Number One Provider of Medicaid Compliant Annuities

Medicaid Planning Product - NEW

I am working with an insurance company which has developed the newest Medicaid planning product. The product was designed for families of all wealth, but really has a special interest amongst those families in the low to moderate range. The product is a single pay life insurance policy, and is a guaranteed issue to age 99.

Once the life insurance policy is issued, the owner/insured immediately assigns all of his or her interests to a trust controlled by the life insurance company.  The assignment is an uncompensated transfer for Medicaid purposes, and will disqualify the insured from obtaining Medicaid benefits for 60 months.

On the first day following the 60 month period, the insured is immediately eligible for Medicaid benefits - assuming that he or she has countable assets of no more than $2,000.00 and monthly income that is less than the private pay rate of the nursing home.  For most clients, the asset and income tests are easily satisfied. 

Finally, following the insured's death, the insured designated beneficiary(ies) will receive the life insurance proceeds.

The life insurance policy is an excellent tool for those clients who are looking to pre-plan for Medicaid.  The policy can accept a single pay amount of no more than $50,000 per insured, and the death benefit can be divided up amongst any number of beneficiaries or can be paid to a family trust. It is an outstanding product for those individuals who want to leave behind a small family legacy.

At Krause Financial Services, LLC., we specialize in working with the latest and greatest Medicaid products. To learn more, please get in touch with us.

Women and Nursing Home Care

Recent statistics clearly show that in the average nursing home, women residents outnumber men by three to four. Why is this? The answer is simple, women live longer than men. As a result of living longer, and without someone at home to provide simple care, women are most vulnerable to enter a nursing home. Add frailness to the formula, and a simple slip and fall, the world suddenly takes a turn for the worse.

With the high risk, comes a high cost. On average, nursing homes in Wisconsin charge $6,500 per month for typical nursing home care.  With the average stay lasting 36 months, the total cost can easily reach $250,000.  For those with Alzheimer’s and dementia, the stay will be much longer, and the total cost will exceed $400,000.

Are most women prepared to pay for the nursing home?  The answer is, “no”. Unless she has a large monthly income and substantial savings, the task is almost insurmountable. For most families, the task will include liquidating the family home.  Is this a good result for most families? Not quite! Is there a better way to prepare for the potential expense of a nursing home? The answer is, "yes".

The easiest way for most women to prepare for a potential nursing home stay is to purchase long term care insurance policy, which is more commonly known as “nursing home insurance”. Is it a good buy? Without question, the answer is, “yes”.  Was that always the case?  The answer is, "no".  More than 15 years ago, most of the nursing home insurance policies had so many qualifiers that the average nursing home resident could not meet all of the requirements. Thus, they were not able to obtain any benefits. 

Now, 15 years later, after significant governmental regulation, insurance companies are offering quality long term care insurance policies at a reasonable cost.  The policies have finally come in vogue.

Today, to have the best coverage available at a reasonable price, I recommend that the policy should include 5 years worth of coverage. The coverage should include all levels of care, including: home health, assisted living, and nursing home care. The policy should also offer a monthly benefit, which, when added to monthly social security and pension income, will allow her to privately pay the actual long term care costs. The policy should include an inflation rider, which allows the policy to keep up with future long term care costs. The policy should include a return of premium rider, which allows for a full return of all premiums paid, if the insured should not use the coverage.  Finally, in order to eliminate having to pay premiums forever, I recommend that the policy should include a quick pay option, so that no more premiums after either a single payment, 5 year’s worth of annual payments, or 10 years worth of annual payments.  For most women, the aforementioned long term care insurance policy will be well suited for their future needs.

Krause Financial Services, LLC., offers long term care insurance plans throughout the United States.

Long Term Care Insurance - Is it a Necessary Evil?

According to statistics reported by the American Association for Long-Term Care Insurance, only 400,000 long term care polices were  sold in 2007.  Does this surprise you?  It surprised me! With long term care situations occurring at a greater frequency than a house fire or an automobile accident, it is hard to believe that more people are not insuring against the risk and the potential for a total financial loss.  Is it because long term care is so cheap, and individuals feel they are well situated to pay for the care? Hardly!  Long term care, whether it occurs in the home, an assisted living facility, or nursing home is very expensive  The cost for one year's worth of part-time home health care can exceed the cost of a new car, and the cost of two year's worth of care in a nursing home can exceed the price of a new home.

So why do people insure their homes and cars against such a small risk, and leave themselves totally naked against a long term care risk - that is likely to happen?  The answer lies in education. People need to be educated on the need for long term care insurance, and the opportunities that a good policy can provide them.

So what is in a good policy?  A good long term care insurance policy will provide all levels of care, including: home health, assisted living, and nursing home care. The policy should also include an inflation rider - so that the future benefits stay current with future costs, a return of premium rider - which states that the insured's beneficiary(ies), following the insured's death, will get a full refund of the premiums that the insured paid to get the coverage, and a quick pay option - which eliminates the need to pay for the coverage for the rest of the insured's life (single pay, 3 annual  payments, 5 annual payments, or 10 annual payments). 

Annual Exclusion Gifting and Medicaid Planning

The current IRS rules allow a donor ("each one of us") to give away up to $12,000 per year to any number of donees, and the gift or gifts do not require the donor to file a gift tax return or pay any gift taxes.  As long as each donee only gets gifts that total up to $12,000 per year from any one donor, the plan works perfectly.  In the case of a husband and wife, they can each give away up to $12,000 per donee, thus a donee could get $24,000 in a given year, and the couple would still not have to file any gift tax returns or pay any gift taxes.

For Medicaid purposes, all gifts made within 5 years of entering a nursing home and applying for Medicaid benefits will be treated as uncompleted gifts.  In other words, the donor will still be viewed as having control over the gift amount(s).  In most states, if the gift amount(s) total to more than $2,000, the donor will not be eligible for LTC Medicaid benefits.

In light of the above, and on the assumption that a donee may want to spend the gift amount(s) if they were left in the donee's name, is there good way to make the aforementioned gifts and not ruin the opportunity for the donor to qualify for Medicaid benefits within the 5 year look-back?  The answer is, "yes".  The donee(s) should establish a revocable family trust, and place all the gifts inside of the trust by way of tax deferred annuity.  Once the 5 year look-back period has passed, the donee(s), as co-trustees, could agree to terminate the trust, and disburse the trust corpus to themselves. At that time, the donor would be eligible for LTC Medicaid benefits, and none of the gift(s) would be deemed available to the donor.

$47,000 Per Month For A Nursing Home Stay

I recently worked with an elder law attorney, who had a client who was adamant about not selling any of her stock portfolio in order to qualify her husband for Medicaid benefits.  She was spending $7,000 per month on her husband's nursing home care, and was obtaining the bulk of the money from selling small portions of her stock portfolio.  Her long standing financial adviser had convinced her not to qualify her husband for Medicaid benefits, because in order to do so, she would have to sell-off the majority of her stock portfolio. It was his opinion that such a sale would subject her to outrageous income tax liabilities, both state and federal.

In order to better understand the situation, I asked the client if I could complete an independent review of her stock portfolio.  Reluctantly, she told me, "yes".  I completed my review and learned that with the significant downturns in the stock market, in the month before, she had realized a loss $40,000. I also learned that with the majority of her stocks well off their annual highs, most were trading around their original cost basis.  After performing some taxable gain calculations, I determined that it would be in her best interest to: retain $100,000 of stock portfolio as her CSRA amount, liquidate the balance of her stock portfolio, purchase a Medicaid Compliant Annuity with the stock sale proceeds, and immediately qualify her husband for Medicaid benefits. With the Medicaid benefits in place, his monthly payment to the nursing home was going to drop from $7,000 per month to $1243.00 per month, for a monthly saving of $5,757.

When the Medicaid Plan was finished, the client told me that she had never realized that she was spending $47,000 per month on her husband's nursing home care.