Kansas & Missouri Estate Planning

Deductibility Of Long-Term Care Insurance Premiums

With the death of CLASS, the would-be first public option long-term care insurance policy, there are a good number of people left puzzling about how to protect themselves against the growing likelihood of needing long-term care in the future.

How can it be made more affordable? For the self-employed, though, a recent article from Forbes has idea worth investigating.

Any individual who purchases a long-term care insurance policy receives certain tax advantages based on their age group and the cost of the premiums (relative to their adjusted gross income (AGI)). It's usually a better bet when you are older.

The premiums can be deducted as medical expenses when they exceed 7.5% of your AGI (or exceed 10% after 2013 when the relevant parts of the health bill come into affect). However, this amount also is limited by your age bracket and an effective cap in deductions. For example, in 2011, if you're 41 to 50, it's $640 a year; if you’re 51 to 60 it's $1,270; if you're 61-70 it's $3,390; and if you're 71 and older, it's $4,240.

But what if you're self-employed? You can purchase it though your business! As a business expense it can be 100% deductible. Note: Businesses already can do this with health insurance and, when you're the sole owner and sole employee, you can direct the operations of the business to include these benefits.

The original article has at least one success story and, although there are certain problems to mixing your business and personal life, this may just be a solid way of securing at least this one very important financial objective.

Reference: Forbes (December 6, 2011) "Uncle Sam Can Help You Pay for Long-Term Care Insurance"

More Medicaid Asset Transfer Travails

Oftentimes, Medicaid and Medicare can be entirely necessary programs. They also can be pretty tricky to navigate, especially if you, or a loved one, fall just above the income limits.

That said, Medicare and Medicaid don’t like it when they feel you are "gaming" the system. Elder Law Answers highlights yet another case in which an elderly person was denied benefits because of improper planning.

The case in question is Hedlund v. Wisconsin Dept. of Health Services (Wis. Ct. App., No. 2010AP3070, Oct. 13, 2011). Lucille Hedlund was a Medicaid applicant who was denied benefits because she also was a beneficiary to an irrevocable trust that qualifies as an available asset, bringing her above the income threshold. It didn’t matter that the trust has been set up 17 years ago, especially because of the circumstances.

Mrs. Hedlund transferred all of her assets to her children in June 1991, with the exception of a checking account. And, on the very same day, her children put those very same assets into an irrevocable trust and named her as beneficiary. While this was pretty sneaky, it was not enough to give Medicaid the slip.

Medicaid ruled that there was reason to infer that Mrs. Hedlund had directed her children to create and fund the irrevocable trust because the plan was effected on the same day. Note: It didn’t even matter that the assets weren’t hers at the time the trust was created, since they were still "available assets" in the eyes of the court… some 17 years later when Mrs. Hedlund entered a nursing home in 2008.

Applications for Medicare and Medicaid are important and should not be taken lightly. If you, or a loved one, need to make plans for long-term care, then you need to seek competent legal counsel before you apply.

I always recommend planning for long-term care in advance. For more information on this essential subject visit the Long-Term Care Learning Center on our website.

Reference: Elder Law Answers (October 14, 2011) "Irrevocable Trust Set Up by Medicaid Applicant’s Children is Available Asset"

No “CLASS” Today (Or Tomorrow)

As you know, I am a big believer in private long-term care insurance. To me, it is a matter of personal responsibility. That's why Gretchen and I took out our own policies some three years ago. In life, we all make choices and we all set priorities with our finances.

For those who won't (or can't) legitimately provide for personal care in their elder years, then the government (read: Medicaid) is the insurer of last resort. And the attempt to create long-term care insurance as part of Obamacare is DOA. The numbers didn't work.

After much speculation, the Department of Health and Human Services (HHS) has pulled the plug on the CLASS part of the health law. As a recent Reuters article points out, this brings to the fore the question of long-term care insurance, both as it impacts the United States in general and each of us in particular, as potential patients in need of such care.

The CLASS act was the first attempt at establishing a public (read: government) option for long-term care insurance and that put it between the proverbial rock and a hard place. The late Senator Kennedy championed the cause. Politics aside, what torpedoed the CLASS act? Money.

According to HHS, the program would prove too costly to achieve its goal. Why? Too few healthy people would elect to pay the required premiums. But what now?

The Center for Retirement Research at Boston College notes that about one-third of the Americans turning 65 this year will need at least three months of nursing home care sometime during their lives. Presumably, however, many of these same Americans will need such care even longer (and future generations can't be expected to fare much better).

So, how we deal with long-term care as a country is yet to be seen. Regardless, since you or a loved one will likely need long-term care, the question remains: How will you pay for it?

Good news: An increasing number of people are turning to private long-term care insurance.

Is private long-term care insurance right for you or a loved one?

For many who wait too long pondering this question, their default option is the more complicated question of Medicare and Medicaid. Undoubtedly, Medicaid (the means-tested shared federal-state program) is the largest source of long-term care financing. However, last time I checked, the federal government was not exactly flush with cash and many states are operating in the red.

In the end, whatever you decide to do when it comes to paying for long-term care, the best time to make plans is yesterday. Whatever you do, be sure to seek appropriate legal counsel.

Reference: Reuters (October 17, 2011) "What’s next for long-term care after CLASS act folds?"

Alzheimer's: Be Prepared Now!

Living with Alzheimer’s disease is very difficult for the individuals affected, as well as their loved ones. Nevertheless, by dedicating some time to prepare personally, financially and legally early on in the diagnosis a family can know they have done everything to support their loved one to live a full life and protect their legacy.

You may not have known but September is World Alzheimer's Month. As the month comes to a close tomorrow, it's important not to forget about Alzheimer's all year long. Medical research and advocacy are vital causes to uphold. And, it is a disease that you and your loved ones might have to face directly, if you have not already. The reality of Alzheimer's or dementia striking close to home (along with some understanding and prior planning) can help you come to terms with the extensive economic toll and the unique legal ramifications.

According to a recent Forbes article, Alzheimer's is as widespread as it is demanding. Consider this: Another American citizen will develop Alzheimer's every 69 seconds. Oftentimes, the symptoms are subtle, at least initially. Some estimate that more than 13 million Americans will have the disease by 2050 and run up as much as $1 trillion in costs. Because of the progressive nature of the disease, most of the costs and problems won't develop until later on. Nevertheless, significant planning must take place at the time of diagnosis, if not anticipated beforehand.

So, what is the scope of this "significant planning"? First, you will need to secure medical care, both for now and down the road. That means fundamental financial planning needs to be addressed, to include securing government benefits like Medicare and Social Security Disability Insurance. Second, because of Alzheimer's progressive cognitive degeneration, estate planning must occur early in the process to secure and protect family assets.

Fundamentally, it's important to understand that Alzheimer's is not the same as other diseases. Through it all, competent counsel will be necessary to properly assess the needs and possibilities, as well as to ensure that everything is in place when needed most.

Reference: Forbes (September 21, 2011) "September Marks World Alzheimer's Month as Advocates Push for Early Diagnosis and Health Care Planning"

Elder Homeowners - Betwixt And Between

Are you a seasoned citizen, or do you care for someone who is? Perhaps you can relate to this sentiment: "But for these doggone depressed home prices, I'd sell this paid-off home I can't keep up and move into one of those nice everything-included senior housing places." If you can relate, you are not alone.

The housing market is still idling at terribly low levels. That's not news, I know. While many younger families may "want" to move for the additional space, many seniors "need" to move. Both, when you get right down to it, are betwixt and between. The younger folks cannot sell their smaller home to buy the larger homes of the seniors. And, the seniors must get top-dollar for their homes to afford the "nice everything-included senior housing places."

Kaiser Health News recently released an article taking stock of the situation and new reactions from assisted-living and nursing home facilities.

For many seniors, the gameplan had been to use the equity in their home as the investment to keep them afloat in retirement. BA-BOOM. The value in those homes dropped like a rock in 2008. Regardless how much the house may have been worth before the crash, it's tough to sell a house these days. Really tough. To make matters worse, they tend sit on the market for years, or fetch too little money to make the sale feasible. End result: Seniors are waiting much longer before they can enter into a facility. That wait, incidently, isn't good for their finances or health.

But seniors aren't the only ones unhappy with this trend. The facilities themselves aren't happy. In certain facilities in locations hardest hit by the housing bubble, the occupancy rate has dropped as much as 10%. It seems nursing homes and continuing care facilities have been hit the hardest and assisted-living only slightly better.

In the face of such challenges, however, some facilities are working to help ease the transition for seniors. For example, certain facilities have begun incentive programs, ranging from simple real estate education classes to more fluid contracts. The contracts allow the entrance costs of the facility (usually something akin to the cost of a home itself) to be paid whenever the house is sold. One management company, Brookdale Senior Living, has even begun offering to buy houses of senior residents at pre-determined prices, if they do not sell within a designated timeframe.

For you or a loved one it means that there are a number of planning possibilities. For those who are just not ready to leave home, consider in-home care services or perhaps having a younger loved one move in (e.g., many grandchildren are unemployed or underemployed, yet responsible). Still, if a facility is necessary, then be sure to checkout potential options, depending on the facility and where you live.

It might be possible to work with the administration on a creative solution. Remember: Chances are you're not the only one with the problem and they may offer a solution you hadn't considered.

In the end, if you don't ask, the answer is always "no."

Reference:  Kaiser Health News (August 21, 2011) "Housing Bust Derails Some Seniors’ Assisted-Living Care"