Special Needs, Disability and Long-Term Care Planning

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A Certified Elder Law Attorney (CELA) does not limit their practice to a specific area of law but rather to the various legal needs of the over age 55 and disabled population, including long-term and disabilty care at home or in a facility. Families with special needs children have different needs and goals to protect them when parents are infirmed and unable to provide care or are deceased. These planning issues must be addressed during lifetime by creation of Special Needs or Disability Trusts as well as establishing post death protection in the parent's Last Will and Testament.

Special Needs and Disability Planning

Medicaid has carved out special exceptions and exemptions for the special needs and disabled population which parents should implement. Two examples:

A. Consider a grandparent/parent with a disabled or special needs grandchild/child. The Medicaid law allows establishment of a "Sole Benefit" Trust for the special needs individual for their lifetime. The funds establishing that Trust do not place any public benefits at risk for the grandparent/parent, should they need Medicaid long-term care, nor for the child. This Trust is exempt from the five-year Medicaid look back rule.

B. An individual is seriously injured in an accident or due to malpractice and will be disabled for the balance of their lifetime. They receive a settlement or award for their injuries. Without special needs planning, that award will disqualify them for other public benefits, including Medicaid, until they spend down all of the award, long before their lifetime ends. By the use of a "Special Needs Trust", the amount of the recovery can be preserved while still attaining eligibility for public benefits. Most personal injury attorneys are aware of this planning opportunity and refer the matter to a Certified Elder Law Attorney (CELA) to create this type of Trust for their injured or disabled client.

Long-Term Care Planning

In the event an individual suffers a catastrophic illness which is beyond coverage by Medicare, then the need for long-term care arises. Long term care may be rendered at home, in an assisted living facility or in a skilled nursing facility. Typically, the cost of that care must be privately paid before the individual is eligible for public benefits or Medicaid. The current cost of care for a private, 24/7, at home healthcare agency care is approximately $6,500 per month; an assisted living facility is $7,500 to $8,000 per month and nursing home care is $11,000 to $12,000 per month. These staggering costs will diminish the lifetime nest egg of the infirmed individual and their spouse unless long-term care and financial planning is instituted to guard against medical impoverishment.

The basic rule to become eligible for public benefits is quite simple. "You spend all of your funds first and when you're down to your final $2000, you will then become eligible for Medicaid". There are legal planning methods available whereby the individual does not need to exhaust their entire lifetime nest egg as a precondition to qualify for public benefits. This is not to say that you will "beat the system" and not need to privately spend down to attain a quality level of care. The reward for trying to beat the system is to find yourself in a state operated, Medicaid Only facility wherever there is a bed available, without family choice as to the facility or location. Instead, with our counsel, the individual can control what their "fair share" spend down will be, while still attaining Medicaid eligibility.

Therefore, what "self-help" private financing options are available to address the cost of the long-term care before Medicaid?:

  1. Long term care insurance - You place the responsibility for payment of the long-term care on an insurance company, rather than solely on your personal assets. Due to market competition, the benefits of long-term care insurance have substantially improved over the years, including tax deductibility of premiums and expanded coverage to home and adult daycare. There are now even life insurance policies which contain a long-term care insurance benefit rider. (I have one)
    The primary argument against long-term care insurance is "what if I pay the premium for all of those years and never need long-term care?". The statistics are that 65% of the over 55 population will in fact need long-term care but with the type of life insurance policy referenced, if there is no need for long-term care, then the full life insurance benefit will pay out upon death.
  2. Other public benefits - The availability of the Veterans Administration Aid and Attendance benefit, noted elsewhere on this website, is separate and distinct from Medicaid eligibility and offers 2016 monthly benefits ranging from $1150 per month to $1788 per month to qualified applicants. Also consider PTR (senior tax freeze) for home real estate taxes and PAAD (Pharmaceutical Assistance for the Aged and Disabled), which reduces drug co-pays to $7.00, without monthly premiums.
  3. Use of home equity to pay for care - Many clients have substantial equity in their homes with the ability to access a "line of credit" to pay for the cost of long-term care. There are also "reverse mortgages", although they have substantial costs. Finally, there are Medicaid exemptions for caregiver children or disabled children which place the home beyond the reach of medical spend down prior to eligibility and are not subject to the Medicaid 5-year look back.
  4. IRC 7702B (c) benefits - A chronically Ill Individual can qualify to allow the total long-term care cost of home care, assisted living and nursing home care to be fully deductible for income tax purposes.
  5. Use of your IRA or retirement plan or appreciated investments can offset the income tax impacts if used for tax deductible long-term care expenses.
  6. Although there is a five-year look back and potential five-year penalty of ineligibility for Medicaid due to transfers, there are a number of exemptions from the transfer/penalty rules when the client exercises "self help" planning. Reliance only on governmental public benefits to pay for care will not suffice.

For a free initial consultation regarding Special Needs, Disability and Long-Term Care Planning in New Jersey, call us at 973-887-4254 or click here to contact us online.