In Part 2 we discussed how Veteran’s Benefits can provide additional income to cover long term care expenses.  If you are not a Veteran or widow of a Veteran these benefits are not available to you.  Even if you qualify for Veterans benefits your long term care costs can easily exceed these benefits.  So luckily there is a backup plan available to all middle class seniors to pay for long term care expenses – Medicaid.

Medicaid is not Medicare

Healthcare risk is by far the greatest risk to your estate … bar none! Most people believe that when they turn 65 that they simply sign up for Medicare and they are protected from catastrophic health care events. Some folks go one step further and sign up for a Medicare Supplemental plan for prescription drugs etc.  Essentially Medicare pays for your doctor and hospital bills.

But let me tell you Medicare does nothing to protect you from long term health care expenses.  While Medicare does pay for some nursing home care it is limited to medically necessary skilled nursing and will only cover a period of up to 100 days.  After that you are on your own.

What is Medicaid?

Medicaid pays for long term care expenses primarily for nursing home care.  However, there are some exceptions where Medicaid will pay for home care or assisted living expenses.  These exceptions are somewhat difficult to obtain.

The Big Medicaid Myth

Like most folklore and myths, someone, somehow, somewhere started a rumor that Medicaid is for poor broke people. Nothing could be further from the actual truth. As a matter of fact, over 50% percent of people in nursing homes are on Medicaid.  Does that mean that 50% of people in a nursing home are poor? Hardly!

So in its purest form, Medicaid is the Long-Term Care avenue of payment for most people in middle-class America with assets ranging from $100,000 to $1 million.

However, for middle class seniors to qualify for Medicaid takes some advance thinking and planning.  As you might imagine there are numerous rules and regulations as to how middle class seniors can qualify for Medicaid without having to spend down their life savings.

That’s where we can help.  We walk you through the maze of regulations so that you can legally qualify for Medicaid without destroying your life savings or losing your house.

Advanced planning is particularly important for married couples because an expensive long term care event for one spouse can leave the healthy spouse in financial distress.

Let us know if you would like a review of your situation to see if you can plan ahead to protect your life savings from a health care disaster.

Part 2

Veterans and their widows are likely to be able to become eligible for a government program that pays a portion of their long term care costs.  In December we discussed Veteran’s Pension.   Officially it is called the Non-Service Connected Pension Benefit and has been available since the 1950’s.  You probably have never heard of it – the government has done a good job at keeping it a secret.

What are the benefits?  If you need long term care you may be eligible for the following amounts:

Veteran – Single   $19,736 per year

Veteran – Married  $23,396 per year

Widow of Veteran $12,681 per year

These amounts are tax free and increase with inflation each year, at the same rate as increases in social security benefits.  There was no increase in 2010.

There are lesser amounts available if you don’t need long term care assistance; however, these amounts are for very low income veterans and widows.  I won’t go into the benefits for low income veterans/widows in this article but if you know someone who may qualify please contact our office and we will do what we can to help.

How Do You Qualify?

There are four basic qualifications: 1) military service, 2) medical, 3) income, 4) assets.

Military Service – The veteran needs to have served for 90 days consecutive service with only 1 day during a time of war.  Typically we see veterans who served during World War II, Korea and Vietnam.  Any service (Army, Navy, Air Force, Marines, Cost Guard, and even some Merchant Marine service) or duty is eligible.  Service need not be combat related.  You could have driven trucks in Kansas and still qualify.  WAVES and WACS are eligible as well.

Medical – In order to qualify for the maximum benefit the veteran or widow should require long term care assistance.  If you are in an assisted living, nursing home, memory care facility or even receiving home care you likely qualify medically.  If the spouse of the veteran needs long term care assistance the veteran may qualify for a lesser benefit.

If you don’t need long term care now this benefit is a great “insurance policy” in case you do need it in the future.

Income – If the cost of the long term care facility or home care exceeds your income, then you likely will qualify for the entire benefit.  We can analyze your situation to see if there is anything that can be done to help you qualify.

Assets – The $80,000 myth.  Few people know about this benefit and even fewer know what they are talking about.  Many people in the long term care community will tell you that you won’t qualify if you have more than $80,000 in assets excluding your house.  This is simply wrong. We can help most middle class veterans/widows legally qualify with some financial planning to make your assets “VA Friendly.” This is our specialty, helping middle class veterans qualify for this benefit so they don’t have to spend down their life savings before they can qualify.

What About Medicaid?

Ideally you won’t need Medicaid assistance if you need long term care and qualify for the VA Pension.  However, a well designed long term care plan should include the possibility that your cost of care may increase substantially and you may need additional assistance.  We design long term care plans for veterans/widows and non-veterans so that your long term care expenses are paid for without you going broke.

In Part 3 we discuss

How Medicaid Works and How Does it Fit Into Your Long Term Care Plan?

If you are a veteran or widow of a veteran living in an assisted living facility, nursing home or other long term care facility or if you have home health care expenses you are likely are missing out on up to $22,135 per year (tax free) from the Veterans Administration. Not only is this benefit tax free it increases every year – unlike your CD’s.

How do you qualify? Obviously, by being a Veteran or a widow of a veteran. In addition you have to have served at least one day on active duty during time of war. Declared states of war are: WWlI from 1941- 1946, Korea 1950-1955, Vietnam 1961- 1975 or the Gulf War 1990 -?? Your one day of service doesn’t have to be in combat, an) duties or posting qualifies. You only have to have been active duty military for one day during a time of war and not received a dishonorable discharge.

For those who have even heard about this benefit there is a misconception that this is only for “Poor People” or only disabled Veterans. This is FALSE! If you are permanently disabled OR over age 65 you likely can qualify for the “Improved Pension Benefit” from the VA if you are in a long term care facility or are receiving home health care.

Yes, there are financial requirements that have to be met, but with proper planning you may able to qualify for this TAX FREE benefit. There are things that you shouldn’t do. Most important, don’t submit your application without knowing that you have met all the requirements and know that you will qualify. If you do you could be costing yourself and your family thousands of dollars over many years because there is up to a two year backlog in the appeals process. Make sure you do it right the first time. Because figuring out what to do is complicated I help veterans, their widows, and their families prepare an elder care funding plan, where evaluate your options such as the veterans benefit, Medicaid, self-funding, etc.

In Part 2 I will discuss some of the additional requirements that need to be met to qualify.

Stocks have returned nothing over the past 10 years. Real estate has plummeted. Government bonds and CDs pay a measly 3%. Pension plans are under pressure.

How can you be sure to have the income you need in retirement? This month we’ll show you how to add the missing element to your retirement plan – Guarantees; Guaranteed Income and Guaranteed Rate of Returns.

We’ll introduce you to a retirement solution few Americans have considered. It is one of the most misunderstood, and well-kept secrets of the rich… something we call the “Guaranteed Retirement Contract.”

The Guaranteed Retirement Contract is unlike any investment or savings vehicle you’ve considered before.

For one, the money you receive is guaranteed by a company that (unlike a bank or brokerage firm) is required by law to have enough cash on hand to meet all future obligations.

Another thing that makes this investment unique is that you can set up your contract so the monthly payouts you receive can go up in value… but never down, even if stocks, bonds and real estate stay in a bear market for years. In other words you can’t lose money and you have an inflation hedge.

It gets even better…

Unlike any other investment or savings vehicle we know of, you will receive income from a Guaranteed Retirement Contract for the rest of your life and your spouse’s life if you chose.

Let’s take a closer look….

What is the One Thing You Will Need In Retirement?

Income. Unless you already receive a substantial pension you will at some point need to convert your investments into income. This is usually the least thought through part of most people’s retirement plans. You will need income and you will need it for the rest of your life.

But there are many factors that will impact your investments over the rest of your life. How long will you live? How high will inflation be? What will happen to the stock market and the economy? All these things will affect your retirement income… and it is impossible to know the answers.

Naturally, that is why you should consider making sure you’ve got a least a certain level of guaranteed income. Even in a worse-case scenario, you’ll know that you’ve got enough money to meet your basic expenses. Clearly, that is an important goal!

Guaranteed Retirement Contracts come in many flavors but recently new types have come on the market that will give you three guarantees:

1) Guaranteed growth in your principal until you need the income. Some contracts have guaranteed returns of 7% to 8% for 10 years or more.

2) Guaranteed life time income (and your spouse if you chose).

3) Guaranteed never to lose money.

At a guaranteed rate of 7% your money will double every 10 years. Your $200,000 invested on November 1, 1998 at 7% would be $400,000 on November 1, 2008. While your $200,000 invested in the S&P 500, over the same time, would be worth only $176,350, a loss of -1.25% – a wasted decade. You only have so many decades to gamble with. The same $200,000 invested in CD’s over the same time would be worth only $287,636.

What is the catch? How can a company guarantee a return of 7% or 8%? The catch is you are trading liquidity for the guaranteed income. If you put your money into a Guaranteed Retirement Contract you agree not to take out more than 10% of your money in any given year for up to 20 years. However, if you plan properly, you only use money you won’t need for an emergency. You should only use money that you plan to live on over the rest of your life. Therefore, the “cost” of reduced liquidity is not really a cost at all because if you spend the money what will you live on?

Additionally, there will likely be money left over for your heirs. However, how much is left, if any, depends on a number of factors such as how long you live and when you start taking income.

The Guaranteed Retirement Contract Diversifies Your Portfolio

Portfolio diversification is used to reduce risk by investing in asset classes that don’t all move in the same direction at the same time. Most portfolios we see are really not diversified – they have some mix of stock and bond funds – which did not stand up to the recent market declines. We saw bonds used supposedly to diversify retirees portfolios take hits at the same time the stock portfolios declined. A scary situation if you are already retired.

The Guaranteed Retirement Contract gives you the bedrock to your portfolio that is immune from market fluctuations in the stock markets and from the interest rate markets.

There Is No Alternative To The Guaranteed Retirement Contract

No other vehicle that we know of can guarantee you a solid rate of return and guarantee you income for the rest of your life.

Current bond and CD rates are too low to generate substantial income and if rates increase, which they likely will, any bond investment will have a loss if liquidated.

Clearly it would make most people feel much more comfortable about their retirement if a portion of their portfolio had guaranteed growth and guaranteed lifetime income. A portion of your portfolio that requires no thought or management from you and you don’t have to rely on someone else’s investment skills to make sure you have enough money to live on. Simply let your money grow at a guaranteed rate and turn on the income when you need it and start receiving the monthly checks.

If this strategy interests you please feel free to call and we will be glad to answer any questions you might have.

In last month’s article we provided an overview of the different types of long term care facilities that are available: home care, assisted living, group home, nursing home/memory care. All of these facilities are expensive. If you don’t plan correctly you can outlive your money if you end up in an expensive care facility for an extended period of time.

This month we discuss Long Term Care Insurance and Government Programs that can assist with long term care costs.

What about Medicaid and Medicare?

Well Medicare does not pay for long term care. Medicaid is the government program designed to pay for long term care. However, the bottom line is that you have to be essentially destitute to receive this government assistance. It’s basically welfare for those who need long term care. If you qualify for Medicaid you lose many of your options because Medicaid has low monthly limits on what it will pay for care so your choices of facilities go way down. The better facilities have few if any Medicaid beds. So if you have been considering paying for a “Medicaid plan” you might want to rethink that decision. It is much better if you can structure you finances so you never have to go on Medicaid. However, if you need the benefit it is obviously very important to have this backstop.

Long Term Care Insurance

Long Term Care Insurance (LTCI) is an obvious solution to protecting yourself from long term care costs. However, LTCI is typically very expensive. Often those who can afford it don’t really need it – meaning that they could pay for their own long term care from income or assets without much trouble. Like any insurance you hope you never need it – if you don’t need it you may have spent $50,000 to $100,000 in premiums over your lifetime that your heirs will never see. Or if you need long term care you may only need it for a couple of years so again you may have been able to afford the care out of your own assets and saved the premiums. Of course if you need extensive long term care such as Alzheimers or memory care for many years a LTCI policy would have been a very wise choice. But again many people simply don’t want to spend the equivalent of a nice vacation every year for a LTCI policy so they take the chance that they won’t be the one who needs the coverage.

Long Term Care Insurance – Without the Premium

But instead of gambling that you won’t be one that needs extensive long term care there is an alternative to paying big LTCI premiums. Asset Based Long Term Care is a hybrid product that allows you to take money you have set aside or are not planning on using to do double duty: 1) it provides long term care benefits if you need it or 2) if you don’t need long term care then it acts as an investment. Here’s how it works:

If you qualify, (some asset based long term care polices have easier medical underwriting) you can deposit funds into a special interest bearing account. When you deposit funds into this account, you have four immediate benefits:

1) You receive some interest on your deposit and have Liquidity: a money back guarantee

2) You have an asset that earns compound interest

3)You receive a much larger amount than the deposit to use for nursing care if you need it. For example, a male in his late 70’s could deposit $100,000 (based on age and health at the time the deposit is made) could immediately have $3,300 monthly benefit for nursing home care. This benefit could be used for long term nursing care expenses, home health care expenses, adult day care expenses, assisted living facility expenses, or even homemaker services. Also this benefit can increase over time depending on your interest earnings.

4)You have a life insurance policy that pays tax free on death. In the above example the 70+ year old would immediately have a $133,000 insurance policy.
In other words, he got an “insurance benefit” of $33,000 for depositing $100,000 in an interest bearing account, with no additional premiums required!! Keep in mind he could also get his $100,000 back anytime he wanted.
Of course there are a number of different types of asset based long term care polices and the younger you are the better the numbers look.

Veterans Benefits

Veterans and Widows of Veterans can often qualify for tax free long term care benefits of between $12,000 to $24,000, per year, for life. This benefit is available for most middle class veterans with some planning. We have a specialized practice that helps middle class veterans and widows who need long term care qualify for this very valuable benefit. If you know a Veteran or Widow of a Vet who needs assisted living, home care or memory care have them contact us and we can quickly evaluate if they qualify for this government pension.

How Assisted Living and Nursing Home Expenses Can Wipe Out Your Savings

Part 1

“I never thought I would end up in a place like this.” This is what Bob told me when I met him at the Assisted Living Facility. Bob’s wife had a stroke and he could no longer care for her so they had to move into an Assisted Living Facility from his rural home. This was a huge transition in lifestyle but it was also a financial strain as instantly they went from comfortably being able to pay all their bills with money left over to having $2,000 more in expenses each month than they had income. Suddenly finances were a BIG worry and the reality of Long Term Care costs hit them.

Long Term Care (LTC) Expenses, sometimes called Elder Care Costs, can be one of the biggest threats to your lifetime savings. Long term care can mean anything from Home Care, to Assisted Living to Nursing Home or an Alzheimers/Memory Care Facility. In this series of articles we will take away some of the confusion about how much all this can cost, what government programs really pay for and how you can plan for the worst without costing a fortune.

In Part 1, we will discuss what Long Term Care options are available and give you an idea about the costs. In Part 2, we will discuss the financial aspects of paying for Long Term Care and how to plan so these costs don’t wipe out your life savings.

How Much Does Long Term Care Cost and What is Available?

Well, it depends. About 50% of the population ends up needing long term care of some sort. The basic types of care are:

Home Care – $500 to $5,000 per month. This can be anything from having someone help you with your cooking and laundry to help with medical issues including caring for someone who is bedridden. Often we see family members taking over the home care role, which can become very tiring to the care giver. The cost to have someone full time is prohibitive for most people. So depending on what is needed home care can be anywhere from $500 per month to $5,000 per month.

Assisted Living – $2,500 to $6,000 per month. Assisted living can be anything from just an apartment that has laundry and meal service to providing nursing and physical therapy. Assisted living can work well when one spouse needs help and the other spouse is still healthy so that a couple can still live together. Assisted living can run from $2,500 to $6,000+ per month depending on your needs.

Nursing Home/Memory Care – $5,000 + per month. These types of facilities are typically expensive usually starting at $5,000 per month.

Group Home – $2,500 + per month. A Group Home can often provide most of the care that any of the above facilities provide. Some of our clients prefer Group Homes because they feel that their family members get better attention because these facilities are usually smaller. Often these facilities are renovated homes. The downside of Group Homes can be the lack of privacy in that most rooms double occupancy. Group Homes are often more affordable than a Nursing or Memory Care Facility with monthly costs starting around $2,500 per month.

As you can see LTC costs can be substantial. Of course if both a husband and wife need care then the costs can be twice a big. How do you plan so that you are not gambling your future on not needing expensive care? There are a number of ways to plan for long term care expenses.

Long Term Care Insurance is probably the most discussed in the popular press. Long term care insurance is typically expensive. LTC Insurance can cost anywhere from $1,500 per to $5,000 per year per person – usually the cost of a nice vacation each year. Keep in mind these are costs for one person. At $3,000 per year you will have spent $30,000 in ten years for one person on something you might not need. In some instances LTC insurance might make sense if you can afford it and you don’t have the assets to use Asset Based Long Term Care Funding (see next item).

Long Term Care Insurance without the Premiums – Few people have heard of this strategy. This strategy is also called Asset Based Long Term Care Funding. This strategy can often give you the best of both worlds. It allows you to set aside assets that can be converted into an income stream for long term care if necessary or if you don’t need long term care, then your assets have continued to grow at reasonable rates and can be passed on to your kids. You also avoid paying any LTC Insurance Premiums.

Government Programs – Medicare, Medicaid, and Veterans Benefits. Government benefits are very complicated. Most seniors are familiar with Medicare for their day to day health insurance. Medicare doesn’t pay for long term care. Medicaid will pay for LTC expenses but has some big drawbacks. Medicaid is basically welfare for the elderly with health problems. Veterans benefits can be a life saver for middle class veterans and widows of veterans who need long term care.

We will go into LTC Insurance, Asset Based Long Term Care Funding and Government Benefits more in Part 2 next month.

Sid

P.S. We are in the process of helping Bob, who we mentioned at the beginning of the article, get an extra $1,250 per month in tax free income from the Veterans Administration.

P.P.S. We work on the financial side of Long Term Care and have developed a great deal of firsthand knowledge about the types of facilities and their costs in Albuquerque. If you or a family member may need to move to a LTC facility let me know and I can let you know what facilities are available in the Albuquerque area.