Incorporating Long-Term Care Insurance into an Elder Law Plan in NY

by Bryan Lane Berson, Esq.

As life spans have increased, so have chronic ailments associated with aging and the demand for personal care. Alzheimer’s disease and organic cognitive impairment (senility) are the leading causes for personal care needs.

Costs for this care are exorbitant. The New York State median cost for a private room in a nursing home is $125,752 annually. Costs on Long Island are even more expensive at $156,950 annually. Medicare, Medigap, and most medical and health insurance plans do not cover long-term nursing home or home care.

So how can a family of ordinary means afford such a staggering sum without losing everything? You must be pro-active and plan ahead – seeking advice from an estate planning attorney and a long-term care (LTC) solution specialist. They have the knowledge to advise on your elder and Medicaid planning and LTC solutions options.

LTC insurance pays benefits when the insured’s doctor states that the insured cannot perform several activities of daily living – such as feeding, bathing, toileting – or suffers from Alzheimer’s or senility.

LTC plans are customized, based your goals, needs, and what is comfortably affordable. Insurance premiums depend on the applicant’s age, health, and benefits. Insurers may offer discounts if spouses or domestic partners purchase policies together. Some businesses offer to LTC benefits to employees. Discounts and underwriting concessions may be available.

Most LTC insurers entertain new applications up to age 80. Policies are guaranteed to be renewable for life as long as the insured’s premiums are paid promptly. Premiums remain constant unless the state regulator authorizes a rate increase.

You should consider LTC insurance when you are relatively young and healthy – before a pre-existing health condition makes you uninsurable. Once approved, a condition cannot make you uninsurable. Exclusions – such as substance abuse, war injuries, and self-inflicted injuries – are never covered.

In addition to LTC insurance, there are several other types of coverage such as LTC benefit riders added to life insurance and annuities (known as ‘hybrids’) and critical illness coverage. These are especially good options if you do not qualify for standard LTC insurance.

The most comprehensive type of coverage is standard LTC insurance. It covers skilled care, intermediate care, and custodial care either in your home, an assisted living community, adult day care, or a nursing home.

Skilled care is provided by nurses or therapists 24 hours a day under doctor’s orders – usually in a rehabilitation or nursing facility. Intermediate care is for stable conditions that require daily supervision or services, but not around the clock. Custodial care covers personal care when one cannot perform several activities of daily living or requires supervision for cognitive reasons.

Policies pay a benefit amount for services, regardless of the setting where LTC care is provided. The elimination period is a waiting period, or a deducible measured in days, during which time the LTC insurer does not pay benefits until the deductible is met. The deductible needs to be met only once in an insured’s lifetime. After discharge, Medicare may cover 20 to 100 days of rehabilitative care in one’s home, assisted living or to a rehabilitation or nursing home, provided certain conditions are met. Thus, many applicants choose a 90 to 100-day elimination period.

LTC insurance can be used in lieu of or in conjunction with Medicaid. To meet Medicaid’s asset and income tests, an applicant may have to transfer assets to family or an irrevocable trust. Seniors who are reluctant to transfer assets should consider purchasing a LTC policy or other LTC coverage option.

If one has transferred assets within 60 months (5 years) preceding the Medicaid application, there is a penalty period. Also, after the recipient dies, Medicaid seeks to recover at least some of the benefits from the recipient’s estate. To protect their inheritance, some adult children purchase LTC policies for their parents.

In New York State, there are “non-Partnership” (Traditional) and “Partnership” LTC policies. Partnership policies can be more costly because the State mandates certain minimum benefits including an inflation rider. An advantage of Partnership policies is that the insureds do not have to transfer assets to qualify for Medicaid. Penalty periods do not apply, and there are no recovery actions against the insureds’ estate after the insured’s death. This can be a great advantage in estate planning and asset protection.

If one does not intend to transfer assets, a Traditional policy may be more suitable. Most likely, when the senior becomes incapacitated, the person’s agent appointed under a durable power of attorney will transfer the assets. Then, the Medicaid penalty period begins. When the insured qualifies for LTC services and has met the deductible, the LTC policy will pay. If the insured outlives insurance and penalty period, the senior can apply for Medicaid to pay for care. Medicaid recovery actions will apply.

Some say that LTC policies are expensive, although they don’t have to be. Compared to the catastrophic costs of paying out-of-pocket for nursing care without insurance, they can preserve wealth for one’s family.

Plan early before a crisis happens. If you have questions about estate planning, elder law, or estate administration, contact The Berson Firm, P.C. I can help.

About the Author:  Bryan L. Berson, Esq. is an attorney and mediator at The Berson Firm, P.C., a law firm that handles estate administration and planning, real estate, commercial transactions, and commercial litigation.  His e-mail is bberson@bersonfirm.com.  His phone number is (631) 517-1055.  Connect with The Berson Firm on Facebook and Bryan L. Berson on LinkedIn.  The firm’s website is www.bersonfirm.com.

* I would like to thank Sheila A. White, RN, MA, CSA, CLTC for her insight and contributions to this column. Sheila is a LTC Solutions Specialist and Partner at LTC Financial Partners, LLC. You can learn more about Sheila’s services at www.sheilawhite.ltcfp.com and can contact her at (631) 893-4040.

Disclaimer:  Constructive Knowledge is published by The Berson Firm, P.C. (the “Firm”).  The information contained in this column is provided for informational purposes only.  It is not tax or legal advice on any subject matter.  No readers, clients or otherwise, should act or refrain from acting on the basis of any content without seeking appropriate legal or other professional advice with respect to one’s particular circumstances.  This column reflects a general discussion of the law in New York.  It may not accurately reflect the law of other states.  The content is general information and may not reflect current legal developments, verdicts, or settlements.  The Firm expressly disclaims all liability with respect to acts taken or not taken based on any or all content of this column.  This column is Attorney Advertising.  IRS Circular 230 Legend:  Nothing in this column is intended to be used and cannot be used to avoid U.S. federal, state, or local taxes.  It was not written to promote, market, or recommend any tax planning strategy or action.  Copyright:  All rights reserved.  No part of this publication may be reproduced without prior written consent.  Readers may share this column through, but not limited to, social networks.

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