What happens if we can no longer pay for the long term care insurance in a nursing home? 5 Answers as of September 20, 2011

You may be financially responsible for the cost depending upon your assets and their worth. We suggest that you meet with an attorney to address the available exemptions and possible planning opportunities and your long range goals.

I understand how overwhelmed you are and fearful that you could lose everything, now that Long term care insurance is getting cost prohibitive. Let me assure you the laws allow a spouse special protection. We will do everything in our power to help you through this, including a lot of hand holding. I want to provide a little background on who I am, a checklist of information you may want to start on and a short primer on the law including the concept of a lady bird deed and a proposed fee agreement. I hope that I have not provided you too much information. First a little bit on me: My practice is limited to specializing in issues concerning disability, estate, long term care, nursing home, Medicaid and special needs planning. I am the Chairman of the Board of Directors of the Alzheimer's Association - Greater Michigan Chapter and member of the Association's executive committee; Member of National Academy of Elder Law Attorneys and have been listed since 1991 in the Academy's Experience Registry. Also I am the immediate past Chair of the Governing Council of the Elder Law and Disability Rights Section of the State Bar of Michigan. I am also a Charter Member of the Academy of Special Needs Planners and Member of the Financial and Estate Planning Council of Metropolitan Detroit. I have been selected in years 2009, 2010 and 2011 as a "Superlawyer" which designates that I am in the top 5% of lawyers in the country in my field. I am also an accredited attorney with the US Department of Veterans. In 2010 I was selected by Hour Detroit Magazine as 5 Star Wealth Manager in the area of estate planning and was recently selected again for 2011 Enough about me, as I explained to the both of you there are 2 types of Long Term Care Planning; proactive and reactive. In your case until your husband's health declines we should treat this as proactive. The following is a discussion based on the worst case scenario. I would not be doing you a service if I did not plan for the worst and hope for the best. Therefore we need to: 1. Plan for the unthinkable, if you were to go first, the assets should will by pass your husband and go to the legally. Then the children would have a moral obligation to take care of their dad. The children could if necessary establish a trust to provide for dad and protect the assets from all of their own potential problems, including health and creditors 2. You will be able to keep your home provided the equity value of the home (fair value usually determined state equalized x 2) provided that value is no more than $500,000. We would need to remove your husband's name from the title to the home and do a deed from mom to a trust. I know the law states a home in a trust is countable asset, however, in this case it is advantageous to place it in the trust for the snapshot value discussed immediately below. This will boost the amount of assets that you would be able to keep. If we were to ever apply for Medicaid for your husband then we would take the home out of the trust and do a lady bird deed do a lady bird deed to continue to avoid probate and potential estate recovery. See explanation of lady bird deed attached. 3. You as the community spouse would be able to keep 50% of the countable assets up to about $109,000 of the value of the assets at the time your husband first receives 30 days of continuous care. THE SNAPSHOT DATE. 4. With respect to the assets above the protected amount we would then at the time only (application for Medicaid) transfer them to a special sole benefit trust for your benefit. In order to understand this concept you have to understand the annuity method. We will not use the annuity method unless it makes sense for qualified IRA's and annuities to minimize income taxes. I have explained this concept and other laws below. V. MEDICAID PLANNING A. New Law Increased Lookback Period All transfers under the new law, whether to individuals or to Trusts, will be subject to a five-year lookback period rather than the prior three-year lookback period for individuals and five years for transfers to Trusts. This will make the application process more difficult and could result in more applicants being denied for lack of documentation, given that they will need to produce five years of records instead of three years. This will be particularly true for families dealing with Dementia. Postpones the Penalty Period Start Date The new law shifts the start of the period of ineligibility for a transfer of assets from the first day of the month of the transfer to the date when the individual would qualify for Medicaid coverage for nursing home care, but for any gifting. (See example in enclosed summary of new laws). B. Your Husband's Guaranteed Resource Allowance Under the current Medicaid rules, your husband is allowed to keep a total sum of $2,000.00 as his resource allowance. The balance of his assets, excluding his non-countable assets, must be spent, transferred, converted, or annuitized. Please note: In order for your husband to be eligible for Medicaid, he must be residing in a Medicaid certified facility and a Medicaid certified bed. C. Income Allowance Medicaid rules will allow your husband to keep a monthly income of approximately $60.00 as a personal needs allowance and an amount necessary to pay for his supplemental health insurance policy, if applicable D. Annuities A Medicaid Qualified Annuity is an irrevocable, non-transferable, non-commutable and actuarially sound annuity. While Tax-deferred annuities are considered countable assets for Medicaid purposes, Medicaid Qualified Annuities are considered non-countable assets under current Medicaid guidelines. Albert may wish to consider converting some or all of his assets into a Medicaid Qualified Annuity. Michigan requires a Medicaid qualified annuity to be structured so that payments are made in "substantially equal monthly payments" (starting with the first payment) and continue for the term of the payout (i.e. no balloon or lump sum payments). This simply means that should Albert fund such an annuity, the annuity would provide a regular monthly income payment. The disadvantage to the immediate annuity is the principal used to purchase the annuity is unavailable and will remain so even if Albert should pass away prior to the expiration of the term of the annuity. Also, the monthly payments, no matter the amount would be added to his income and be paid to the nursing home. Upon his passing, the remaining monthly income payments would continue to the family as beneficiaries. On October 1, 2007, the State issued new regulations requiring an annuity purchased or amended on or after February 8, 2006 must name the State of Michigan as the remainder beneficiary, or as the second remainder beneficiary after the community spouse or minor or disabled child, for an amount at least equal to the amount of the Medicaid benefits provided. E. Trust or the Sole Benefit of the Community Spouse This method is the best way to shelter non-IRA/retirement assets from having to be spent down. Taking the annuity concept one step further is the Sole Benefit Trust. A Sole Benefit Trust is when assets are titled into a special Irrevocable Trust in the name of the nursing home spouse and the terms of the Trust payout similar to the Medicaid Qualified Annuity discussed above. The best way to explain this is by example: Wife enters the nursing home and husband is in the community. Together they own countable assets above the husband's Resource Allowance consisting of a $200,000 stock portfolio.

Your financial responsibility will depend on your assets and your income. If you have questions, you should seek out the advice of an elder law attorney who is familiar with the Medicaid rules and VA benefits and can advise you on how to pay for long term care.

You should talk with an elder law attorney about getting qualified for government assistance.

It depends on the home and the care needs; the state figures an average of $6,000 a month, but it ranges from a couple of thousand a month for assisted living to over $10,000 a month for skilled nursing care. Medicare will pay for skilled nursing care for a limited period; thereafter, it's all you or, if you can't afford it, Medicaid. When your joint assets (yours and his) get down around $200,000 (not including your home) it is time to see a lawyer about applying for Medicaid.