Afraid of Long Term Care Costs in the Middle Class? Seek Asset Protection Through Long Term Care Planning in Illinois, for Middle Class Seniors and Boomers

Problem: We recommend that our clients seek to purchase long term care insurance. But, what happens if it cannot be purchased either due to unaffordable costs or underwriting prohibitions?

Solution: Medicaid is the only federal governmental program that will pay for long-term care. This will require using some of your own funds in order to properly pay your way at a long term care facility, but if planned for properly, will not result in the use of all of your funds.

Therefore, in order to access the Medicaid program in Illinois, one must take some of the following steps in order to become eligible. Be aware, this is a very complex area of planning, but these initial steps should be an overview of what you need to do to begin the process. You would be wise to consult with an Illinois elder law attorney who focuses in this type of asset protection work.

  1. Revise Powers of Attorney

First, revise any powers of attorney for property and health care that you currently have. Most of the powers of attorney that we see in our office, while valid, are inadequate to allow the necessary repositioning and reclassification of assets to gain eligibility to Medicaid, VA, and other governmental benefits.

  1. Contact a Physician

If the senior has mental competency issues, then perhaps contacting a physician to determine whether or not the senior has the requisite mental capacity to execute new estate planning documents is essential. It is unethical to have a senior sign anything that they don’t have the capability of understanding.

  1. Seek Guardianship

This step is a last resort, but may be necessary in some cases, if no powers of attorney can be executed due to diminished mental capacity.

  1. Revise Old Wills and Trusts

Revising old wills and trusts is also essential. Most wills and trusts are nothing but death plans. But, when you’re looking to gain eligibility for Medicaid for long-term care, the documents must reflect the authorization of handling long-term care planning matters rather than just distribution of assets and a death.

  1. Create a Blueprint

The next step, which is useful to seniors, and the family members that are supporting them, (and boomers that are beginning to ponder the long-term care journey), is to create a blueprint.  This blueprint will consist of breaking down considerations into life’s 3 main phases: preplanning, wait-and-see planning, and crisis planning. Preplanning is done when there is plenty of time to plan, waitand-see planning is done when there is a diagnosis, but you are not forced to leave home for long-term care, and crisis planning is when you must seek a higher level of care in an institutional facility of some type.

Quite often, after the blueprint is done and steps one through four are completed, there is nothing further to do until the situation becomes more escalated and a higher level of care may be needed by the senior or boomer, who may migrate to a crisis planning stage.

  1. Inventory Assets

Assuming that we need a higher level of care, we need to continue the work that we did in steps one through five and take the next step, which is set up work necessary to inventory assets and get an understanding of asset ownership, beneficiary designations, and ability to convert to cash in order to pay for long-term care expenses, at least for some period of time.

  1. Seek Placement in a Facility

The next step, assuming that a higher level of care is to be delivered, is to seek placement in a facility. There are many kinds of facilities, such as, independent living facilities, assisted living facilities, supportive living facilities, and nursing homes, and continuing care retirement communities (CCRC’s). I am pleased to say that, for the most part, we see these business entities delivering good care to most of our seniors. Like any other business entity some of their business contracts are fair and others are unscrupulous. It is necessary for you to have a lawyer familiar with these types of contracts to be sure that, from a legal standpoint, whatever you are signing is acceptable. Remember, some of these contracts can require you to pay $10,000 a month and may unnecessarily impose financial liability on children and other signers of these contracts.

  1. Select a Strategy

The next task is to select a strategy which will allow the senior or boomer to legally and ethically reposition his or her asset(s).  This opens up eligibility for the Medicaid benefit in Illinois without spending down to the paltry statutory level of $2,000 of assets. Remember without further planning, Illinois expects you to rely on $2,000 for the rest of your life. This is impossible because some of our seniors enter long-term care at the age of 67 and may remain in long-term care for the next 20 years. It would be nice to have more than a mere $2,000 to buy the TVs, radios, bathrobes and slippers, hearing aids, and eyeglasses that make life more tolerable.

  1. Prepare and File the Medicaid Application

The next step is to prepare and select a time, after the implementation of all asset protection strategies, to file the actual Medicaid application, which fully documents all transactions over the last 60 months. In some cases this can be very demanding task as some seniors lose documentation and forget about transactions and assets.

  1. Prepare for the Post Application Audit

The next step is to prepare for the post application audit by the State of Illinois staff members and be ready to file an appeal in the event the state objects to anything you have presented in the application. Also be ready on an annual basis to respond to the state’s request in what is called their annual redetermination process (REDE).

Summary:

I hope this gives you a simplistic view about how to qualify for Illinois Medicaid while using Medicaid asset protection strategies. Most clients are trying to preserve some assets and they are entitled to do so as a matter of exercising their civil rights as long as they do this legally and ethically.

This planning is not done by wealthy individuals, as they can pay their way through any costs associated with long-term care. Rather, this planning is best done by middle class individuals who have worked to accumulate some savings only to find that the cost of long-term care make their life’s work disappear in no time.

Our goal, as asset protection attorneys for the middle class, is to allow seniors to gain access to the Medicaid program. Although this requires clients to use some of their own assets for their cost of long-term care, it also enables them to preserve some of their assets.  Therefore, in their senior years, after a lifetime of work, they are entitled to some dignity and some resources to make a life in a nursing home more livable.

Anthony B. Ferraro

BS-MSTax-CPA-JD