ElderLaw News

ElderLaw News is a weekly e-newsletter that brings you reports of legal developments and other trends of vital interest to seniors and their advocates. This newsletter is brought to you by The Estate Planning & Elder Law Firm, P.C., William S. Fralin, Esq., President.

Smart Planning with Long-Term Care Insurance

Long-term care insurance is one of the best ways to provide for your future long-term care needs. With the baby boomers facing projected federal deficits, reductions in Medicaid spending, as well as rapidly rising health care costs, it is clear that alternative methods of financing long-term care support is critical. Now is a good time to purchase long-term care insurance, because more companies are offering competitive and reasonably priced policies.

When shopping for a policy, however, it is crucial to consider carefully your entire financial situation. Failure to do so can result in purchasing too little coverage, which can be worse than purchasing no coverage at all. For example, consider Harry and Sally, a married couple with minimal assets, who are facing Harry's nursing home costs of $5,000 per month. Harry has $2,000 in monthly income, as well as a long-term care insurance policy with a monthly benefit of $3,300. Sally has income of $400 per month. At a glance, the couple is better off with the policy; they have an extra $3,300 per month, without which they could not afford the nursing home. They can pay for nursing home costs and have $700 per month for Sally's support. Unfortunately, Sally's monthly expenses exceed her monthly income, and Harry is not eligible for Medicaid assistance because his income (including the long-term care insurance benefit) is greater than the nursing home bill. In this example, Harry's long-term care insurance policy does not provide enough of a benefit to allow Sally to have sufficient income to meet her needs. If Harry’s long-term care insurance policy had provided a $5,000 per month benefit, more of his income would be available for Sally's monthly expenses. Harry and Sally could have fully financed his long-term care needs and ensured that Sally would have enough funds to meet her monthly expenses.

If Harry and Sally had recognized this shortfall and decided to not purchase the long-term care insurance, or if they could not afford the increased premiums for the increased monthly benefit, they could have used Medicaid assistance to help pay for Harry's nursing home costs. Most of Harry's $2,000 per month of income would normally be required to pay the nursing home expenses; Sally would keep her $400 per month. Because Sally's income is so low, however, the Medicaid rules would also allow Sally to receive part of Harry's income to support her monthly living expenses. Sally could receive a monthly maintenance needs allowance of up to $2,377.50, (including her income) which includes allowances for housing and utilities. Therefore, in this case, Harry and Sally would have the nursing home costs paid, and Sally would have up to $2,377.50 monthly for her support.

This example demonstrates that clients need to thoroughly analyze their entire financial situation, including future income needs, before purchasing long-term care insurance, in order to ensure that the policies will adequately cover their future needs. This is particularly important with married couples who may eventually have one spouse in a nursing home and one spouse trying to make ends meet at home. The Estate Planning and Elder Law Firm can help clients navigate this complicated process and advise them on their available options for financing their long-term care needs.

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The Estate Planning & Elder Law Firm, P.C.

The Estate Planning & Elder Law Firm, P.C. is an elder law firm. We represent older persons, disabled persons, their families, and their advocates. The practice of elder law includes estate planning, estate and trust administration, powers of attorney, advance medical directives, titling of assets and designations of beneficiaries, guardianships, conservatorships, and public entitlements such as Medicaid, Medicare, Social Security, and SSI, disability planning, income tax planning and preparation, care management, and fiduciary services. For more information about The Estate Planning & Elder Law Firm, P.C., please visit our website at http://www.chroniccareadvocacy.com.

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This newsletter is not intended as a substitute for legal counsel. While every precaution has been taken to make this newsletter accurate, we assume no responsibility for errors, omissions, or damages resulting from the use of the information in this newsletter. The Estate Planning & Elder Law Firm, P.C. thanks the law firm of Hook Law Center for their input to this newsletter.

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