APRIL 2021
CURRENT ISSUES IN THE AREAS OF ESTATE, TAX
AND PERSONAL AND BUSINESS PLANNING
The information that follows summarizes some of the current issues in the areas of estate, tax and personal and business planning which may be of interest to you. Although this information is accurate and authoritative, it is general in nature and not intended to constitute specific professional advice. For professional advice or more specific information, please contact my office.
Planning For Paid Care In The Home – Continued. The last issue of this newsletter began a discussion about planning for paid care in the home. Some of the pitfalls associated with “under the table” caregiving were addressed and the article noted that there are areas in regard to which Southwestern Indiana Regional Council on Aging, Inc. (“SWIRCA & More”) can help in determining and providing for care needs. SWIRCA & More offers two services: (i) Self-directed Attendant Care; and (ii) Structured Family Caregiving. To be eligible for Self-directed Attendant Care, the individual requiring assistance or that person’s health care representative or guardian must be able to select the caregiver, conduct a background check, maintain timekeeping records, and hire or fire at will. The health care representative, guardian, or spouse cannot be hired as a paid caregiver, although it is often a family member already providing care that is selected. The caregiver is paid on an hourly basis and payment, including tax withholding, is administered through a third party. SWIRCA & More may be able to provide funding choices to pay for this service, such as the CHOICE Program and the Medicaid Aged and Disabled Waiver Program. For Structured Family Caregiving, a person receiving compensation must live with the person requiring care. This is often a family member but not a requirement. The health care representative or spouse may be the caregiver, but a guardian cannot. The caregiver is overseen by the company offering the service. Compensation is based on a flat rate. Funding sources for this program include the CHOICE Program and the Medicaid Aged and Disabled Waiver Program, although Medicaid waiver funding is the likely viable option. More information will be provided in the next newsletter, including “private pay” services, other risks of “under-the-table” caregiving, and reasons why it may make sense to use a licensed home health care agency to provide required services.
Revisiting Long Term Care Insurance. Several previous issues of this newsletter have addressed various aspects of long term care insurance. Since most people prefer to remain in the home as long as possible, and to be able to control their care, having long term care insurance will facilitate their ability to do so. However, relatively few individuals actually have long term care insurance, and for many of those that do, the policies are antiquated and the liability limits inadequate. There is no perfect time to purchase long term care insurance. The sooner you buy it, the lower the cost will be, but the insured will be paying that cost for a much longer period of time. Since policies change, an old policy may no longer meet the needs of the person requiring long term care. Waiting too long, however, may result in the inability to obtain long term care insurance. Having long term care insurance can provide funding to avoid some of the emotional impact that a spouse or another caregiver will bear if that caregiver must provide much of the care personally. Even respite care will ease the burden of caregiving on the part of the family member who is providing that care.
Although pure long term care insurance may be the best for many people, hybrid policies are also available. The advantage of a “pure” stand-alone policy, if it is a Partnership Program policy, is that it will provide Medicaid asset protection after the benefits of the policy have been exhausted. Indiana participates in the Partnership Program. Hybrid policies are a mix between long term care insurance and an annuity or a life insurance policy. The advantage of a hybrid policy is that if the insurance benefit is not used, or to the extent it is not used, benefits will still be payable.
My recommendation to clients is that they should talk to more than one vendor or insurance agent, and that they obtain two or three proposals from each one. The proposals should be similar so that they can conduct an “apples to apples” comparison, but they do not need to be identical. One proposal might include a Partnership Program policy, which is typically more expensive, while another proposal might include a shorter term policy providing a reduced benefit. Such a policy may not offer Medicaid asset protection, but it will provide additional funding and can facilitate the planning process so that assets can be preserved. Asset protection planning is still advisable irrespective of the existence of long term care insurance, and may make particular sense if a hybrid policy is used. Since hybrid policies have value, planning should be undertaken to protect them if long term care is required. Also, if benefits are paid at death under a hybrid policy, those benefits can be protected against long term care claims on the part of the insured’s surviving spouse. Even with long term care insurance, the coverage might not be adequate, or the coverage could be lost through nonpayment of premiums. Consequently, planning is always advisable. While attorneys typically recommend that people look into long term care insurance, unfortunately, long term care insurance vendors rarely recommend that people who purchase long term care insurance consider appropriate estate and asset protection planning. Their primary interest is in selling the policy.
High Cost Of Nursing Home Care. A few years ago it was estimated that the total national nursing home and home health care cost amounted to close to $300 billion. At the same time, the cost of hospital care was a little over $1 trillion. Individual nursing home cost varied tremendously by state, and often within the state, with urban nursing home cost being substantially higher than rural facilities. In and around the Evansville area, it is not at all uncommon for the monthly cost of nursing home care to exceed $8,000, and I have clients who are paying more than $10,000 per month. Although home health care is often touted as being less expensive, actually, the cost of around-the-clock home care can easily exceed the cost of a nursing home. In general, long term care costs are not paid by Medicare, except in certain cases for “skilled care” for up to 100 days when combined with a Medicare supplemental policy that covers the co-payment amount during a portion of that time period. As a result, Medicaid is the biggest contributor to paying the cost of long term care. Planning to qualify for Medicaid can preserve resources for people and can be especially beneficial to people who have very limited resources. It is never too late to plan, but planning sooner can avoid a number of risks and pitfalls and provide a much better financial result.
Additional Information. Future issues of this Newsletter will address other issues of current interest. Please contact my office with any questions that you might have.