Unfortunately, many individuals, including many professionals, believe these two planning options are mutually exclusive and that one negates the need for the other. In fact, a carefully planned and cost-effective strategy to guard against the high costs of long-term care often includes both asset protection planning and long-term care insurance.
When used effectively, Medicaid planning can help individuals reduce prospective costs of long term care insurance, and long-term care insurance can provide certain services that New Jersey Medicaid doesn’t fund. What families need to know is which expenses are worthwhile and which can be cut.
Those looking for the simplest, least expensive asset protection plan must not forget that even partially implemented plans are often useless. Typically, individuals are concerned about protecting their residences from state liens and are willing to engage in legal planning for this purpose. Yet, on occasion, families are unwilling to take further steps that are necessary to protect stock accounts, IRA’s, CD’s, and other assets. Medicaid laws are extremely strict, and the financial requirements are definitive.
To qualify for benefits in New Jersey, an individual must not have countable assets in excess of $2,000, or, under certain programs, $4,000. A spouse’s assets are also subject to limitations. If an individual’s or couple’s liquid assets exceed the Medicaid resource limits, Medicaid will require that these be depleted before benefits begin. Therefore, as with long-term care insurance, certain costs of legal planning can be minimized while others cannot be compromised or the plan will be ineffective.
When engaging in asset protection planning, individuals must create a strategy that includes the possibility of remaining in one’s home and to the extent possible, receiving benefits to pay for in-home care. However, a large percentage of would-be Medicaid applicants are not eligible for in-home care subsidized by Medicaid in New Jersey because their monthly incomes are too high.
This year, the income limit to receive in-home care is $2,022 per month. Because many New Jersey residents are disqualified due to income level from Medicaid home care, individuals who anticipate reasonably high retirement incomes would be wise to purchase long-term care insurance with a home care rider, even if such an option results in somewhat higher premiums.
While trying to minimize costs, individuals cannot compromise certain aspects of the insurance and legal planning. For instance, insurance purchasers must not lose sight of the fact that the benefit amount they choose must cover the cost of care, taking prospective income and other expenses into account. Most of our clients are paying approximately $9,500 per month for a semi-private room in a nursing home and costs in excess of $6,000 in assisted living facilities. In trying to cut costs, purchasers must make sure they have ample coverage. Because the cost of nursing homes rises significantly and rapidly, inflation protection should be considered. Many policies offer this feature and allow the policy owner to pay the same premium over time while coverage increases.
While certain options should not be compromised, implementing a strategy that includes both long-term care insurance and asset protection planning can save individuals substantial assets in life savings and insurance premiums. While cutting the monthly insurance benefit amount is not recommended, individuals can save money on their long-term care insurance purchases by limiting the length of the benefit. Rather than choosing a policy that would pay out over the lifetime of the individual, individuals can still be adequately prepared to meet the costs of long-term care by selecting a policy that pays for nursing home care for a limited period of time.
Five years is an ample amount of time for the insurance benefit period because the Medicaid lookback period for a transfer of assets is set by federal law at 60 months. Those who consider long-term care insurance may wish to select an insurance benefit period of not more than five years. While the benefit period is occurring, the asset protection plan can be implemented and completed so that once the benefit payout ends, the Medicaid applicant can continue receiving the same level of care for which the insurance was paying and make a smooth transition to Medicaid benefits.
Even an insurance payout period as short as three years can make a large difference in clients’ abilities to protect their assets. Depending upon clients’ income and asset levels, many individuals can become eligible for Medicaid in less than five years from the time they first enter a facility. For those clients, a three year insurance payout term would still give a long-term care insurance policy owner ample time to protect savings through an asset protection plan and thereby still meet the primary goals of asset protection. A solid asset protection plan accounts for: reserving enough assets to meet care needs beyond the minimum for which Medicaid pays, protecting the spouse and helping maintain the family home and lifestyle, leaving an inheritance to children, and avoiding state liens.
Because federal law sets the Medicaid lookback period at five years, individuals must begin asset protection planning early to protect their savings. While many clients can become eligible for benefits prior to the expiration of five years from the time they begin asset protection planning, a majority of individuals would be well advised to begin legal planning when the possibility of nursing home care still seems extremely remote. On the other hand, individuals and couples that have purchased long-term care insurance have more flexibility as to when they might decide to begin asset protection planning since their savings will not recede as quickly as the accounts of individuals who are paying an average of $9,500 per month in nursing home care with no long-term care insurance.
Attorney Dana E. Bookbinder focuses much of her practice on elder law, and routinely recommends that clients investigate their long-term care insurance options. She practices with Begley Law Group, P.C., in Moorestown, Princeton, and Stone Harbor, New Jersey where clients seek her expertise in asset protection, disability planning, estate planning, and estate administration. However, when that option is foreclosed, she assists individuals in protecting their life savings through legal planning. When long-term care insurance and an asset protection plan are established in tandem at an early stage, these separate strategies will work together harmoniously to comprise a comprehensive, protective plan that maximizes savings for families.
Ms. Bookbinder has been certified as an Elder Law Attorney by the ABA accredited National Elder Law Foundation. She is a past Chair of the Elder and Disability Law Section of the New Jersey State Bar Association and past chair of the Burlington County Probate Committee. She has authored several articles on legal devices for asset, estate and tax planning in publications including the New Jersey Law Journal’s Financial Planning Supplement. She also lectures to civic and retirement groups and holds seminars sponsored by the New Jersey State Bar Association. She is also a member of NAELA and a life member of The National Registry of Who’s Who. Ms. Bookbinder is a member of the New Jersey State, Pennsylvania and District of Columbia Bar Associations. She received her bachelor’s degree with distinction from Cornell University and her juris doctor degree from The George Washington University Law School.
For more information:
Begley Law Group
http://www.begleylawyer.com
509 S. Lenola Road, Building 7
Moorestown, NJ 08057
Tel: 800.533.7227
Fax: 856.273.1062
With the cost of nursing homes now averaging approximately $9,500 a month for a semi-private room in New Jersey, this situation could be financially catastrophic. Because Medicare covers only an extremely limited amount of nursing home care, the cost of such care can devastate an estate, leave a spouse with inadequate assets to maintain the marital residence, or eliminate the chance of leaving an inheritance to one’s children.
Moreover, the stress of having a spouse in a facility and paying the bills for such care can ultimately impact the health of the spouse living at home. Those concerned about long-term care owe themselves the opportunity to investigate all options to protect their savings and current family financial situation.
All too often, couples who are seeking long-term care insurance find out they have begun their planning a little late when one of them learns that they can qualify for the insurance, but the other cannot. In the event that the spouse who is not covered by the insurance requires long-term care, both spouses’ estates will be dramatically impacted.
While being turned down by the insurance company is a disappointment and may encourage the spouses to consider how they can improve their health, the rejection in itself should not be allowed to lead the couple down a path of financial devastation. By being informed and proactive, couples can protect their savings even when one becomes sick. To maximize control over your financial future, keep the following in mind:
1. Begin early. When researching legal protection planning options and especially long-term care insurance, everyone must begin early. Generally, once an individual acquires a long-term illness, the person can no longer acquire long-term care insurance. This by no means suggests that the individual is unable to save substantial assets by engaging in legal planning, however. In fact, even after an individual enters a nursing home, the individual can still save substantial assets for his or her family through asset protection planning. Such legal planning is most effective when it is done early, usually before the prospective long-term care resident enters a facility. Every Medicaid application is also subject to a five-year lookback as established by federal law. Therefore, just as insurance premiums will be much lower the earlier one purchases the insurance, the savings through planning will be substantially greater. In addition, early planning gives families peace of mind and the security that generally comes from being proactive.
2. Select your advisor carefully. When purchasing insurance or considering legal planning, it is important to carefully select a provider. Increasingly, professionals are amassing more knowledge of Medicaid. However, the Medicaid asset transfer rules are complex, so partial knowledge of the subject is likely to place the client in a worse situation than if no planning had been done at all. Because many seniors discuss long-term care planning amongst themselves and with their trusted advisors, many myths abound. In New Jersey, for example, many professionals still try to sell annuities under the guise that these products will expedite Medicaid eligibility. While such claims may be true in limited cases, an annuity purchase by a senior citizen who is contemplating Medicaid eligibility is more likely to benefit the financial advisor than the purchaser. The most seasoned legal advisors to the elderly are likely to be members of the National Academy of Elder Law Attorneys (NAELA) or Certified Elder Law Attorneys (CELAs), accredited by the National Elder Law Foundation. Those seeking elder law advice should refer to www.naela.org.
Likewise, when choosing a long-term care insurance company, the selection must be done carefully. It is critical to choose a stable company that will be in existence for many more decades to come. Many insurance brokers agree that even a slight increase in premiums is worth the stability and security that a large company offers. Purchasers are best advised to select a broker who represents several companies so that they can review and compare different prices and features. Any long-term care insurance discussion should include a comparison of home care benefits to be paid out, including whether the policy has an inflation rider and a comparison of “elimination periods,” which show how long it will take before the policy begins to pay once the individual is incapacitated enough to trigger the benefit.
3. If one spouse is rejected from insurance coverage, consider both legal planning and insurance. In situations where one spouse is sick, the couple can plan for each of their care by purchasing long-term care insurance for the healthy spouse and engaging in asset protection planning for the ill spouse. This is commonly done, but couples are well advised to remember that Medicaid does look at the assets of the healthy spouse as well as the ill spouse when an application is filed. Therefore, while adequate insurance coverage will guarantee that the healthy spouse can retain assets and property in his or her name and still pay for long-term care if it is needed for him or her, a comprehensive asset protection plan is still necessary. Without legal planning, if the spouse without the insurance required institutionalization, the couple could be faced with an estimate of $9,500 of nursing home bills. On the other hand, through legal planning, the couple could convey the marital residence to the spouse who is covered by insurance and protect it if the other spouse ever requires Medicaid. They could also transfer certain other assets as consistent with state and federal law to the covered spouse, and in some cases to other family members, to minimize the financial impact of privately paying for care. Ideally, the spouse living at home can protect his or her standard of living, including being able to afford long-term care insurance premiums.
Attorney Dana E. Bookbinder counsels clients in asset protection, disability planning, estate planning, and estate administration. She has seen many clients that should be utilizing both a long-term insurance plan and asset protection plan to safeguard their life’s work and family. As a certified Elder Law Attorney at Begley Law Group, P.C. in Moorestown, Princeton, and Stone Harbor, New Jersey, she is skilled in helping individuals and families investigate their long-term care insurance options and plans for savings. The firm is highly respected for its successful track record and attention to their client’s needs to create a comprehensive, protective plan that maximizes a family’s savings and livelihood.
For more information:
Begley Law Group
http://www.begleylawyer.com
509 S. Lenola Road, Building 7
Moorestown, NJ 08057
Tel: 800.533.7227
Fax: 856.273.1062
Since a lawsuit itself is essentially the collateral to secure the finance company’s advances, the lending company will obtain information from the personal injury attorney concerning the case. They will follow these steps to offer the monies:
USURY
Since the loan is structured as a non-recourse loan, most states have held that usury laws do not apply.
PUBLIC BENEFITS ISSUES
If the client is receiving means-tested public benefits such as SSI and/or Medicaid, does receipt of the funds pursuant to the terms of the LLA disqualify the client from means-tested public benefits such as SSI and Medicaid? If the funds are received by parents of a child under 18 receiving such benefits, do the funds received under the LLA deemed to the child so as to disqualify the child from those benefits? This becomes a tricky issue. If the funds are considered a loan and there is a reasonable expectation of repayment, then the funds are not considered income in the month received. However, funds kept into the next month will be considered a resource.[1] The issue then becomes whether the transaction is characterized by Social Security and Medicaid as a loan, subject to a reasonable expectation of repayment, or whether it is characterized as a cash advance, which is the categorization made by the pre-settlement lending company to avoid the usury statute. The lawsuit funding company contends that the transaction is non-recourse and therefore not subject to state usury laws. This is clearly an issue that needs to be taken into consideration.
BEST PRACTICES
The best practice with respect to pre-settlement lending is to refer the client to a reputable third party to perform the following:
Best practices dictate that the litigation attorney engages the services of a third party to identify a reputable pre-settlement lender and supervise all aspects of the transaction.
CONCLUSION
Pre-settlement lending is appropriate if the injured person is unable to work, has reduced income, or has expenses associated with care or disability as a result of the injury. Because of the high fees associated with pre-settlement lending, it should be a last resort. Alternatives to pre-settlement lending might be:
The Begley Law Group, PC has counseled individuals and families on their financial and legal choices for more than 75 years. Thomas D. Begley Jr., Esquire, CELA, has extensive experience in personal injury, disability law, special needs trusts, Medicaid planning and elder law. He is a member of the New Jersey Bar Association, all relevant state and local affiliates, and the National Academy of Elder Law Attorneys.
For more information:
Begley Law Group
509 S. Lenola Road, Building 7
Moorestown, NJ 08057
Tel: 800.533.7227
Fax: 856.273.1062
The post PART TWO: PRE-SETTLEMENT LENDING IN PERSONAL INJURY CASES first appeared on SEONewsWire.net.]]>A number of issues arise in connection with these loans including legal, ethical, Medicaid and practical concerns that must be considered in determining whether applying for such a loan is appropriate.
PURPOSE OF THE LOAN
The purpose of pre-settlement lending is usually to enable the injured party and/or his family to meet their living expenses during the period of time when the lawsuit is pending.
LOANS INVOLVING MINORS AND INCAPACITATED PERSONS
If the lending agreement is made directly with the injured adult plaintiff, it is much easier than if the lending agreement is made with parents on behalf of a minor child or an incapacitated adult plaintiff whether acting as natural guardian or legally-appointed guardian of the plaintiff. In cases involving a minor or incapacitated plaintiff, many courts will refuse to enforce the terms of the lending agreement, unless it can be clearly demonstrated that the funds were used for the direct benefit of the injured minor or incapacitated person. Excellent recordkeeping is critical.
For example, if a parent misses considerable time from work superintending a catastrophically injured child and falls behind in mortgage payments, a court may question whether a pre-settlement lending agreement used by the parent to bring the mortgage payments current was for the direct benefit of the child and, therefore, enforceable. On the other hand, if the parent is the injured party, unable to work because of the injury, and assuming the pre-settlement lending was used to make mortgage payments, there should be no enforceability issue based on the fact that the “borrower” does have an interest in the lawsuit.
BORROWER’S CREDIT
In most situations involving a loan, the borrower’s credit is paramount. Even if the loan is secured by a real estate mortgage, most lenders will want to see that the borrower is credit-worthy because of today’s sensitive lending environment. In pre-settlement lending transactions, the borrower’s credit is immaterial, because the pre-settlement lending company is looking to the proceeds of the lawsuit as collateral for the loan.
The Begley Law Group, PC has assisted individuals and families with their legal and financial decisions for more than 75 years. They are highly respected for their successful track record and attention to their clients’ needs first and foremost. Thomas D. Begley Jr., Esquire and CELA, has extensive experience in personal injury, disability law, special needs trusts, Medicaid planning and elder law.
For more information:
Begley Law Group
509 S. Lenola Road, Building 7
Moorestown, NJ 08057
Tel: 800.533.7227
Fax: 856.273.1062
The post PART ONE: PRE-SETTLEMENT LENDING IN PERSONAL INJURY CASES first appeared on SEONewsWire.net.]]>