As we all know, long term care is not cheap, whether it is hiring a home health care attendant or paying for a nursing home stay. So finding the right solution to pay for this care is critical. While many people believe Medicare will cover long term care expenses, this is really a quite limited situation. Medicare covers only up to 100 days of “skilled nursing care” per spell of illness, of which only 80 days are fully covered. The patient must start paying a copayment per day from the 21st to the 100th day unless he has a supplemental insurance policy that will cover this. Further, to qualify for Medicare, the patient must enter a Medicare-approved “skilled nursing facility” or nursing home within 30 days of a hospital stay that lasted at least three days (and you must have been admitted for those three days, not just there for “observation.”).
So a few long term care planning tips.
Tip #1 Long term care includes nursing home, assisted living, adult day care and home health care. Caregivers tell us they experience frustration, severe emotional distress and lose many dollars a year in lost wages trying to deal with bureaucracy. An experienced and knowledgeable professional should be able to help you in assessing your situation and putting together a plan that suits your family needs. Working with such a professional will ultimately save you tens of thousands of dollars, many hours of your time, and give you peace of mind.
Tip #2 Purchase long term care insurance if you can afford it. Whether you get a short policy for 3 years, a five year policy or one with spousal options, it again will ultimately save you money and give you peace of mind. There are more options available now beyond a strict long term care policy, which options include life insurance and annuity plans.
Tip #3 Be aware of the many professional long term care planning tools: personal dependency and medical deductions, home transfers taking into account basis and capital gains tax issues, annuities, domestic help, family caregiver contracts, the sale of your home, reverse mortgages, owner occupancy rules, partial sales, gift tax rules, life estates, Medicare, Veterans Benefits, Medicaid, many spend down strategies, promissory notes, life insurance loans and cash ins, divorce, income trusts, special needs trusts, annuitizing retirement accounts, and various asset transfer options. This kind of planning is very personal and fact specific, so one plan does not fit everyone. Be very wary of the source of your information. It is usually well worth paying for the correct advice and plan.
Tip #4 Consider putting a caregiver contract with children or others in place. This contract must be in writing and should be as specific as possible. The caregiver should keep a log of services rendered and must include the payment under this contract as taxable income.
Tip #5 Have good legal documents in place as soon as possible, as disability and long term care needs can come at any age. Your current power of attorney and will should be reviewed, and revised or replaced if necessary, depending on your wishes and goals. Often our documents are very simple, as that is all that was necessary at the time they were drafted for you. You now may need to add specific language to deal with the IRS, gifting, specifics on real estate that may need to be sold, and to add accounting provisions to safeguard your financial assets.
The best “tip” I can give you is to seek advice and counsel from an experienced elder law attorney if long term care planning is important to you. This is not an area where your information should be coming from someone other than a specialist.
Marie Mirro Edmonds