A recent study by Lincoln Financial provides some interesting data that reflects a general understanding by American consumers of the value of long term care insurance, and long-term care planning, but less than half of the people surveyed took any positive action to prepare for what are often unanticipated costs.



One of the most significant mistakes Americans are making, according to the study, is thinking that investments and social programs such as Social Security and Medicare will cover long-term care and additional unexpected expenses.  The study reports taht the average US family's savings is $120,000.  What many people do not seem to fully appreciate is that one year in a nursing home can cost $60,000 - a cost that is not covered by Social Secuirty and Medicare.

The study does show that some Americans, those who help oversee the care of an elderly loved one, are more aware of the economic burden of aging.  Ninety-three percent of caregivers used their own income to help pay for care and 72% personally provided care in the loved one's home.

Appropriate long-term care planning can help families obtain the long-term care for their elderly loved ones, without exhausting the family's savings or using other family members' income to help pay for the care.  Proper planning through the use of a Medicaid spend down plan can help preserve assets that otherwise would be used to pay for long-term nursing home care.  Those funds can then be used to improve the quality of life for the elderly family member who needs the care, or can be used to provide financial support for the spouse who is left at home.

There are various options that legally provide for the preservation of assets in this context.  These options include the Qualified Income Trust ("QIT"), irrevocable Medicaid Qualified income only trusts, personal care contracts, enhanced life estate deeds ("lady bird deeds"), certain types of real estate investments, and many others that have varying levels of asset protection.

Many long-term care planning options remain even after the elderly person is already in the skilled nursing home.

The most common misconception regarding long term care planning, as indicated by the Lincoln Financial survey is the mistaken belief that Medicare or Social Security will provide funds for long-term care in a nursing home.  Medicare provides very little, and perhaps no, long term care funding, depending on the circumstances surrounding the nursing home resident's medical condition.

There basically are three ways to pay for long term care.  The first of these three is to use your personal savings and investements.  As suggested by the Lincoln Financial study, at $60,000 a year, it doesn't take long to use up the total savings of most families.  The second alternative for paying for long term care is long term care insurance.  Most families do not consider long term care insurance until it is too late for them to qualify their elderly family members for such coverage.  The third option for paying for long term care is Medicaid.

To qualify for Medicaid there are financial and non-financial considerations.  Assuming you meet the non-financial qualifications, the financial considerations fall into to two limitations.

The first is an income limit.  If your income exceeds the Medicaid limit, you will not qualify for Medicaid benefits. 

The second is an asset limit.  If your "countable" assets exceed the Medicaid limit, you will not qualify for Medicaid benefits.  The asset limit in Florida is $2,000.  So, if your "countable" assets exceed $2,000 you will not qualify for Medicaid benefits.

Long term care planning, among other things, allows you to evaluate the character of your assets and determine if there are legal options available to convert "countable" assets to "exempt" assets - which are not included in the determination of Medicaid eligibility.  Other legal options include the appropriate "spend-down" of assets in a manner that complies with the legal requirements for Medicaid eligibility, and provides some benefit to the elderly person or close family members.

The objective of long term care planning is to preserve the elderly person's assets for their use in provided care that is not otherwise available through a skilled nursing facility, and to provide supplemental support for the elderly person and other family members.

Only through appropriate action through long term care planning can American consumers prepare properly for the extraordinary costs of long term care that are not covered by Social Security and Medicare.