Presented by Donna Ries
When talking to your clients about extended long term care planning, it is important to emphasize that income pays for care, not assets. Health insurance covers virtually none of the long term care costs of nursing homes, assisted living facilities or in-home care. The care many people may require late in life is paid out of pocket. Even substantial savings can quickly be spent for extended care.
The Long Term Care Partnership Program may be an answer to help protect your client’s assets. The 2005 Deficit Reduction Act combines public and private insurance resources to help clients prepare for potential long term care needs. Because state and Medicaid eligibility requirements may vary, you should consult an attorney or tax advisor for information related to a specific situation.
Long term care insurance under these programs may create an opportunity to enjoy the benefits of both long term care insurance coverage and asset protection in the event that Medicaid benefits are required. With a Partnership-qualified long term care policy, your client may be able to qualify for Medicaid while retaining more assets than otherwise permitted.
To qualify for the benefits of a Partnership Program, the policy must be a federally tax-qualified plan and must meet inflation protection requirements based on the client’s age as of the date of the application.
Individual state requirements may vary. Certain states may require specific levels of inflation protection to qualify. If the client is younger than 61, the plan must include compound inflation. For ages 61 to 75, the plan must include some form of inflation protection.
As an example, suppose your client purchased Partnership-qualified long term care insurance and received $300,000 in benefits. Usually, your client would be able to keep an additional $300,000 in savings or investments, in addition to the assets your state already allows your client to keep and still meet your state’s asset test for qualifying for Medicaid.
Without the Partnership Program, your state may require that your client spend their $300,000 in savings or investments for long term care services prior to becoming eligible for Medicaid. Remember, generally both income and assets are included in determining eligibility for Medicaid, and that the Partnership Program protection relates to your client’s assets only. It is important to note that, in most states, you are not required to use all the benefits of your long term care insurance prior to receiving dollar-for-dollar asset protection. Every benefit dollar counts.
It’s critical that you discuss how the cost of extended care will be covered. Call us to discuss how long term care planning can help protect your client’s assets.