Why and How to Integrate your Estate Plan with a Long-Term Care Plan

For most people, a Long-Term Care Plan is essential

to the success of their Estate Plan

At some point in their lives, most people will think about their Estate Plan.  The plan might be a simple Will or a Living Trust.  Other plans might be more complex.  Whatever the plan, the goal is to transfer ownership of their money and property to their beneficiaries upon their death in the most efficient and tax efficient way.

One question that should be asked – but unfortunately is often ignored – is what is the most significant financial risk to my estate?  For most people, the answer to this question is clear: it’s your health.  You probably have good medical insurance  (Medicare or an employer-sponsored plan), but you most likely do not have long-term care insurance (very few people have it).

Many people erroneously believe that Medicare covers long-term care.  It does not.  Medicare pays for rehabilitation (up to 100 days) – but once rehab is completed, any further care (e.g., home aides, assisted living, nursing home) is not covered by Medicare.

According to statistics published by the U.S. Department of Health, 7 out of 10 people over the age of 65 will need some kind of long-term care at some point in their lives, and 4 out of 10 will need nursing home care.  The cost of long-term care is ruinous and could deplete your life’s savings.  This disastrous result happens far more often than most people might imagine.  If it should happen to you, you could end up with an estate plan, but no estate.

Even if you don’t need care now, you can create a plan that could be easily amended to enable you to receive government-paid care in the future.  That option is described later in this article.

Are Long-Term Care Costs Really So High?

When people first begin to need assistance, they may start out by having their children, other relatives, or friends help them.  Once your care and welfare becomes too much for family members or friends to manage, hiring an aide becomes imperative.

Once people need to hire an aide, they quickly realize that home care is distressingly expensive.  As an example, in the New York Metropolitan area, 8 hours per day of home care could easily cost over $100,000 per year.  Assisted living or nursing home care would be significantly more expensive than that.

The Good News 

You can create a long-term care plan that will protect your assets from the ruinous costs of long-term care during your lifetime and for your estate.  Your plan would ensure that you have access to the care you need.

The Even Better News

Your Long-Term Care Plan can be seamlessly integrated with your Estate Plan.  The legal document used to implement your integrated plan – typically an Irrevocable Asset Protection Trust  will serve multiple purposes:  (1) it will clearly express and implement your estate plan; (2) there will be no probate or other court proceeding;  (3) it will facilitate access to Medicaid for long-term care benefits, (4) your assets will be protected against future creditors, including Medicaid;  (5) your beneficiaries will avoid capital gains tax on the appreciation in value of your assets that accrued during your lifetime.  The money you save by having Medicaid pay for your long-term care, and that will be protected by your Trust, will be available to the beneficiaries.

Be aware that a Will does nothing to protect your assets or to help make you eligible for government benefits like Medicaid.   Also, every Will, without exception, is subject to probate, which is a costly, time-consuming, and often aggravating court procedure.

How to Get Started if You Need Care Now or Soon

You will want to consult with an Elder Law Attorney about an Irrevocable Asset Protection Trust (also commonly referred to as a “Medicaid Asset Protection Trust”).  Your attorney will prepare your Trust Agreement.  You will need to appoint an independent Trustee to manage your Trust (someone other than yourself or your spouse).  Then you will need to transfer ownership of most of your assets (other than retirement accounts) to your Trust.

Be aware that forms generated by computer programs or AI often fail to provide necessary provisions or include provisions that will be problematical.  Also, trusts that have not been properly funded are useless.

What to Do if You are in Good Health and Don’t Need Care Now

If there is no immediate or anticipated need for long-term care, you might want to consider a Revocable Trust (also referred to as a “Living Trust”).  With a Revocable Trust, you can act as your own Trustee and remain in complete control of your money and property.  If you pass away without needing care, the assets in the Revocable Trust will be distributed according to your wishes without the need for probate or other court proceedings.

If during your lifetime you subsequently need or anticipate a need for long-term care, your Trust can easily be amended and restated as an Irrevocable Asset Protection Trust.  You will have already thought about and expressed your wishes regarding the distribution of your assets and have done the work of transferring your assets to your Trust.  As a result, the amendment can be done easily and quickly.

A Summary regarding Your Integrated Plan

• Your assets are protected during your lifetime
• You can have Long-Term Care Insurance, or you can access Medicaid benefits, or both
• No probate proceeding, no court involvement
• Your assets are distributed according to your wishes, privately and without delay or expense
• Your beneficiaries avoid capital gains tax on unrealized gains that accrued during your lifetime

If you want to create an effective plan for yourself and your family, talk to a Lamson & Cutner Elder Law Attorney about the benefits of integrating your Estate Plan with a Long-Term Care Plan.