What Are Life Settlement Programs?

Feb 27, 2014  /  By: Barton P. Levine, Esq.  /  Category: Healthcare

A new model or option when it comes to paying for long term care is centered on transitioning a life insurance policy into a payment source for long term care expenses. It’s relatively new and therefore, for many, it’s a risky option. This week, we explore these new financial products to see if they’re worth the hype.

First, it’s important to understand that each policy will yield different payments. There are a number of moving parts involved, including the age of the individual wishing to convert his policy, his medical history and the policy itself.

Calculations are used to determine how long you’re likely to live, which determines, of course, how much the company can eventually pocket as profits.

In most instances, the life insurance policy is transformed into a pre-funded, irrevocable benefit account that is administered with monthly payments made on behalf of the individual. For many seniors, it’s an option worth consideration because all health conditions are accepted, and there are no wait periods, no care limitations, no costs to apply, no requirement to be terminally ill, and there are no premium payments. Policy owners simply convert the policy to qualify for the benefit plan. Usually, payments begin immediately and often paid directly to the assisted living facility, senior housing plan or they can be used to cover long term care costs.

In most instances, Medicaid won’t consider the life instance as an asset that would have to be relinquished since it transitions into an irrevocable status. Further, in most instances Medicaid won’t try to collect the proceeds following one’s death as part of the “asset recovery” effort. It’s important to remember, though, that the policy is no longer an asset to the applicant. It belongs to the company that bought it.

One reason this could be a viable solution is the reality that there are many people who feel as though they can no longer afford the premiums to maintain the policies. That means they drop the policies and lose the value they’ve acquired over the years. The policy owner is able to recoup some of the value which is ideal for covering the growing costs of long term care. “People get to a liquidity crunch and paying the premiums doesn’t make sense, so they just walk away,” said Lauren H. Cohen, a finance professor at Harvard Business School who has written about life settlement.

Remember, in most policies, there is no cash surrender value and until the insured dies, there’s simply no value. This levels that playing field to some degree.

Some companies (and there are several) will often pay 40 to 45 percent of the policy’s face value. If it’s someone in his late 70s and with chronic conditions, it may equate to only 20 or maybe 30 percent. Keep in mind, though, this is a rough idea and the unique circumstances dictate the final tally. Also, companies have various payment options. For some, the payments must be paid directly to the long term care provider, an assisted living facility or nursing home. Others will simply send a check to the recipient with no stipulations on how the money is to be used.

So when is this not right? If you need to provide for a spouse or another dependent after death, you’ll probably need to hold on to the policy. In other instances, some with poor health and with only a few months to live will work with their family members to find a way to cover the costs for those few months and then have the life insurance policy pay off its face value and perhaps receive even more than what they paid for the care. Obviously, that’s a better choice for some.

Also, because this is still a new offer, some states are putting together legislation that will protect consumers. For instance, in Texas, new legislation would require settlement companies to fork out a $5,000 funeral benefit to the family of the policy holder after he’s died. And if the company is still directly paying a long-term care provider when an individual dies, the remainder of the converted amount will be paid to a designated beneficiary. The disturbing aspect is that many of the life insurance companies are actually participating in the drafting of some laws. Needless to say, it’s a fine line for any family so it’s important to understand all of the elements.

Have questions about your loved one’s long term care options? Give us a call today to explore what might be available. Be sure to follow us on Twitter and like our Facebook page, too. This way, you’re always in the know of various estate planning laws in New York.

The Law Offices of Barton P. Levine is a member of the American Academy of Estate Planning Attorneys.

The Medicaid Five Year Look-Back Period

Jan 02, 2014  /  By: lrosales  /  Category: Elder Law, Healthcare

People typically know very little about the Medicaid program if they never needed the benefits provided by the program. Unfortunately, this lack of knowledge can provide a problem if you suddenly find you need to qualify for those benefits. The chances are good that you may need Medicaid benefits at some point during your golden years because Medicaid covers long-term care expenses unlike most other insurance policies. If you do find that you need to qualify for Medicaid, the five year look-back period could be a barrier to eligibility.

There is a good chance you, or your spouse, will need long-term care at some point in the future. There is an even better chance that your private health care insurance will not pay for that care nor will Medicare. Medicare only covers long-term care under very limited circumstances and then only for a very short period of time. Medicaid, however, will cover the majority of those expenses, making it important that you qualify when the time comes.

Medicaid is a federal funded means test program, meaning that you must meet income and asset limits to qualify. If the value of your resources (assets) exceeds the program limit you will be required to spend-down those assets before receiving benefits. This can cause you to lose a lifetime of savings just to cover the costs of long-term care. The five year look back period is used to ensure that you cannot simply transfer those assets to a loved one and then apply for benefits. When you apply for benefits, Medicaid will “look-back” up to five years for asset transfers made by the applicant. If a transfer is discovered there is a good chance that the value of the asset transferred will be added to the applicant’s countable resources just as if the transfer never occurred.

The good news is that by working with your estate planning attorney now you can develop a Medicaid plan that will allow you to protect your assets and still qualify for benefits if the time comes when you need them. Although it is always best to plan ahead, if you suddenly find that you, or your spouse, needs to qualify for Medicaid there are legal strategies you may be able to employ to help you qualify sooner. Consult with your estate planning attorney for more information.

 

The Law Offices of Barton P. Levine is a member of the American Academy of Estate Planning Attorneys.

Medicaid Planning in New York NY: How to Prevent Losing Your Life Savings to Healthcare Costs in Retirement

Dec 05, 2013  /  By: Barton P. Levine, Esq.  /  Category: Healthcare

If you are like many people you have worked hard all your life, saved methodically, and tried to invest wisely so that you can live comfortably during your retirement. With the rising costs of healthcare, however, you could easily lose your life savings trying to cover those costs unless you plan ahead. For many people, that means including Medicaid planning in your overall estate plan.

You probably know that healthcare expenses will rise when you reach your golden years; however, you may not realize exactly how much the average couple is expected to spend on healthcare expenses during their retirement years. A recent report by Fidelity Investments offers a startling glimpse into the future and shows us what we should plan on spending on healthcare in our senior years. According to the report, a couple retiring today at age 65 will spend, on average $220,000 on healthcare expenses assuming they live to the average life expectancy of 82 and 85 years old. These costs are out-of-pocket expenses after health insurance and/or Medicaid have paid out their portion.

For the average couple $220,000 is no small amount of money. Studies tell us that half of all Medicare beneficiaries have less than $77,500 in savings. Unfortunately, your own retirement healthcare expenses could actually be even more—significantly more. If you retire today and outlive the average life expectancy by living an additional ten years you can plan on incurring another $135,000 in expenses between you and your spouse or partner.

What may really push your retirement healthcare costs close to the $1 million mark though is long-term care. Experts tell us that if you live to be 65 years old you then stand a 70 percent chance of needing long-term care at some point in the future. At an average cost of around $77,000 a year, long-term care expenses alone can run through a lifetime of savings in a few short years. Don’t count on your health insurance policy or Medicare to cover those costs because they won’t. Long-term care insurance is available; however, a policy typically runs around $2,000 – $3,000 a year, an expense that many people cannot afford.

Medicaid Planning in New York NY

The Medicaid program may be your only option if you are faced with long-term care costs down the road. Medicaid, however, has income and resource limits that can prevent you from qualifying or that will require you to use all of your available resources before providing benefits. To prevent this from happening you need to start planning early on. By including Medicaid planning in your overall estate plan you should be able to put yourself in a position where you will qualify for Medicaid benefits should they be needed without losing your life savings.

The Law Offices of Barton P. Levine is a member of the American Academy of Estate Planning Attorneys.

Can’t I Just Give Away My Assets and Qualify for Medicaid?

Nov 19, 2013  /  By: Barton P. Levine, Esq.  /  Category: Healthcare

The longer you live the higher the probability that you will eventually need long-term care. This may be in the form of an assisted living facility or an around-the-clock nursing home facility. The cost for any type of long-term care can be exorbitant. Unless you can afford to pay these costs out-of-pocket, or have insurance that will cover the costs, you may find yourself in a position where you need to qualify for Medicaid benefits. The Medicaid program has both income and resource limits that are often an issue for applicants. This leads many people to ask “can’t I just give away my assets and qualify for Medicaid?” The simple answer to that is “no” unless you accomplish this through Medicaid planning ahead of time.

Nationally, the average cost of a year’s stay in a long-term care facility is around $75,000. With an average stay of two and a half years it is easy to see how paying for long-term care costs can wipe out a lifetime of savings for the average person. What makes matters worse is that most private health insurance policies do not cover long-term care costs. Likewise, Medicare benefits do not include the cost of long-term care except under very limited circumstances and then only for a limited period of time. The good news is that he Medicaid program does cover a substantial portion of the costs of long-term care. The bad news is that to qualify for Medicaid you must have income and resources below the program eligibility limits. The resource limit for Medicaid eligibility is often as low as $2000, meaning if you have managed to save anything during your lifetime you will likely not qualify for Medicaid benefits unless you “spend down” your assets first.

Simply giving away assets to loved ones and then applying for Medicaid benefits is not a solution. The reason for this is that Medicaid has a “look back” period that effectively allows the program to consider any assets transferred in the previous three to five years to still be owned by the applicant. If you need Medicaid benefits now, or are concerned that you may need to in the future, this may all sound disheartening; however, with careful Medicaid planning you can protect your assets and still qualify for benefits. There are legal strategies that can be employed and Incorporated into your overall estate plan that will let you protect your life savings while still qualifying for the benefits you may need.

Consult with your estate planning attorney about how Medicaid planning can help you and/or loved one.

The Law Offices of Barton P. Levine is a member of the American Academy of Estate Planning Attorneys.

How Do I Apply for Medicaid?

Oct 25, 2013  /  By: Barton P. Levine, Esq.  /  Category: Healthcare

The cost of healthcare in the United States has been at the forefront of the last several elections and continues to be a concern for the average American. With the passage of what has come to be known as “ObamaCare” many Americans are now just as confused as they are concerned about healthcare coverage. While the legislation will require many individuals to purchase private health care coverage it did not do away with the Medicaid system, meaning that millions of Americans will continue to qualify for free, or almost free, healthcare coverage. Before considering applying for private healthcare insurance you should determine if you qualify for Medicaid.

First and foremost it is important not to confuse Medicare with Medicaid. Although both programs are funded by the federal government, Medicare is also administered by the federal government wall Medicaid is administered at the state level. This means that both the eligibility criteria and the benefits can vary from one state to another. In all states, however, the Medicaid program is designed to provide healthcare benefits for low income individuals and families. Where Medicare is available to anyone over the age of 65, Medicaid benefits are only available to those who meet income and/or resource limits.

The amount of income you are allowed to have depends on your family size, age, disability, and county or city of residence. If you receive Supplemental Security Income, or SSI, you will automatically qualify for Medicaid. In addition, while there are special eligibility categories for young children and pregnant women, the elderly are also in a special eligibility category for Medicaid in most states. In the state of New York, for example, an individual who was over the age of 65 has a slightly higher income limit that an individual or a couple without children who is applying for benefits.

There are number of ways that you may apply for Medicaid benefits in the state of New York. You may download an application from the New York State Department of Health’s website, Or you may secure an application in person to the local Department of Social Services.  In addition, you may apply by using the services of an enrollment facilitator. If you have a loved one who is currently in a hospital, clinic, or facility operated by the New York State Office of Mental Health or People with Developmental Disabilities, you can also apply for Medicaid by requesting to speak with a patient resource officer or other support personnel.

The Law Offices of Barton P. Levine is a member of the American Academy of Estate Planning Attorneys.

Medicare Three Day Hospital Stay

Oct 24, 2013  /  By: Barton P. Levine, Esq.  /  Category: Healthcare

As you likely already know, the costs associated with a stay in a long-term care facility or nursing home can be exorbitant. You may also know that as a general rule Medicare does not cover long-term care costs. There is an exception to this general rule, however, if the patient is transferred to a skilled nursing facility or rehabilitation center following a brief admission to a hospital. Although Medicare should cover the costs of the nursing facility or rehabilitation center under the circumstances there is a new status category being used by hospitals that could result in Medicare refusing payment.

The Medicare rules state that an individual who is admitted to a hospital for a three-day stay and then is transferred to a skilled nursing facility or rehabilitation center is entitled to a maximum of 100 days of Medicare coverage assuming that all other eligibility criteria are met and the patient is making progress and/or maintaining their skill level as a result of the services provided by the facility or rehabilitation center. The Medicare program will not cover 100 percent of the costs for the entire 100 day stay; however, the first 20 days are covered at 100 percent with the remaining 80 days covered in part by the Medicare program. Given the high cost of a stay in a skilled nursing facility or rehabilitation center the portion that Medicare does cover can be significant.

Where a patient, or the patient’s loved ones, runs into a problem is when the Medicare program denies coverage based on the fact that the hospital did not formally admit the patient. Instead of formally admitting patients some hospitals are categorizing a patient as being in the hospital under “observation”. A hospital has the option to list a patient as being under “observation” for days at a time. If the patient is then transferred to a nursing facility or rehabilitation center it allows Medicare to deny coverage because the patient was never technically admitted to the hospital for the required three day stay.

It is not uncommon for a patient and/or the patient’s loved ones to be unaware of the patient’s status in the hospital. Understandably, it may be assumed that a patient has been admitted to the hospital if he or she is Overnight. To ensure that Medicare will cover any subsequent nursing care facility or rehabilitation center costs following a hospital stay it is imperative that you inquire what the patient’s formal status is at the hospital. If a patient is listed as being kept for “observation” ask that he or she he formally admitted. Consult with the patient’s primary care physician if needed to ensure that the patient’s status is listed as admitted to that he or she will receive all of the Medicare benefits to which he or she is entitled.

The Law Offices of Barton P. Levine is a member of the American Academy of Estate Planning Attorneys.

The Facts About Healthcare Directives

Jan 18, 2013  /  By: Barton P. Levine, Esq.  /  Category: Estate Planning, Healthcare, Living Wills

Healthcare directives, also known as Living Wills, list your wishes in terms of medical care and treatment. When you become unable to communicate or take care of yourself due to illness or incapacitation, your healthcare directive will go into effect. Any doctors or care takers overseeing your care are required by law to follow any instructions you place in your healthcare directive.

What Can I Include In My Healthcare Directive?

When you create a Living Will, you are able to leave instructions that include:

  • Who will oversee your care
  • What measures can be taken to keep you alive
  • Whether or not you want to use life-prolonging techniques
  • What a physician is required to do if you fall into a coma
  • What medications physicians can prescribe to you

What are the Benefits of Using a Living Will?

When you create a Living Will, you can rest assured that your healthcare will be carried out in the way you see fit. Without a Living Will, physicians overseeing your care will have the discretion to make medical decisions on your behalf – some of which you may have disagreed with.

You can create a Living Will at the same time you make your Will and Trust with an estate planning attorney. Make sure you consult your attorney on what care practices you should place in your Will to address all of your care needs if you ever become incapacitated later in life.

The Law Offices of Barton P. Levine is a member of the American Academy of Estate Planning Attorneys.