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Serving: WI

Long-term health care requires planning

Long-term health care requires planning
The goal for everyone is to remain financially secure and in control of assets for as long as they live.

I grew up on a dairy farm and learned about hard work from my grandmother. Even after selling the farm to my parents, she thrived on doing as much as she could on the farm for as long as she could. She died at age 89 in her bedroom on the family farm.

Most of our clients would choose that exit option:  to die at an advanced age in their home on the farm surrounded by family.  Too often, when a health crisis occurs, it creates several areas of stress:  care-giving needs, cost of care and exposure of farm assets to care costs.

When planning for possible long-term care needs, it is important to understand the Medicaid eligibility rules in order to make appropriate planning choices.

Escalating care costs
We were fortunate that with the assistance of several family members, my grandmother could remain at home even when she became bed-ridden. For many families, in-home care is not possible. We know that the longer a person lives, the greater the risk for long-term care needs. We also know that long-term care is expensive. The average daily cost of nursing home care in Wisconsin in 2015 was $252.95 or $92,326.75 per year. This creates significant concern in many farm families where a large portion of the farm or farm assets are held by senior members of the family.

People’s basic estate planning goals include obtaining financial security, providing for one’s spouse, treating children fairly, avoiding taxes, avoiding probate and protecting assets in case of the need for long-term care. The goal for everyone is to remain financially secure and in control of assets for as long as they live. While every client should have powers of attorney and a will or trust to distribute assets upon death, there is no magic solution for every client when making decisions about possible long-term care needs.  One call does not fit all. 

Significant changes in the Medicaid rules in the last year have created almost feverish concern about the potential loss of assets in the event of the need for nursing home care. Some salespeople attempt to capitalize on that fear. Many people believe that if their parent or spouse requires nursing home care, it means automatically that the farm is lost. They assume the nursing home will simply take the farm, which is not the case. The resident is receiving services and will receive a monthly bill. A comprehensive estate and succession plan will incorporate unique circumstances for each client and will address specific client considerations in determining a plan how to deal with that monthly bill for long-term costs. When developing an appropriate plan, clients must consider age, health, assets, cash flow, family dynamics and farm operation details. 

Medicaid rules
After review of their circumstances and options, some of our clients will choose to purchase long-term care insurance, some will choose to create irrevocable trusts (or Medicaid trusts), some will choose to create family entities to hold partial interests in assets, some will choose to divest themselves of asset ownership partially or entirely. Some clients will choose to do nothing for tax reasons or to maintain full control for as long as possible so they can make decisions based on current circumstances.  Even if clients choose to do nothing immediately to preserve assets, anyone can be eligible for Medicaid in five years under current Medicaid rules. That means that a person’s maximum exposure to nursing home expenses is five years.

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When planning for possible long-term care needs, it is important to understand the Medicaid eligibility rules in order to make appropriate planning choices. Medicaid is a joint federal and state welfare program.  It is also called Medical Assistance or Title 19. 

In order to be eligible for Medicaid, a person must have medical need and financial need. The applicant may have certain exempt assets and be found in financial need. The exempt assets for a single person include $2,000, personal property, a $1,500 life insurance policy and a funeral trust or life insurance policy that is irrevocably assigned for funeral purposes. A car is exempt if used for transportation of the individual.  

The exempt assets for a married person (if one spouse is institutionalized and the other remains in the community) include the homestead if occupied by the spouse, a vehicle, personal property, a $1,500 life insurance policy, a funeral trust or life insurance policy that is irrevocably assigned for funeral purposes, the community spouse’s retirement benefits and $50,000-$119,000 in other assets. The homestead property includes adjacent acreage up to a maximum of $750,000 equity. Income-producing assets are also exempt, which is important for individuals such as farmers engaged in a trade or business.

When a person applies for Medicaid, the applicant must also report any gifts of assets during the look-back period, which is the five years prior to the individual’s application. Any gifts made during the look-back period are subject to a divestment penalty, but gifts prior to the five-years are not counted. The divestment penalty or ineligibility period for Medicaid is calculated as the total amount of gifts during the prior five years divided by the average daily cost of nursing home care.

The challenge for everyone is to remain financially secure and in control for as long they live. With appropriate long-term estate and succession planning that is periodically reviewed and updated, farm assets need not be unnecessarily exposed to unexpected long-term care costs.

Rietbrock is a partner in the ag law firm of Twohig Rietbrock Schneider & Halbach S.C. and a member of the National Academy of Elder Law Attorneys.Call Rietbrock at 920-849-4999.

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