Upcoming speaking engagements:
- Elder Care in North Carolina: Resolving Legal and
Financial Issues, June 22, 2006, continuing legal
education presented in Asheville, NC.
- “The Lateston Legal Issues for the Elderly”
at the Ninth Annual Alzheimer’s Conference, “creating
a Family Quilt: A Cross-Cultural Approach to Alzheimer’s
Disease,” sponsored by the Black Mountain Center Foundation
at Blue Ridge Assembly in Black Mountain on August 11,
- The North Carolina Bar Association’s seminar “Basics
of Elder Law” for attorneys on the topics of Medicare,
Veterans Benefits and Long-Term Care Insurance as sources
of payment for long-term care on October 12, 2006.
QUESTION & ANSWER CORNER
My husband and I are considering purchasing
long-term care insurance. Is this necessary? Can you help
us understand the policies?
Long-term care insurance is a baffling
topic for many. Without knowing your particular circumstances,
I can’t advise you on which products may be most advantageous.
But, I can offer you some general information.
What is it? Long-term care insurance
is an insurance policy that will pay benefits to the insured
upon the occurrence of certain “triggering events.” Usually,
benefits under the policy are triggered when (i) the insured
begins receiving home care or care in a skilled nursing
or assisted living facility and (ii) such care is required
due to insured’s need for assistance with at least two activities
of daily living or due to cognitive impairment. Activities
of daily living are dressing, feeding, toileting, transferring,
bathing and continence.
Who needs it? The simple answer
is that most of the members of our community age 50 or above
should at least consider purchasing long-term care insurance.
A semi-private room in a skilled nursing facility in our
community may easily cost as much as $5,000 - $6,000 per
month, or up to $72,000 in a year. And that amount only
pays for room and board. This significant expense quickly
depletes most estates.
For the larger estate, long-term care
insurance can be the “mote around the castle” that protects
all of the careful financial and estate planning that’s
been accomplished by insuring that assets will not be depleted
on long-term care. For the smaller estate, long-term care
insurance can be the difference between the “privilege”
of Medicaid eligibility for long-term care and saving the
family home. However, long-term care insurance for such
estates may not be appropriate unless the premiums can be
paid out of disposable income without changing lifestyle.
Because long-term care insurance can be cost-prohibitive
for the smaller estate, particularly for retirees on a fixed
income, adult children frequently pay the premiums for such
policies for their parents in order to protect the family
assets, particularly if highly appreciated real property
Is this a good policy? You should
consider the following factors when evaluating a long-term
- Company – ALWAYS check the credit rating of the company
offering the policy. Regardless of the “bells and whistles”
the policy may offer, the policy is only as good as the
company’s ability to pay any potential claims. You can
check the credit rating of insurance companies on the
web at www.standardandpoors.com.
- Coverage – We see lots of policies that cover only
care in a skilled nursing or assisted living facility.
Most people prefer to receive care in their homes. Since
none of us has a crystal ball, we recommend that clients
purchase a comprehensive policy that covers home care,
adult day care, assisted living and skilled nursing care.
- Daily Benefit – Your “daily benefit” is that amount
that your policy will pay to you for home care, adult
day care, assisted living or nursing home care. You should
base your daily benefit amount on the most expensive of
these options – nursing home care (although home care
may be more expensive, most people do not receive 24-hour
home care). If we assume that the daily rate for a semiprivate
room in skilled care is $165/day,then your daily benefit
amount should be $165 less that amount that you
can pay from your income for your care without impacting
your lifestyle or that of your spouse.
- Benefit Period – The “benefit period” defines how long
your policy will pay benefits. Often, this is expressed
in terms of a maximum dollar amount that the policy will
pay. So, a policy with a daily benefit of $150 and a lifetime
maximum of $164,250 would provide three years of nursing
home coverage at that level. Because nursing homes care
for the frailest and sickest of our seniors, the typical
nursing home stay is less than two years. However, for
the dementia patients, long-term care may extend for years.
We have typically recommended policies with a three year
benefit period because the Medicaid “lookback” period
has been 36 months. The Deficit Reduction Act of 2005
extended this lookback period to 60 months, which may
mean that we will begin to see longer benefit periods
for long-term care policies. Lifetime benefit periods
are more expensive and are generally not necessary other
than as a peace of mind measure.
- Elimination Period – The “elimination period” is the
number of days that you must receive care that would otherwise
be covered under your policy before your policy begins
to pay benefits. We typically see a 90-day elimination
period for nursing facility benefits because this period
of care may be covered by a Medicare supplement
policy. Please note that adult day care and assisted living
care will not be eligible for coverage under a Medicare
supplement policy and that there is very limited coverage
under Medicare for home care. Therefore, depending on
your circumstances, a zero elimination period may be appropriate
for home care, while a 90 elimination period may be sufficient
for skilled nursing care.
- Inflation Protection – We know that the expense for
medical care is growing at a rate that exceeds the general
inflation rate. Therefore, purchasing a policy that fixes
the daily benefit amount leaves your estate vulnerable
to the increasing costs of nursing care. Particularly
for those purchasers in their sixties, we advise a compound
inflation rider that increases the daily benefit amount
annually. Depending on the circumstances, the older purchaser
may include a simple inflation rider or may purchase a
higher daily benefit with no inflation rider.
Even with the outline above, long-term
care insurance is a difficult topic. Too often, long-term
care insurance is evaluated as an investment product and
found lacking by financial planners. Measured against other
investment products, long-term care insurance may not provide
the estate with a return that competes with life insurance
or market investments. But for the surviving spouse with
a significant estate, long-term care insurance may provide
the peace of mind of knowing that her care will not financially,
physically or emotionally burden her children, that her
care will not “un-do” her husband’s careful financial planning
or eliminate opportunities for her children or grandchildren,
that she can exert some control today over things that may
happen tomorrow. For the later second marriage, long-term
care insurance may maintain the separation of the assets
of each spouse. For the more modest estate, long-term care
insurance may eliminate the painful task of taking apart
mom and dad’s estate in order to fund dad’s care in the
nursing home. In each of these circumstances, long-term
care insurance defies mathematics to quantify the value
The above discussion is provided as
general information only and does not constitute legal or
investment advice. Please consult your attorney or financial
advisor to evaluate any long-term care insurance product
you are considering.
- Wendy has been appointed as Chair of the Elder Law
Section of the North Carolina Bar Association for the
2006-2007 year. She has served as Vice Chair of the Sections
since late last year.
- Wendy has been writing a monthly article for the Black
Mountain News since March of this year. These articles
focus on issues of particular importance to seniors. Upcoming
articles will focus on the use of revocable living trusts
and charitable giving techniques.
For the summer months, our office
will be closed on Fridays. We expect to resume our usual
9 am – noon schedule for Fridays when Buncombe County
schools resume for the fall.
- Please note that our FAX NUMBER changed when we moved
into our new office last July. Our new fax number is 669-0055.
We are still receiving a number of faxes at our old number.
For your privacy and for a quicker response from our office,
please send correspondence to the new fax number!
In our December newsletter, we alerted
our readers to the Medicaid changes contemplated by the
Deficit Reduction Act of 2005 (“DRA”). Unfortunately, regardless
of the opposition of the Democratic party, AARP and NAELA,
President Bush signed DRA into law on February 8, 2006.
DRA made significant changes to the Medicaid
program for nursing home care. Most significantly, DRA does
- Increases the “lookback”period from 36 months to 60
months for all applications;
- Requires residents in continuing care retirement communities
to use all assets declared on their entrance application
to pay for their care prior to applying for Medicaid benefits;
- “Stays” any penalty periods created by transfers of
assets (including church pledges, birthday gifts, tuition
payments, etc.) so that such penalties do not begin to
run until the Medicaid applicant otherwise eligible for
Medicaid (e.g., Grandmother pays college tuition of $20,000
for grandson and then 4 years later has a stroke and requires
nursing home care. The 4 month period of ineligibility
for Medicaid benefits created by the $20,000 transfer
will not begin until Grandmother has less than $2,000
in assets and is in the nursing home. Grandmother would
have no assets to pay for her care and would be ineligible
for Medicaid benefits.)
To date, DRA has NOT been implemented
in North Carolina. The Elder Law Section of the North Carolina
Bar Association is carefully watching and critiquing the
legislation currently being considered by our General Assembly
that would make DRA effective in our state. At this point,
it looks as if DRA will be effective in North Carolina later
this fall. It is unclear if DRA will impact any transfers
made before such date.
We also previously alerted our readers
to the estate recovery legislation passed by our General
Assembly last summer. The North Carolina General Assembly
adopted legislation last summer that would permit the state
to impose pre-death Medicaid liens against the real property
of recipients of Medicaid for long-term care. Largely through
the efforts of our North Carolina Chapter of NAELA (National
Academy of Elder Law Attorneys), we expect this legislation
to be repealed during the current session of the General
Assembly! Our office was very active in this effort!