Special Needs, Disability And Long-Term Care Planning

Certified elder law attorneys (CELAs) do not limit their practice to a specific area of law, but rather to the legal needs of the over-55 and disabled population, including long-term and disability care at home or in a facility. Families with special-needs children have different goals to protect them when parents are infirm and unable to provide care or are deceased. These planning issues must be addressed by creating special-needs or disability trusts as well as by establishing post-death protection in the parents' wills.

Special Needs And Disability Planning

Medicaid has carved out exceptions and exemptions for the special-needs and disabled population that 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 life. The funds establishing that trust do not place any public benefits at risk for the grandparent/parent, should Medicaid be needed for 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 life. The person receives a settlement or award for the injury. Without special-needs planning, that award will disqualify the recipient for other public benefits, including Medicaid, until it is all spent down, long before his or her 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 such matters to a certified elder law attorney (CELA) to create this type of trust for their injured or disabled client.

Long-Term Care Planning

If an individual suffers a catastrophic illness that 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 private, 24/7, at-home health 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 infirm individual and his or her 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 $2,000, you will then become eligible for Medicaid. There are legal planning methods available whereby an individual does not need to exhaust his or her 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, you can control what your "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 long-term care before Medicaid?

  1. Long term care insurance — You place the responsibility for payment of long-term care on an insurance company, rather than draining your personal assets. Due to market competition, the benefits of long-term care insurance have improved substantially over the years, including tax deductibility of premiums and expanded coverage to home and adult day care. There are now even life insurance policies that contain a long-term care insurance benefit rider.
    The primary argument against long-term care insurance is the possibility that you pay the premium for all of those years and never need long-term care. Statistics show that 65 percent 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 such need, then the full life insurance benefit will pay out upon death.
  2. Other public benefits — The availability of the Veterans Affairs Aid and Attendance benefit, noted elsewhere on this website, is separate and distinct from Medicaid eligibility and in 2017 offered monthly benefits ranging from $1,155 per month to $1,792 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, 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 long-term care. There are also reverse mortgages, although they have substantial costs. Finally, there are Medicaid exemptions for caregiver children or disabled children that place the home beyond the reach of medical spend-down prior to eligibility and are not subject to the Medicaid five-year look-back.
  4. Tax benefits — A chronically ill individual can qualify to allow the total long-term 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 several exemptions from the transfer/penalty rules when the client exercises "self help" planning. Reliance only on government 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 our lawyers in East Hanover at 973-577-6010 or click here to contact us online.