By Jessica L. Estes
Generally, most people do not have sufficient income or assets to fund their long-term care for extended periods of time. And, most people are not what the government deems “needs-based,” so they would not qualify immediately for any needs-based benefits. Rather, most individuals are somewhere in the middle.
For anyone in this “middle” category, a long-term care insurance policy can be an effective tool to pay for their long-term care, while at the same time, allowing them an opportunity to preserve their assets and qualify for government needs-based benefits. For example, if you have a policy that will supplement your income to cover your monthly long-term care costs, you could gift money to an asset protection trust and use the policy and your income to pay through any look-back period. When the policy is exhausted, you would be eligible for benefits, as the gift would be outside the look-back period.
Moreover, having an insurance policy that will pay benefits not only for nursing home care, but for home care, adult day care, assisted living and respite care is best, as it covers all the bases. The policy does not need to have a lifetime benefit; usually, a 3 to 5-year term, with an inflation rider of 3% to 5%, compounded if one can afford it, is ideal. The shorter the elimination period – the time you must wait before benefits are paid, the costlier the policy. However, a 90 to 120-day elimination period is typical.
Additionally, you may want to consider a policy that qualifies as a partnership policy under the Maryland Long-Term Care Insurance Partnership Program. Certain policies that qualify as a partnership policy will allow individuals to preserve assets in an amount equal to the benefits that were paid out on the policy if they ever need to apply for Medicaid. In other words, if one has a partnership policy that paid out $300,000.00 toward his/her long-term care and then he/she applies for Medicaid, he/she will be allowed to keep $302,500.00 in assets instead of the normal $2,500.00.
Even though these policies may seem costly, the annual premium likely is less than a month’s cost in a nursing home; yet, most people do not want to spend the money if there is a chance they will never use the policy. For these individuals, companies have created policies that can act as an annuity and provide a return of premiums if they never use it or can act as life insurance and provide a death benefit. Also, for a married couple, and if both spouses can qualify for a policy, some policies will allow a transfer of benefits to one spouse if the other spouse does not use them.
The Maryland Consumer Guide to Long Term Care provides information on the companies authorized to sell policies in Maryland, as well as detailed information regarding Maryland’s Partnership Program. Also, there is a one-time tax credit up to $500 that you can take on your Maryland return for purchasing a long-term care insurance policy.
To schedule an appointment with Jessica L. Estes, Esq., call ERA Law Group, LLC today at (410) 919-1790!