Ep. 12 - Long-Term Care Planning - All You Need to Know!

Narrator: [: 00:00:00

to the Good Steward Law Wealth Podcast, where host Ledly Jennings explores law and finance to help listeners become better stewards of their wealth. Each episode covers the latest trends and strategies in estate planning, elder law, investment, and wealth management. Tune in for the knowledge and tools for financial success and security.

Ledly Jennings: Welcome back to the Good Steward Law Wealth Podcast. I'm Ledley Jennings, your host, and I'm excited today to talk about long term care planning and all that that involves. Um, so pretty topic that's relevant for a lot of people, um, especially those caregivers that have aging parents. Um, this is a topic that's front of mind, so I wanted to dive into it.

long term care. Um, it could [: 00:01:00

And where are you going to get that care from? So that's what we're going to talk about. But why is this even a topic of an estate planning law and wealth planning podcast? Well, when you hear the cost of everything, you'll see that it comes into every realm of planning, especially being a good steward of our wealth.

So the cost of nursing home care. Is pretty expensive and this is a published number by the state of Arkansas where I am. It averages about 8, 500 a month for full fledged nursing home care. That's for one person. So if you have two people, it could be upwards of 16, 17, 000 per month. So it's very expensive.

p with everything medically, [: 00:02:00

Um, that's where assisted living comes in. So that cost is, it varies on the type of facility, but I just generally usually say about 4, 000 a month, about half the cost of nursing home care. Now, another option is in home care, and this can vary greatly. A lot of people always say that I want to stay in the home when you can, but you still need care.

istance with your day to day [: 00:03:00

Um, those are the options of long term care. And so I saw a lot of, you know, the price people, I say that to them, what it and their eyes get really big, um, because it is expensive. And I forget the numbers, but the majority of everyone will have some form of long term care in their life, whether it's nursing home care, um, or just in home care of sorts.

You will have to think about this at some point in your life. So people come to me wanting to know their options. How do we plan for this and how do we pay for it? Well, the first And best way to pay for it is yourself, uh, private pay. And few people can pay for that with 8, 500 a month. It can be very expensive.

million, then you [: 00:04:00

Now you can pay for care a lot longer if you are touching principal, but most of the time people come to me wanting to preserve what they built and pass something on to their heirs. So that is being a good steward of your wealth. So when we're talking about all this types of planning and things to pay, we're not doing anything that avoids, um, paying what we owe and we're not avoiding taxes.

We're not avoiding something that we should be paying. We are not hiding money. We are just planning to the best of our ability using the rules and the laws that we've been given. And I teach people how to navigate those rules and laws to get the most out of what they have. That is being a good steward of our wealth is.

s not what we do at this law [: 00:05:00

million to two and a half million and say it makes 4 percent interest per year. That would be ballpark enough to cover nursing home care, especially when you add in what you're getting with social security. Um, the other option. Is to have long term care insurance. And I will have an expert on here to talk more about that on a future episode, but long term care insurance has had its popularity in throughout the years.

Uh, used to, you just buy a long term care policy, you pay for it every month. And if you didn't use it, it would go to waste. The downside to this is it's expensive and it went to waste if you didn't use it. So lately they've introduced a new product, um, that is basically a life insurance policy that has a long term care rider or an asset based long term care policy.

builds and grows. So if you [: 00:06:00

So that's a good option for certain people, but you have to start looking at that. Um, you know, when you're in your fifties to early sixties range is usually when you start thinking about this and you're still healthy enough to qualify at an affordable rate, um, for life insurance policy. So, um, talk with your advisor about that.

And we'll certainly guide you through some of that in future episodes. But the main thing that we will talk about here, and people come to me for, if you can't private pay and don't have long term care insurance, who foots the bill? Or is all your assets just gone to pay for nursing home care? Well, generally, people would like to get the government to pay for their care if they can't.

is how you pay for long term [: 00:07:00

Um, that is not true. Medicare is Kind of like insurance, it pays for your health insurance and the needs that that supplies, but not your long term care. Uh, it will pay for a certain amount in a nursing home. If you're in rehab, I think it's around 100 days. They will pay for you to be in a nursing home in rehab.

But beyond that point is when medicaid has to step in. Um, so how do you qualify for medicaid? Can anyone just apply and get it? Well, anyone can apply and you can get it if you qualify. Medically and, um, your assets. So medically that's usually pretty easy to prove. You need to be in the long term care facility.

s, they, they need this type [: 00:08:00

So, um, that's pretty low. Basically, you have to be broke to get on Medicaid. And if you're married, you are the community spouse. They divide you in two. Two sectors, the community spouse and the institutionalized spouse. So the one that's not in the nursing home and the one that is, um, the community spouse can have up to 150, 000 in their name.

still a lot higher, um, than: 2000

So people think, well, man, I have have a house and I've got a car and I'm already over that limit just with that. Or if you're single, you're probably over that limit with what's sitting in your checking account. Um, So how do you qualify? Um, well, that's what we come in for is getting people qualified for Medicaid.

say, well, I'm well over this: 2000

And when I say family home on this, uh, Podcast, we're talking about the personal residence that you live in and it can even include the land surrounding it. Maybe you sit on an acre or five acres. Uh, but had some up to a hundred acres that basically a contiguous parcel that [00:10:00] your home sits on. That's what we're talking about when you have a home.

And I have good news for everyone that's listening, especially if you're in Arkansas, is you can protect your home very easily with a special deed. So typically how this works with your home is Medicaid actually allows you to have a home. So they don't count it as an asset, but when they pay for your care, And you pass away, they put a lien on it after you're gone.

Um, so when people talk about, I want to protect my home, basically they mean, I don't want Medicaid to put a lien on it, or I don't want to have to sell my home to pay for care. So you don't have to sell your home because you're allowed to have a home, but they will put a lien on it. Unless you have a beneficiary, uh, type deed that we are able to draft that specific to Arkansas.

s. You file this deed at the [: 00:11:00

Um, The other way we look at it is when people come to me to pre plan, a lot of times we talk about, well, should I get things out of my name while I'm young, healthy, before I need care, so I can eventually qualify for Medicaid, and by that they mean gifting to their kids today or transferring it out of their name in any way, and a gift would mean a Outright gift or a transfer for anything below, um, fair market value.

So that does work. If you gift things and get it out of your name, then that can get you qualified for Medicaid. But there's some stipulations on that. They have a five year look back period. So if you make a gift and within five years, you need to go to the nursing home care, then they look back and they still count that asset as yours.

[: 00:12:00

So what happens if you do make a gift and you have to go to the nursing home? Well, they, uh, they assess a penalty. Um, And the number for Arkansas, it just happens to be the cost of care, average cost of care for that per month of a nursing home. So 8, 500. Let's say you gifted 100, 000 to your kid. Then you take that 100, 000 and divide it by 8, 500.

ur pocket, um, privately. So [: 00:13:00

And that's how I always advise looking at it, because even if you are healthy and don't think you're going to need nursing home care within five years, you could always have a stroke or, um, fall, something happens and boom, just like that, you're in nursing home care, you're in a penalty period and you can't pay for it.

So before you start gifting things away, you need to come talk with me and we devise a plan that will protect you in all aspects. So gifting things away is a good thing if you do it right. But what are downsides to that? Well, one is you gift an asset. It's not yours. So if you give your kid a hundred thousand dollars CD, it's not yours.

to with it. Same with land. [: 00:14:00

You've probably heard a lot in the news lately about capital gains, uh, step up and basis. That's what we're talking about here. So, um, I'll generally describe this. Let's say you own a hundred acre farm that you either bought or inherited at a hundred dollars an acre. Then your basis in that property is 10, 000.

difference. On that amount. [: 00:15:00

That's about 48, 000 that they would owe in tax if they sold it. And that's if you give it outright, but how to avoid that is. To create a step up in basis by allowing them to inherit the asset, whether it's through, um, probate or through a will or through a trust, if they inherit it, then if they sold it the very next day, they would owe no capital gains tax.

So they inherit it. Their basis is 250, 000. They sell it at 250, 000. There's no tax owed. So there's two risks of. gifting assets is, um, loss of control and ownership and tax risk. Um, so what is the plan that we develop for clients that come in pre planned? They have this hundred acre farm and they want to make sure it's protected.

ly start with a. irrevocable [: 00:16:00

So once you set it up, it's set in stone and this specific trust has to meet certain, um, Qualifications. So as DHS and Medicaid will not see it as your asset. So the concept is you set up this trust, you place your land and your farm in the trust. And if you make it five years, there's still that five year look back period.

But if you make it five years, it's considered out of your name. So what's the difference in doing that and gifting outright? Well, if it's in the trust, you as the person that created the trust still have some control, so you can adjust who the trustee is. In some cases, you can, uh, change the beneficiaries.

create a trust and your kids [: 00:17:00

Um, so the trust is a great way that I usually advise instead of gifting outright. Um, the downside to this type of trust is for it not to count as your asset. You can't be in control of it, meaning you can't be trustee and you can't be a beneficiary of it lifetime or otherwise. Um, so. Meaning it's not yours.

It's the trust you do have control. You can use it. Like if it's your home, you can stay in it. If it's hunting land, you can use the land, but if it makes income, you can't benefit from the income and you can't access principle. Um, so that's the risk of the trust and how we usually set this up is. You name a trustee.

e a friend, or it could be a [: 00:18:00

Um, So the risk with this is you can't benefit from it. So this type of trust only works for certain assets. When, um, clients that come to me that I do this for, it's for assets that they do not need income from. Think about like a farm, you know, the land that they have, uh, timberland. Or, you know, basically a farm and timberland do not produce income regularly that they need.

Yes, maybe timberland eventually will be cut and you have that money, but it's not something they need to live off of and maintain their lifestyle. So, um, those are the type of assets I will put in there. In the rare occasion, I will put larger CDs or investment accounts in there, but it has to be an asset.

That the owner does not [: 00:19:00

Um, so that is pre planning. That's what I like to do. Nothing makes me happier than helping clients protect what they've, uh, spent their life building and protecting a family legacy and heritage. That's what I love doing. And that's what pre planning is. So the best clients think about this stuff ahead of time.

And that's what I want this podcast to be is where I'm educating you enough to know that you need to be thinking about it. Now, you may not know all the solutions and I won't know all the solutions till I sit down with you and devise a plan, but at least, you know, you need to be thinking about it and getting to work.

d we're in a situation where [: 00:20:00

And then they come to me saying, Ledley, we have 300, 000. We've got a house, we've got all this. There's no way we can go to Medicaid. And now all that mom worked for is going to be gone. Well, we call this crisis planning because it is somewhat of a crisis, but there is ways to plan for it. So the first thing I do when I sit down and look at assets and they're going to nursing home, we figure out what assets are countable and not countable.

And when I say not countable is what is. DHS and Medicaid not care about, you know, what, what don't they count? And we mentioned the home, they don't count your home. Um, so the first thing I do is protect the client's home with a special deed that we discussed to protect it from liens. Um, the other things they don't count is funeral expenses.

ou know, you can purchase an [: 00:21:00

How much are we over this 150, 000 mark for a married couple or 2, 000 for single? And basically to do that, you look at all your accounts, your investment accounts, your bank accounts, all that add up a balance. And those are easy because they have a balance, you know what they're worth, but you have to look at some other assets that not many people think about.

d see if there's cash value. [: 00:22:00

The other thing we look at is. So they don't count the home, but they do count other homes. Like if you own a condo on the lake or, um, timberland, something separate from your home, they count that. And how we get the value of it typically is you look at your property assessment. Look at the assessed value and multiply it by five.

That's what they see it as being worth. Um, oil and gas interest is another thing that slips through the cracks a lot is maybe you're getting a hundred dollar check a month and you don't really think about it from mineral interest that you own. Um, but that is accountable asset. The income goes toward your income.

do with that? How do we get [: 00:23:00

Cause I will never waste money and spend things down. What we do is spend it on things that you need. So like your home is a asset that you're allowed to have. So I asked the spouse, um, how is your home? Is there anything we need to improve? Is it. Up to date, maybe they say I need a new roof or the AC unit is about to go out or, um, we need to adjust the bathroom so I can fit in with my wheelchair.

You know, that type of stuff is a way we can spend money on an asset that we are going to keep and it increases the value of the home. Therefore, we are not wasting the money. So that's the first place I look is what can we buy, um, that will increase in value. The next thing is if they do not have a funeral, uh, policy, we purchase an irrevocable funeral policy.

, [: 00:24:00

You need it to meet certain standards so we can go purchase a car. Um, so those are the three things that I start with doing and say, we started out with 300, 000. And we upgraded the house. We spent down on things we could, and now we're down to 200, 000. Well, what do we do with that? Um, that is where creative planning comes in.

ecial compliant annuity. And [: 00:25:00

So the assets not going to waste, it's just no longer an asset. It turns into something that pays them monthly. Um, so that is a way to protect. Basically everything you have and those annuities are very specialized. There's only a few companies that do it. I always work with, uh, Ashbur, A S H B E R. Um, they've been really good working with clients and they know the Medicaid compliance space, like the better than anybody.

And also that's where I go to get these free resources where you want to see. Um, what's the penalty period for my state, or what is the minimum allowance for my state? Those numbers change every year and Asheville produces a, a chart that shows you that for each state. So that's what I have up on my screen right now to make sure I knew that 154, 000 is the max that a spouse can have.

a married couple. Um, not to [: 00:26:00

Well, the strategy is. You know, you have a, say we're at that 200, 000 mark and we want to give it away to our kids. Well, if we give it away to our kids, we're going to incur a penalty period. And basically that whole asset's going to go back to nursing home care because we're paying privately. What you can do is gift about half of it away.

e, if you're married, we can [: 00:27:00

Single, we can still save. Well over half of an estate, depending on, you know, how things are set up and each situation varies, but there are options out there. So, um, I guess the takeaways I see with this, that I want people to know is pre planning is the way to go and Medicaid planning can be complicated.

Not many attorneys know these ins and outs of rules. You have to wake up each day and focus on this and think about it and follow the changes in the law. So make sure you go to a elder law attorney for advice on this type of stuff and plan ahead, because just because you have assets and you can pay for care, There's no need that it should all go to pay for nursing home care when there's other options to save what you spent your life working for and pass it on to your beneficiaries.

t and highest use out of our [: 00:28:00

Narrator: Thank you for tuning in to the good steward law and wealth podcast. If you're ready to take control of your financial future, visit good steward firm. com to book a meeting and sign up for our newsletter.