Elder Law Firm of Steve Bailey

Tips for Seniors to Avoid Getting Ripped Off by Their Loved Ones

  “About 90 percent of the financial abuse of elders is home-grown.”

We hear about older Americans being the victims of con artists who steal their life savings through many financial scams. These include emails that claim they have won a lottery and need to send their bank account information to claim the prize. However, stranger danger actually only accounts for about ten percent of the fraud perpetrated on our seniors. About 90 percent of the financial abuse of elders is home-grown. With that in mind, here are tips for seniors to avoid getting ripped off by their loved ones.

A Second Set of Eyes

Before your aging loved one signs anything, she should take it to her lawyer to review. Many seniors sign over the title to their home or a financial power of attorney (which is like a free pass to all their accounts and assets), without realizing what they signed. When their adult child or someone else close to them asks them to sign something, they often trust that the document is what the child says it is. They do not even consider or want to believe that their child would steal from them.

The older adult should also talk with his lawyer to make sure that he is protected against fraud from those close to him. There are ways to make it more difficult for people to get their hands on his money.  However, he must take the steps before the damage, not afterward. For example, he can set up his accounts, so all withdrawals or checks over a specified amount must have two signatures.

Pull the Credit Report

Have your older loved one request her free credit report once a year and go over it to make sure her accounts are in order. If someone is a joint owner of an account, make sure it is not fraud. Verify that her credit card balances are not higher than they should be. Sometimes a family member gets a senior’s credit card information and uses it as his personal piggy bank.

Call in the Officials

There are two times when you should contact your local authorities and agencies about elder financial abuse – before it happens and after it happens. First, contact your local agency on aging and office of adult protective services to see if they have any elder fraud prevention programs. Your prosecuting attorney’s office might also have a special elder fraud or elder abuse task force. Learn how they can help your loved one avoid being the victim of fraud.

Sometimes, no matter how careful the senior is, a close friend or relative pulls a scam and swipes some of his assets. If this happens, immediately contact the local prosecuting attorney, the adult protective services office, and your local agency on aging to take action. Sometimes, they can reverse the transactions and get the money back or have the title revert to the senior. The more time that passes, the less likely it is that he will ever see his assets again.

Because laws differ across the nation, talk with a local elder law attorney to see if your state’s laws vary from the general law of this article.

References:

AARP. “Fraud in the Family) (accessed April 7, 2018) https://www.aarp.org/money/scams-fraud/info-2018/family-fraud.html

When Should You Start Eldercare Planning?

“The AARP says that the most important thing is to start (and complete) the process, regardless of whether the ideal time was well in the past.”

If you have aging loved ones, you might be thinking about what they may need you to do to help them as they get older. You might know nothing concrete about their financial picture, including their assets, debts, investments, accounts, pensions, retirement or other benefits. If they cannot make or communicate their decisions or take care of themselves, due to injury or illness, how will you figure out the bills you need to pay, find their checkbooks, discover who is supposed to be paying them benefits or income and other necessary information?

If you could go back and sit down with them to ask them these questions, it would make your task much easier. When should you start eldercare planning?

The Best Time is Now

Wondering when to plan for eldercare is like wondering when is the best time to write a will or take out life insurance. The time to write a will or buy life insurance is before you need them.  The ideal time to begin eldercare planning is before there is a crisis. In the real world, however, many people do not engage in elder care planning, until they absolutely must, such as when a senior has suffered a stroke or heart attack.

How to Start the Eldercare Planning Process

The AARP says that the most important thing is to start (and complete) the process, regardless of whether the ideal time was well in the past. The AARP suggests a five-step approach to eldercare planning:

1. Prepare to have the conversation. The talk should initially focus on the senior’s outlook for the future. Explore her goals for the coming years and what factors, such as independence, financial security and being close to family, are essential to her. Ask about the activities she wants to pursue.
2. Decide who will be on your loved one’s family caregiving team. These teams usually consist of family members and close friends. Be careful not to “take over” or treat the senior like a child. His input is the most crucial facet of the plan.
3. Assess your loved one’s needs – both current and future. Determine areas of need, such as personal care, transportation, financial matters, home maintenance and modifications, medical care, insurance, adaptive devices like walkers or wheelchairs, the schedule of caregiving visits and her living situation. As part of this stage of planning, get all of your loved one’s relevant documents, healthcare provider contact information and medical and financial information.
4. Make the plan. The plan can be a simple, handwritten outline that contains the general guidelines, decisions, and agreements. Write this draft while the team is still together to make sure there are no misunderstandings or disagreements.
5. Put the plan into action. Depending on the facts of your situation, you might need to implement some or all aspects of the plan right away, or you might put it away in a file cabinet until circumstances make it necessary.

This posting is about the general law, and laws vary from one state to another. Talk with an elder lawyer near you to protect your rights.

References:

AARP. “Prepare to Care: A Planning Guide for Families.” (accessed January 31, 2018) https://assets.aarp.org/www.aarp.org_/articles/foundation/aa66r2_care.pdf

MarketWatch. “A simple but thorough checklist to help aging parents.” (accessed January 31, 2018) https://www.marketwatch.com/story/a-simple-but-thorough-checklist-to-help-aging-parents-2014-10-30

Being Prepared for a Possible Disability

Plan, if you are one person who will suffer from Alzheimer's disease.

Alzheimer’s disease is a scary proposition and something everyone should consider as a possibility in their future, according to the Times Herald-Record in "Disability planning is vital in case of cognitive impairment."

Unfortunately, experts think no cure for this disease is likely soon.  They expect that the number of people who suffer from it in American will double by the year 2060.

Fortunately, planning for Alzheimer's disease is not very difficult.

An estate planning attorney or elder law attorney can assist you in getting your legal paperwork in order. You will need a health care power of attorney so someone of your choosing can medically decide for you. You will need a general durable power of attorney so someone of your choosing can handle your day to day financial affairs. You will also need a living will so doctors will know what to do and not to do, when you are terminally ill with no chance of recovery.

Reference: Times Herald-Record (Jan. 18, 2018) "Disability planning is vital in case of cognitive impairment."

To Gift or Not to Gift - Understanding the Medicaid Gifting Penalty

“Of course, you would not think of a gift to your child as fraud, but Medicaid may see it differently. They may construe it as an attempt to offload your assets to fall below the asset limit required to qualify for Medicaid benefits.”

If you are in your fifties or older, you may have heard about the Medicaid penalty period, However,  you might not know what it is. You know that if you give people gifts during the wrong block of time, you can end up ineligible for Medicaid help with nursing home costs. Not being clear on what you can and cannot do, keeps you in a stressed-out state of limbo. You want to make gifts to your adult children to reduce the taxes on your estate one day, but you do not want to get hit with negative financial repercussions. You need information on whether you should choose to gift or not to gift – understanding the Medicaid gifting penalty.

How the Medicaid Gifting Penalty Works

You can make generous gifts to your children, and you are in good health, so you think that if you ever need nursing home care, it will be many years later. You have four married children. You give each child and his or her spouse $10,000 for a total of $80,000. Four years and 11 months go by with no problem, and then a health crisis causes you to need to move into a nursing home right away.

You apply for Medicaid benefits to help pay your nursing home costs. One of the first things Medicaid does is put all of your financial accounts and transactions for the last five years under a microscope. This analysis is called the “look back” period. They are looking for fraudulent or improper transfers of assets. You would not think of a gift to your child as fraud, but Medicaid may see it differently. They may construe it as an attempt to offload your assets to fall below the asset limit required to qualify for Medicaid benefits.  Many people do not want to spend what they view as their children’s inheritance on nursing home bills, so they give their assets to their children, not realizing that Medicaid will penalize them for these transfers.

How to Calculate the Penalty

Medicaid will examine any significant gift or asset transfer you make within the 60 months, before you apply for Medicaid benefits to see if it is improper. If Medicaid determines that the $80,000 in gifts violated the rules against fraudulent transfers, they will impose a harsh financial penalty – measured in time, not dollars. They will refuse to pay your Medicaid bills for a time equal to what that $80,000 would have bought you at the average nursing home in Alabama.

For example, if Medicaid says the average nursing home in Alabama costs $5,800 a month, they will make you somehow pay for the first 13.79 months you are in a nursing home. They do not care you are just one month away from the $80,000 gift falling off of their radar. Medicaid does not prorate the penalty. They will hit you with the same 100 percent penalty for a gift you made 59 months before you applied for Medicaid, as they will for a gift made the day before application.

Avoiding the Medicaid Gifting Penalty

Knowing this information about the Medicaid gifting penalty can give you the advantage of possibly avoiding the penalty. You can sidestep the $80,000 penalty by waiting a month to apply for Medicaid. You need the nursing home care, so move into the nursing home, but pay the $8,000 out of your private funds. After the first month passes and the $80,000 slides off the books, then apply for Medicaid nursing home assistance. Paying $8,000 is much cheaper than having to come up with $80,000 to pay for 13.79 months of care.

The Medicaid program is different in every state, so talk with an elder law attorney near you. This posting discusses the general law, which may not be the same as in your state.

References:

Forbes. “The Medicaid Penalty Period Explained.” (accessed January 21, 2018) https://www.forbes.com/sites/markeghrari/2014/08/08/the-medicaid-penalty-period-explained/#78e5b8912ee4

Paying for Senior Care. “What is the Medicaid Look-Back Period? What Penalties, Exemptions & Workarounds Exist?” (accessed January 21, 2018) https://www.payingforseniorcare.com/medicaid/look-back-period.html

Four Ways a DIY Power of Attorney Can Hurt You

“Generic power of attorney forms provide broad authority to the person you select as your agent. A lawyer will limit the powers to only those needed under the circumstances and will have fail-safes to reduce the odds of your agent embezzling your assets.”

You want to save a few bucks by using a pre-fab power of attorney (POA) form you bought online or at the office supply store. That option is less expensive than having a lawyer write your POA, but it could cost your or your loved ones everything you own. If it is a medical POA, it could cost you your very life. Here are four ways a DIY power of attorney can hurt you.

1. The Person You Designate Could Take the Money You Meant for Your Children

When you name someone to serve as your agent, you are giving them the power to take legal actions on your behalf. The underlying assumption is that they will act in your best interests. However, some people unfortunately abuse the trust placed in them. Generic power of attorney forms delegates broad authority to the person you select as your agent. A lawyer will limit the powers to only those needed under the circumstances.  They will also include fail-safes to reduce the odds of your agent embezzling your assets.

Let’s say Tom downloads and prints a DIY power of attorney before having high-risk surgery. He doesn’t want to trouble his adult children with serving as the agent, so he asks an old college buddy, Steve, to be the named agent. Tragically, Tom dies in the hospital. After dealing with the funeral and burial, Tom’s adult children turn their attention to settling his financial matters, only to discover that Steve emptied Tom’s accounts while he was in the hospital.

2. With a Medical Power of Attorney, Your Life is in Their Hands

You can (theoretically) replace money, but you cannot replace your life. If you give the wrong person the power to refuse life support or other life-prolonging treatment, even if you need it only for a short time, for example, to reduce brain swelling for a few days, that is a mistake you cannot undo. Talk with a lawyer to make sure you only give your medical POA agent the authority you actually intend to.

3. Choosing the Wrong Person as Your Agent

Be realistic when selecting someone to serve as your POA agent. Your lawyer can help walk you through this mental exercise. Many people will automatically choose, for example, their son as the agent, when their daughter might make better decisions. You also need not name your spouse as your POA agent. If someone else would be a better choice, you may select that person.

4. If You Do Not Update, Your Former Spouse Can Swipe Everything

When you consult with your lawyer about your estate planning regularly, your documents, including your power of attorney, can stay current and up-to-date. What is the worst that could happen with the DIY power of attorney documents you and your ex-spouse wrote years ago, naming each other as agents? Your ex would never clean out your bank accounts, investments or other assets with a document giving him or her the authority to do so, would they?

Talk with a local estate planning lawyer, because the laws in your state might differ from the general law discussed in this posting.

References:

U.S. News & World Report. “The Dangers of DIY Estate Planning.” (accessed January 21, 2018) https://money.usnews.com/money/personal-finance/articles/2010/06/29/the-dangers-of-diy-estate-planning

CNBC. “The 5 biggest estate-planning blunders.” (accessed January 21, 2018) https://www.cnbc.com/2014/04/13/top-estate-mistakes-140414-schwartz-ec.html

Three Reasons to Plan for Incapacity

“If the fear of bad things happening is keeping you from doing incapacity planning, you should realize that once you have your documents you can relax, knowing that if the worst-case scenario does come to pass, you are covered.”

It is scary and unsettling to think of growing old and feeble. You feel vulnerable and less than safe. Instead of doing mindful planning to ensure that you have enough money, proper care, and a comfortable environment, many people live in a state of denial and simply hope for the best.

This mindset is like setting out to drive from the East Coast to the West Coast with no spare tire, no credit cards, no auto insurance, no AAA coverage, no emergency supplies and no way to pay for any crisis that may arise along the way. It is much better to anticipate what might go wrong and to prepare for it. On the road trip of life, plan for what you would want to happen, if one day you cannot decide for yourself. Here are three reasons to plan for incapacity.

1. Incapacity Planning Documents Speak for You When You Cannot

A well-crafted power of attorney (POA) can direct how you want your financial affairs handled, if you cannot manage them. You can give instructions on running your business, an action plan for your investments and identify who you want to raise your children. These are just a few examples of the subjects you can cover in incapacity planning tailored to your needs and wishes. Typical incapacity planning documents include a:

• living will that details the medical care you want or do not want, if you become incapacitated
• health care power of attorney that appoints someone as your medical decision-maker
• financial power of attorney to make your financial decisions
• will to distribute your assets. If you are incapacitated, you cannot make a valid will.

2. Avoid Expense and Family Disputes

Yes, it costs money to have a lawyer prepare the legal documents for incapacity planning.  However, it can cost far more if you do not have the papers that direct your medical care. In Terri Schiavo , a young woman was in a coma. Her doctors said she was in a persistent vegetative state with only a feeding tube keeping her alive. Her parents battled her husband for 15 years over removing the feeding tube. They spent millions of dollars on legal fees, taking the case to the U.S. Supreme Court.

Had Terri prepared a health care directive however, she did not want to be kept alive if in that condition, there would have been no protracted legal battle that ripped apart a family and prolonged their grief. She could have been kept alive by whatever means necessary, which also would have prevented the legal battle. You can select whatever medical care you want in your medical POA – do not opt for them to “pull the plug.”

3. Your Wishes Might Differ From Your Next of Kin’s Choices

If you do not leave binding written instructions, your next of kin likely may make decisions for you. Let’s say your spouse, however loving, is a terrible money manager. If you do not set up a durable POA for financial decisions, your adoring spouse might bungle your assets and lose your life savings, leaving nothing for your care.

If the fear of bad things happening is keeping you from doing incapacity planning, once you have your documents you can relax, knowing that if the worst-case scenario comes to pass, you are covered. You should have a local estate planning lawyer prepare your documents, because the laws are unique in every state and this posting is about the general law.

References:

TIAA/CREF. “Planning for incapacity.” (accessed January 21, 2018) https://www.tiaadirect.com/public/pdf/C6973_knh_planning_incapacity.pdf

American Bar Association. “Estate Planning for Old Age and Incapacity.” (accessed January 21, 2018) https://www.americanbar.org/publications/gp_solo/2015/november-december/estate_planning_old_age_and_incapacity.html

How Can I Qualify for Nursing Home Care?

How Can I Qualify for Nursing Home Care?

“An elder law attorney can guide you through the intricate Medicaid application maze and prepare a trust or other legal product that can help you retain some assets, without incurring a Medicaid penalty.”

Nursing home care is expensive – thousands of dollars a month – but if you need it, you have to figure out a way to pay for it. Most of us cannot afford to shell out $6,000 or $7,000 a month or more to a nursing home. If you do not have long-term care insurance or other funding, you may be wondering, How can I qualify for nursing home care?

Although every state’s Medicaid rules are different, the general rule is that you may be eligible for Medicaid nursing home benefits if you:

• Have a medical condition that makes nursing-home care necessary, and
• Meet the financial requirements for Medicaid

Functional Eligibility for Nursing Home-Level of Care

If you need help with the activities of daily living, you might meet the first requirement. The state will evaluate your ability to perform tasks, such as dressing, bathing, toileting, feeding yourself and getting in and out of bed and chair. The standards will vary by state, but the more help you need with these basic functions, the more likely you are to meet your state’s threshold for needing nursing home-level of care.

Medicaid Financial Requirements

Although there are no income or asset restrictions for Medicare eligibility, you cannot receive Medicaid benefits unless your income and assets are below the set limits. These limits can change every year. Your income and assets will have to meet the guidelines on the first day of every month to retain your Medicaid funding.

What to Do if Your Income is Too High

If you are not able to live at home safely because of your medical condition, some states will apply a different income limit for Medicaid nursing home qualification. In other words, the income limit can be higher based on your medical needs.

Many states have “spend-down” programs for people who have significant medical expenses and too much income to meet the Medicaid income guidelines. If you have to spend a lot of money every month on medical expenses, you have less money available to pay for your nursing home care. Spend down programs, also called “medically needy” programs, deduct your medical expenses from your income, which can bring you below the Medicaid income level.

When Your Assets Are Too High

Many common assets, such as your home, are not counted for purposes of Medicaid qualification. Be very careful about giving away some of your assets to fall below the Medicaid countable asset limit. Medicaid will look at your bank statements and other assets for the last five years before you applied for Medicaid. This is called the “look-back” period.

Medicaid has strict rules about giving away assets or selling them at below market value during the look-back period. If any of your transfers break the Medicaid asset transfer rules, they can impose a harsh financial penalty on you. The penalty can mean that Medicaid will not pay for your nursing home expenses for many months. They will use a formula to calculate the number of months you will have to pay for yourself, before Medicaid starts to cover you.

An elder law attorney can guide you through the intricate Medicaid application maze and prepare a trust or other legal product that can help you retain some assets, without incurring a Medicaid penalty. The Medicaid programs in every state are different, so you should talk with an elder law attorney in your area. This posting discusses the general law.

References:

Centers for Medicare & Medicaid Services. “How can I get Medicaid if I need nursing home care and have Medicare?” (accessed December 6, 2017) https://www.medicareinteractive.org/get-answers/programs-for-people-with-limited-income/medicaid-and-medicare/how-can-i-get-medicaid-if-i-need-nursing-home-care-and-have-medicare

How Can I Plan for Nursing Home Care Costs?

“To pay for nursing home costs beyond 100 or 190 days, many people turn to Medicaid, veterans benefits, relocation to a less expensive part of the country, long-term care insurance or reverse mortgages.”

You cannot count on Medicare paying for much, if you need nursing home care. Medicare can pay for skilled nursing care for a short period of time, but not for ongoing residential services. Medicare will also not pay for a nursing home admission for a chronic or long-term condition for which there is no cure. It will pay for you to recuperate (convalesce) briefly from an illness or injury. As you strategize for your financial future, you need to answer the question, How can I plan for nursing home costs?

Medicare will pick up the tab for 100% of the first 20 days and 80% for the next 80 days. If you have Medicare Supplement insurance, it will pay the other 20% for days 21 through 100. Neither Medicare nor Medicaid Supplement insurance will pay anything after 100 days, unless you are in a psychiatric hospital that is also a nursing home and you are there for a psychiatric condition. In that situation, Medicare will help pay up to 190 days.

Options to Pay for Nursing Home Care

To pay for nursing home costs beyond 100 or 190 days, many people turn to Medicaid, veterans’ benefits, relocation to a less expensive part of the country, long-term care insurance or reverse mortgages. You should consider different factors for each of these options.

Medicaid pays for more nursing home costs than any other agency or organization – around half of the total nursing home costs in America. Not everyone can meet the stringent financial requirements to qualify for Medicaid. You must be low income and have few assets to be eligible. Medicaid excludes many common assets, like your home, from counting toward the asset limit. There are ways to shift your income and protect your assets through estate planning products like trusts, but you should talk with an elder law attorney to find out your best options.

If you are a veteran or the spouse of a veteran, you may qualify to live in a state Veterans Administration (VA) nursing home. Every state and each nursing home has different rules for eligibility, so you will have to do your homework to find one that meets your needs and that is available for you. If you receive Aid and Attendance benefits from the VA, you cannot also live in a state VA nursing home.

Although it can be difficult to uproot yourself if your medical condition requires nursing home care, where you live can make a tremendous difference in the cost of nursing home care. The average cost of nursing home varies from a low of $147 a day in Oklahoma to $364 a day in New York to a stunning $800 a day in Alaska. The national average is $235 a day. With this variation in the expense, relocation can make your dollars go further.

Long-term care insurance is expensive, and as you get older, the premiums continue to rise. You are trusting that the company will still be in business decades down the road when you need them. At least one major long-term care insurance company liquidated in 2017 under court order. If you never need long-term care, you will get no benefit from all those premiums you paid.

Reverse mortgages and other financial products can offer more flexibility than long-term care insurance at a lower cost, but these products can also have downsides. Planning for nursing home care costs requires the consideration of multiple factors. The laws are different in every state, so you should talk with an elder law attorney in your area to decide on the best plan for you.

References:

Paying for Senior Care. “How to Pay for Nursing Home Care.” (accessed December 5, 2017) https://www.payingforseniorcare.com/longtermcare/paying-for-nursing-homes.html

Planning Ahead for the Care of Your Spouse Suffering from Alzheimer’s

“Once you have your legal documents in order and you have made an inventory of your assets and debts, you can tackle the financial aspect of your spouse’s diagnosis.”

You will never forget the moment you received the news that your spouse has Alzheimer’s disease. The vision you had of your future growing old together was shattered. After the initial shock, anger, and sadness, you took a deep breath and made the best of it. Your next step is planning ahead for the care of your spouse suffering from Alzheimer’s.

The future care of your spouse will involve three major components:

• Legal documents
• Financial preparation
• Make care decisions

Legal Documents

As your spouse’s disease progresses, she will lose the legal capacity to make important decisions and sign legal documents. Talk with an elder law attorney to discuss the legal documents that should be prepared right away, so there will be no question later on whether your spouse had the mental capacity to sign a legally enforceable document.

Assemble the legal papers you already have and go over them with your lawyer to update them for your situation. Make a list of your property and assets, including all investments and bank accounts, and your debts. Discuss with your lawyer the best way to protect your assets for the future and how to deal with your debts. Put your spouse’s preferences for health care and long-term care in writing.

A power of attorney document will designate someone to make financial decisions for your spouse, when he can no longer do so. However, make sure that it is a durable power of attorney, so it will still be valid after he becomes incapacitated. A health care proxy will name someone to make health care and end-of-life decisions for him when he cannot do so. Have him sign a medical release of information, so HIPAA regulations will not ban the person named in the health care proxy from seeing his medical records.

Make sure that your spouse has a will or living trust, so she can decide what to do with her assets after she passes.  If she does not have a will or living trust, the laws of the state will give her property to her legal heirs through the rules of intestacy, regardless of what she would have wanted.

Financial Preparation

Once you have your legal documents in order and you have made an inventory of your assets and debts, you can tackle the financial aspect of your spouse’s diagnosis. The Alzheimer’s Association provides a checklist of many of the costs you may expect to incur , whether your spouse will receive in-home or residential care services.

Explore every possible source of funding for your spouse’s future care costs. Funding sources often will cover some items but not others, so you must piece it all together like a quilt to have the best financial assistance package. Your spouse may be eligible for veterans or other government benefits to help with some services or expenses. If you have a long-term care insurance policy, see what benefits it will provide and for how long.

Make Care Decisions

Just as it takes a village to raise a child, you must put together a care team for your spouse. You cannot do this job 24/7 without some help. Talk with family members and close friends to let them know what to expect and the ways they can help. Make sure that your spouse develops a relationship with medical professionals in the early stages of the disease, so she will be comfortable with them later.

Seek community resources for services, such as government agencies, neighborhood organizations, churches and other social groups. Find out what in-home and full residential memory care services are available in your area.

The better you plan, the easier things will be later. The laws are different in every state, so talk with a local elder law attorney.

References:

Alzheimer’s Association. “Building a Care Team.” (accessed October 29, 2017) https://www.alz.org/i-have-alz/building-a-care-team.asp

Alzheimer’s Association. “Financial Planning.” (accessed October 29, 2017) https://www.alz.org/i-have-alz/financial-planning.asp

Alzheimer’s Association. “Legal Planning.” (accessed October 29, 2017) https://www.alz.org/i-have-alz/legal-planning.asp

Exploring Hybrid Long-Term Care Options

“Some hybrid packages provide fixed income through annuities, cover nursing home costs out of cash retained in the product and pay a death benefit through life insurance components.”

Since Penn Treaty long-term care insurance went out of business, leaving Penn’s business partners holding the bag for some costs of claims and making seniors worried about their futures, people are even more hesitant to buy long-term care insurance than before. Historically, the high cost of long-term care insurance premiums has kept many people from buying this coverage. It now appears that after paying the high premiums for years, long-term care insurance might not be there when you need it.

 There are relatively new alternatives to long-term care insurance. If you are exploring hybrid long-term care options, you may have questions about what they are and how they work. Kiplinger advises these options come in many forms.

Long-Term Care Rider Coupled with Whole or Universal Life Insurance Policy

With this variation, you pay one up-front premium or a series of premiums with set prices. There are no future premium increases. While the number of these hybrid insurance products sold in 2015 was up by 37 percent over 2014, sales of traditional long-term care policies fell about 20 percent during the same time. If you never need long-term care, you will still get a financial benefit from the hybrid policy through the death benefit. Standard long-term care insurance can only pay nursing home expenses.  Therefore, if you do not use it, you lose it.

Growth Rate of Cash Value

Many hybrid products also grow in cash value. The current growth rate is about 2 percent, which is good compared to today’s bank rates.  However, if short term returns increase considerably, you will lose out on the potential return you could get in the market for your money. You must invest at least $50,000 to $75,000, if you want coverage that will provide sufficient long-term care benefits. Taking a distribution from the annuity or life insurance to pay for nursing home costs can be tax-free sometimes, which is likely better than paying for a nursing home with your after-tax savings.

Wealth Management

The New York Times reports that hybrid products can be an essential component of your wealth-management plan, to prevent long-term costs from depleting your life savings, while providing flexibility. Some combinations include long-term care coverage with an annuity, instead of a universal life policy. Some hybrid packages provide fixed income through annuities, cover nursing home costs out of cash retained in the product and pay a death benefit through life insurance components.

Best Candidates for Hybrid Long-Term Care Products

Experts warn these hybrid financial products are not the best option for everyone. If you have less than $500,000 in assets, you may prefer to spend down your assets over time to qualify for Medicaid to pay your long-term care expenses. If you have more than $2 million in assets, you can pay nursing home expenses out of pocket. Between $500,000 and $2 million in assets is the sweet spot, at which buying a hybrid long-term care product might make sense. Talk with your financial advisor about what is best for your situation.

This posting discusses general law. Talk with an elder law attorney in your area to learn the laws in your state. Also consult a financial advisor and a tax expert.

References:

Kiplinger. “Hybrid Insurance Policies Gaining Steam.” (accessed October 8, 2017) http://www.kiplinger.com/article/insurance/T036-C000-S004-hybrid-policies-gaining-steam.html

New York Times. “Hybrid Long-Term Care Policies Provide Cash and Leave Some Behind.” https://www.nytimes.com/2016/03/06/business/retirementspecial/hybrid-long-term-care-policies-provide-cash-and-leave-some-behind.html

Forbes. “Hybrid Long-Term Care Insurance Policies.” (accessed October 8, 2017) https://www.forbes.com/sites/wadepfau/2016/01/21/hybrid-long-term-care-insurance-policies/#33e4fe8a6bea

Penn Treaty. “Liquidation FAQs.” (accessed October 8, 2017) http://www.penntreaty.com/Liquidation/LiquidationQuestions.aspx

Elder Law Answers. “Long-Term Care Hybrid Products Give Buyers More Options.” (accessed October 8, 2017) https://www.elderlawanswers.com/long-term-care-hybrid-products-give-buyers-more-options-7812