal property, prefunded funerals. And then on the right here italicized, I have some things that you may find in other states that are also considered excluded or not counted. which would be community spouse retirement accounts, wedding rings are something that some states exclude. And then special needs trusts or ABLE accounts for the benefit of the institutionalized spouse. Those can be used in certain other states.
Lauren Fink 0:42:11
Unavailable assets are assets that would be counted, but there is some legal reason that they cannot be accessed. So they don't count towards eligibility, they're unavailable.
Jointly held assets, if it is a piece of real estate and it is held as joint tenants with rights of survivorship, meaning one person doesn't have the ability to independently sell that property, that's considered unavailable. It's not counted. assets of an unprobated estate, if you are a beneficiary of an estate but you haven't gotten a check yet, then that's an unavailable asset. You haven't yet gotten the money, you can't reach it and touch it. Property that's involved in a pending legal action. Similarly, if you're about to receive a settlement or anything like that, that's not counted because you don't have the money yet.
Lauren Fink 0:43:06
What do we do in order to qualify? Typically, you hear the phrase spend down. I need to spend down to qualify for Medicaid. But what's really happening is that you're doing an asset reduction.
An asset reduction can include purchasing goods and services, spending money on assets for fair market value that might be excluded, converting assets into income, transferring assets. With any type of planning strategy, you want to consider a couple of different things. What's your health like? With Parkinson's, you can be anywhere in a continuum of diagnosis or health and quality of life. If you are not likely to need long-term care in the foreseeable future, you're on an early end of a diagnosis, then some of the planning strategies that we might take might be more aggressive toward gifting assets or protecting them or using irrevocable trusts. If you are someone who is 99 years old and you're 10-plus years or more into a Parkinson's diagnosis, and you likely don't have that much life in front of you, then it's just a fact that it probably doesn't make much sense to do very aggressive planning. So these are considerations that we keep in mind.
Financials: What are the assets that you have? If you are sitting on $10 million, and the average cost of care in your state is somewhere around $7,000 per month, then you're probably not going to need to do some aggressive planning because you likely have resources that are sufficient to cover your care. Also, what are your overall goals? When we're looking at doing planning, sometimes we're looking at protecting assets to leave funds to the next generation, sometimes we're looking at protecting assets for the people that we're working with. Your goals are specific to your situation and your family and your lifestyle.
What works for one person isn't necessarily going to work for another. So it's important to look at all of those pieces to make sure that we're picking the right option.
Purchasing excluded assets. Again, one way of doing an asset reduction would be to put the money into your homestead because it's an asset that doesn't count. If your homestead is in disrepair or it needs improvements in order for you or the community spouse to continue living there, now is the time to start putting that money into the home. Because it goes into the home, it doesn't get spent down, it doesn't go away; it just increases the equity of your household.
Similarly, with homestead, if you have a mortgage on that property, one way to reduce your assets would be to pay off the mortgage. With income and married couples for Medical Assistance, the institutionalized spouse's income, at least in Minnesota and I believe in many other states, starts to go towards paying their cost of care. So it reduces the amount that the community spouse has available in income every month. They get their own income, but they're losing out on their spouse's income.
By reducing the payments they have every month, such as debt payments or a mortgage, that can be one way that's a good planning strategy to reduce assets.
Lauren Fink 0:46:37
A vehicle can be purchased if you're driving around a 1986 Chevy Nova, now's the time to upgrade that vehicle to something that you're not going to have to put money into repair after you've otherwise reduced your assets.
You can purchase household goods and personal effects. You can do prepaid funerals. I'm going to try to skip through some of these to keep within our time restrictions today. So forgive me, but I think the slides will be available. Prepaid funerals, this is a really great thing to do to reduce assets. Prepaid funerals are a specific type of funeral arrangement where you choose the goods and services that you want associated with your funeral and then you pay for them either through life insurance or an annuity that can be purchased through a funeral pre-planner. And they don't count as an available asset. Prepaid expenses, financial obligations due and payable. So insurance coverage, real estate taxes, income taxes, professional fees, these are all great things to pay upfront while you're otherwise trying to reduce your assets so you don't have to do it after you're within those eligibility limits. And payment of care costs is of course another thing that can always be done in order to reduce assets. I am of the opinion that in planning, if there are things that we can do to improve your quality of life after you have long-term care needs and costs arise, it's better to put your money into that if you can qualify for Medical Assistance or Medicaid to pay for your care.
Lauren Fink 0:48:16
Another planning strategy that can be done is to convert excess assets into an income stream. This can be done in Minnesota and in other states through the purchase of an immediate annuity. So this is a great planning strategy when you have a community spouse who has much lower income than the institutionalized spouse.
So there may be a circumstance where one spouse worked and the other spouse was a homemaker. When they retired, the homemaker spouse was able to claim one-half of the working spouse's Social Security as their Social Security benefit, but that limits their income. And so we're able to take excess assets and create an additional income stream to the community spouse to supplement that lost income once their spouse has long-term care costs.
Lauren Fink 0:49:13
Transfers are something that you have probably heard of, gifting that's not allowed with Medical Assistance. For transfers, these are some examples of transfers that are allowed. The biggest one is that between spouses, transfers can be made. I'll leave some of the others up here just to digest. But what I want to go through is how gifting works with Medical Assistance. You've probably heard of the look-back period. What the look-back period is, is it's the period of time during which, before you apply for Medicaid benefits, you have to disclose any impermissible transfers.
An impermissible transfer is a transfer for less than fair market value or one that doesn't fall under those transfer exceptions. So gifting, refusing to accept an inheritance, refusing to take affordable legal action to get a legal right — these are things that are considered transfers. If they happen within 60 months prior to the date of a Medical Assistance application, they have to be disclosed on that Medical Assistance application.
The county evaluates that transfer and determines whether or not that will be assessed a penalty period. A penalty period is a time frame where the cost of care would not be paid for because of that penalty.
These types of transfers apply for all uncompensated transfers, and there's no de minimis amount of gifting that can happen for Medicaid benefits. Birthdays, holidays, weddings, graduations, all of those types of gifts are things that have to be disclosed when you apply for Medicaid.
How a transfer penalty is calculated is whatever that amount of gifting is that was done is divided by a specific number, and that number is the state average payment to a skilled nursing facility. That division creates the number of months that you would be ineligible for benefits. So in Minnesota, our penalty divisor, our state average payment to a skilled nursing facility, is $9,526.
Lauren Fink 0:51:50
One important thing to know about this is that the penalty doesn't begin unless the person is already eligible. So you already have to be within those asset limits. If you're a single person and you have $3,000 or less and you've made an uncompensated transfer, for that penalty to happen, you've already reduced your assets. And you have to figure out what you're going to do.
Now, what I think is kind of interesting is this is going to be a slide that's a little bit difficult to see. But this gives a listing of penalty divisors around the nation. I've highlighted a couple of ones in here that I thought were interesting. I highlighted the highest and the lowest. The lowest penalty divisor is in Louisiana, and it's $5,000 per month. And the highest is in New York City, and it is $14,142 per month. So it can have a real difference what your transfer penalty is depending on where you reside.
How a penalty works is that if you've made a gift, so under this example, $40,000 was given away prior to applying for Medical Assistance. Then when we apply for Medical Assistance, if that gift happened within that 60 months preceding the application date, we divide it by that penalty divisor, $9,526. And under this example, there would be a 4.2-month period of ineligibility where the person has to figure out, okay, what am I going to do for 4.2 months to pay for care? So options are to wait for 60 months. That doesn't always happen. We don't know when a health event is going to occur.
Privately pay through that penalty period, if you have long-term care insurance, that might be something that can be helpful. Or with funds from family members or friends, try to make it through there. I'm not trying to discourage anyone from gifting, but I am trying to illustrate that if you are gifting and you have Parkinson's disease and you don't necessarily know how you're going to pay for your long-term care, be careful about what you're doing and make sure that you are being thoughtful about that planning, especially if you would need Medicaid.
Lauren Fink 0:54:27
The very last thing that I want to touch on is estate recovery. With estate recovery, in certain states, anyone who receives Medicaid benefits can have those benefits recovered. Meaning that on your death, a claim is placed against your estate for the amount that the state paid out for your medical care under the Medicaid program. And before your beneficiaries receive their inheritance, the state gets paid back first. Some states have assets that are protected from estate recovery. Minnesota is not one of them.
Examples in other states would be assets that are in a revocable trust, life estates, or non-probate assets. Some states don't have estate recovery. So again, it's very important to know what state do I live in, and what are the ways that the Medicaid program is administered.
Strategies and next steps: consider what your values are. Identify your team or key players who are going to help you through the long-term care planning maze. Meet with an elder law attorney so that you know what your options are and how they apply in your specific state. Execute your documents.
Get your estate plan in place, get your capacity documents in place, make sure that you have the legal underpinnings to allow your agents to step in and help you if you can't act yourself. Have the talk.
Talk to your family members about what your goals are. Make sure that everybody is aware. This is what my wishes are, and this is what I want to have happen if long-term care needs arise. And then review it annually. Check for changes.
Next steps and questions. I do just want to identify some resources here. We're going to go through some questions that were submitted, but if there are additional questions, there's an email address for Legacy@Parkinson.org where you can send your additional questions. And then there's also a link here, too, for where you can find additional information at the Parkinson's Foundation website.
And Jim, I see you're back on.
Jim Morgan 0:56:44
Lauren, thank you for that excellent presentation. You've given us a lot to think about and certainly underscored the need to involve our entire team of care partners and professionals, including attorneys like you who specialize in elder law. I think we do have some time for a few questions. And the first is, in the case of a couple, how does a long-term care insurance policy cover the person needing the care versus the care partner?
Lauren Fink 0:57:16
Good question.
So how a long-term care insurance policy works is that there's a specific insured. When you purchase those types of policies, sometimes they're just for individuals, sometimes there are joint policies that have a shared care benefit, is typically what it's called. With the long-term care insurance policy, if you already have one, you're just going to want to take a look at it and see who's the insured on this policy.
And if you're looking at getting one, then I would look and make sure that it takes care of both the individual needing care and the caretaker as well in the event that they develop long-term care. Some policies, too, will also have a benefit that can be paid out every month to be paid to a caretaker. So that might be something to consider as well at the time that you're purchasing the policy. But I will say that with the caveat that if you already know that there's one person who needs care and a caretaker, it might be past the point of qualifying for that type of policy.
Jim Morgan 0:58:29
We had a question that said, if a loved one has to go to a facility due to the progression of Parkinson's, for example, does a facility have the right to know what your assets are, even if you're paying out of pocket every month?
Lauren Fink 0:58:44
Often when facilities will give admission paperwork, they'll request financial information. And the reason that they're doing that is because they're doing an evaluation about whether that person can actually afford to live at that facility. There's not necessarily a requirement for you to provide all of your financial information, but the thing to consider is that you are signing a contract with that facility and each one of those contracts is different. There may be a requirement to provide that information so that they can accept that contract.
Because if you do get to the point where you exhaust your assets and you have to apply for Medicaid benefits in order to help pay for your care, that facility may have been making an evaluation of when you would need that care and when they would have to take Medicaid benefits based on what your assets are. And so, I think as much as possible, you do want to be honest and disclose accurate information about what your finances are when you're moving into that type of facility so that if you get to the point where you have to have Medicaid benefits pay for it, you don't risk eviction because you gave incorrect information on the contract.
Because when assisted living facilities accept Medicaid benefits, they're not getting that full amount that they otherwise would receive for people who are privately paying. So they're not getting the same rent amount, and they're also not accepting the same care package amount. They're getting a lesser amount that's dictated by the state. So they ask for that information because they're trying to keep their doors open and predict that they're going to be able to have available cash flow to do that.
Jim Morgan 1:00:36
The next question is, is it better for a caregiver to remain in the home with a mortgage or sell the home and pay rent instead?
Lauren Fink 1:00:46
And that's a question that I'm going to give an attorney's answer, which is it depends.
Mainly for that would be if the caregiver is remaining in the home, and my presumption from the facts of that question would be that we've had the institutionalized spouse living in an assisted living facility or at a nursing home. There are a number of different questions with that. One of those questions would be, does the caregiver want to live in that home without their spouse? And is it a situation where they're looking at being closer to their spouse, where maybe they could live in the same facility with one another and then still be close and maintain ongoing contact?
I think more than financially, that's a big question to ask, because are you going to be happy if you're separated and you're not able to see one another, if you have the option to live together at the long-term care facility?
Beyond that, if it is a question of finances, if there is a circumstance where you're applying for Medicaid, you're going to want to at least keep the house until those Medicaid benefits have been approved, because the primary residence is an excluded asset. And if you sell it, then that equity in the house becomes an available asset, and then it's subject to that asset limitation.
So if you have a house that's worth $100,000 and in your state the community spouse resource allowance limit is $148,620, and you have $148,620 in that house, if you sell the house, that $100,000 in equity would have to be reduced or spent down then until you're going to qualify for Medicaid benefits.
If it otherwise doesn't matter, then it's more of a question of where do you want to live and what makes sense for you and your family.
Jim Morgan 1:03:01
You know, I think you've kind of touched on this along the way, but when is it too late to purchase long-term care insurance?
Lauren Fink 1:03:10
Sure, and we did talk about that a little bit, which would be if you already have a diagnosis, if you've been diagnosed with Parkinson's disease, then that creates a pre-existing condition that the insurance company is going to use to determine whether or not they're going to deny your application for benefits. So it would be too late to purchase long-term care insurance if you already have a diagnosis because you're either likely going to be denied or the premium is going to be too expensive.
The other time that it may be too late to purchase long-term care insurance would be if your assets are already exhausted. So if you are already within the limitations for qualifying for Medicaid, it doesn't make sense to buy long-term care insurance because you're just creating additional expenses for yourself to protect limited resources that already wouldn't need to be protected because you qualify for benefits.
Jim Morgan 1:04:13
Okay. How is it best to deal with exception days or the elimination period in a long-term care insurance policy? So for example, can they be negotiated and how are they counted?
Lauren Fink 1:04:30
Sure.
So those elimination periods in long-term care insurance policies, I believe that I mentioned that they are usually somewhere around 60 or 90 days. They're usually set to be that amount to tie into that Medicare period where if you go into a hospital and then you're discharged, you have that up to 100 days where Medicare will pay for your care.
So the elimination period days look at when your long-term care needs started, when you had met those requirements under the policy for care needs, and when you had those care costs arise. Then they begin to pay after that time frame is eliminated. I have not seen long-term care insurance companies be open to negotiating those time frames within their policies. It's pretty set that this is when we're not going to pay and then here's when we're going to begin to pay.
But they are typically cumulative. Some of the policies that I've seen where you may have a loved one who is in and out of the hospital and skilled nursing, but it doesn't add up to that elimination period, some of them take those different stays that you've paid out of pocket and then accumulate them to when they're going to start paying under the long-term care insurance policy. It's important to read the terms of your policy.
Jim Morgan 1:06:10
How can I shield my home from being an asset regarding long-term care?
Lauren Fink 1:06:16
And that is a very complicated question. We talked about, at least with respect to Medicaid, that a primary residence is usually an excluded asset, meaning that it's not counted for the purposes of eligibility.
What you can do in order to shield it typically requires that you have at least five years' worth of finances to independently pay for care. And then it depends on your state.
In certain states, you can put your home into an irrevocable trust, which is a specific type of planning tool, where if the home is in that trust for a period of five years or more, then after that five-year period has gone by, your home can be protected from being considered available for long-term care costs, and it can also be shielded from those estate recovery claims.
But again, it's a very jurisdiction-specific, state-specific question about what the best tools are for protecting your home from long-term care.
Jim Morgan 1:07:31
And kind of on that same vein, how can we protect assets generally if I have to go into long-term care?
Lauren Fink 1:07:39
Same answer on that one, too, would be the planning strategies depend on what state you live in, what your health is like, what your financial picture looks like, and what your care needs are, and what your goals are. And so my recommendation for both of those questions would be meet with an elder law attorney and give them information about, here's my health, here's my family situation, here's the assets that I have that I'm trying to protect. Then they can work with you based on the laws of your specific state to give you what planning opportunities are available to protect your assets.
Jim Morgan 1:08:24
I'm about the age of 69 and have Parkinson's disease. Is it possible to get long-term care insurance?
Lauren Fink 1:08:33
Likely not with that pre-existing condition, unfortunately.
Jim Morgan 1:08:41
Caregiving is so expensive per hour. Is there any help for that?
Lauren Fink 1:08:47
And to that question, two of the benefits that we talked about today are potentially available to help with that caregiving. One of the ones that we talked about was the Medicare Home Care Benefit, where if you require skilled care beyond just custodial, then Medicare can help to provide in-home care for you. The other one would be, if you meet qualifications, then Medicaid is a program that can help with that.
Beyond that, if you have planned ahead, then long-term care insurance might be something that can help to allow you to privately pay.
Jim Morgan 1:09:32
Well, great. I think that's all that we have time for today. I hope that this presentation has served as a great resource for thinking about how to ensure that you and your loved ones will have the resources to continue to live well in your later years, and perhaps how to maximize the impact of your personal legacy while supporting organizations like the Parkinson's Foundation that have made a difference in your lifetime.
Again, I'd like to thank the Parkinson's Foundation for making this webinar possible, and to Lauren Fink for her wonderful presentation. Also, thanks to each of you for taking the time to join us today. Thanks and have a great rest of your day.
Lauren Fink 1:10:14
Thanks.
