Supplementing Long-Term Care Insurance

As elder law attorneys, we pride ourselves on developing sound plans to give our clients the peace of mind that they will avoid impoverishment should they endure a long-term care crisis. For many years, the long-term care insurance industry has been providing a similar peace of mind, but unfortunately, it doesn’t always work out in the insured’s favor.
Below, we recount areal-life scenario where a cognitively impaired individual’s cost of care farexceeded what the family and the insurance company expected.
Joe and Barbara lived amodest life and were able to accumulate enough assets to live a comfortableretirement and help their disabled daughter, Fran. Their frugality allowedthem the ability to purchase long-term care insurance, which gave them thepeace of mind that their finances would remain intact should either of themneed long-term care. It also provided them the ability to leave a legacyto Fran.
As Joe aged, hedeveloped signs of dementia. Unfortunately, Joe’s dementia eventuallypresented itself with violent outbursts and rage. He became impossible to livewith during these episodes and endured multiple admissions to psychiatricwards. Memory care facilities refused to accept him. During thistime, Barbara consoled herself with the fact that at least he had long-termcare insurance to pay for his care for three years.
After months of searching,the only facility willing to accept Joe was a skilled nursing facility designedfor individuals needing the highest level of care. The fee for thisservice? $20,000 per month. Joe’s long-term care insurance and income coveredonly $6,000 of the fee, leaving Barbara with a $14,000 per month expense thatwould deplete her savings in 18 months. She contacted us and we explainedthat we could preserve her assets.
The Medicaid rules allowthe applicant to transfer assets to a disabled child without incurring atransfer penalty. In other words, we explained that Joe could gift assetsto his disabled child allowing him to immediately qualify for Medicaid. In thiscase, even though Joe’s long-term care insurance policy did not cover hisneeds, he was able to use his daughter’s disability to finally serve as abenefit.
The result: Joe receivesthe care he needs; Barbara avoids impoverishment; and Fran continues tomaintain a decent quality of life, despite her disability.
Long-term care insurance is an important component of any senior’s plan, but we must always consider what might happen in a worst-case scenario. Here, Fran’s disability created the opportunity to save the day. In most instances, though, it is better to plan prospectively than to react to a crisis. Even families with long-term care insurance should visit with an elder law attorney to make certain their plan will cover all contingencies.
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