By Steven J. Gibbs, Esq.
I often advise clients that there are a few major risks to consider in your retirement years. The top of the list is rising healthcare costs, followed by the arguably lower risks of random law suits and estate tax exposure.
Rising healthcare costs bear a direct relationship with long term care planning is it relates to the cost of home healthcare, preserving one’s estate, and potentially needing full skilled nursing care.
Estate Planning Considerations for
Long Term Care Planning
Part of having a coherent and complete estate plan in Florida, or any state, is considering how to pay for rising long term healthcare costs. Such a plan may include pre-Medicaid planning in Florida. An effective plan may also include Medicare, Medicare supplements, life insurance with a chronic care rider or long term care rider OR what I call a stand alone long term care insurance policy.
The Downside of Relying on Medicaid in Florida
It is no secret that we’re in the midst of a healthcare crisis. Fidelity Investments suggests that the average couple can plan to pay approximately $250,000 in medical expenses during retirement. However, the majority of people have less than that saved for retirement. If you think this sounds serious, you’re correct. This scenario WILL lead to Medicaid for many people. However, the fact is that Medicaid is an overburdened welfare program, as is social security and this problem may only get worse.
Defining Medicaid Planning
Medicaid is a joint state and federal government program that is designed to help low income elderly people pay for long term custodial care, a/k/a full skilled nursing care. In reality, Medicaid is an overburdened welfare based system.
So, if you’re relying on a Medicaid plan, you should be prepared to have limited options. According to the National Care Planning Counsel, Medicaid only pays for a semi-private room in a full skilled nursing facility (nursing home). Worse yet, not all nursing homes take Medicaid patients, so options can become more limited.
Home Health Care vs. Nursing Home Care
Most people given the choice would prefer to spend their waning years at home as opposed to a nursing home. Yet, I can personally attest that it can be difficult in Florida, as in many states, to get Medicaid to pay for home care, despite the facts that there are “Managed Care Programs in Florida” that have been created for this purpose.
For many, a long term stay in a nursing home is an extremely undesirable option, yet under a Medicaid planning approach it may be the only viable alternative.
Strain Upon Loved Ones
Spouses and adult children are often forced to pay out of pocket for outside care givers. If those resources are not available, they may be forced or opt to “tough it out” by providing critical care themselves. For an aging spouse, toughing it out by providing the care themselves can be a huge burden and lead to additional debilitating health declines. For adult children with busy lives, the time investment is often too much. However, the good news is that proper planning can provided needed resources to hire professionals to help shoulder this burden.
Medicare Misunderstandings Concerning
Long Term Custodial Care
Medicare is a type of insurance that is attached to social security and is available to U.S. citizens over the age of 65. Medicare is available regardless of income and includes 4 areas of coverage as follows:
1. Part A: Hospitalization Coverage
2. Part B: Medical Insurance
3. Part C: Privately Placed Supplemental Insurance
4. Part D: Prescription Drug Coverage
Theoretically, Medicaid and Medicare are supposed to work together to help the elderly with long term care costs. However, in practice, Medicare is helpful for “critical care” such as short term hospitalizing and trauma care AND DOES NOT PAY FOR “long term custodial care” for chronic conditions such as Alzheimer’s.
Non-Medicaid Planning Approaches to Pay For Healthcare Costs
1. Planning to Self Fund
2. Private Long Term Care Insurance
The Perils of Self Funding
As you’re researching options for long term medical care planning, you may come across some who suggest “self funding”. What this really means is that you continue to invest your money in various ways proposed by the financial community such your IRA, 401(k), stocks bonds, commodities, etc., or possibly by purchasing assets such as real estate. This planning approach depends upon a belief that your investments will bear enough fruit to supply you with the needed resources to pay for you own long term care.
In my humble opinion, self funding is always problematic. This is an idea that is also touted to replace life insurance by those who promote market based investments. The fact is, when you opt to self fund, you are simply rolling the dice with your financial future. Yet, this isn’t the worst part of self funding. The worst part is that you’re taking assets out of your income producing, wealth building bucket and essentially liquidating them to pay for long term care.
Private Long Term Care Insurance
Private long term care insurance has been gaining momentum in recent years as a viable option to meet the risk of escalating long term care costs. Many people are overwhelmed when considering the right long term care insurance solution, so let’s look at the available options which are:
1. Life Insurance with Chronic Illness Rider
2. Life Insurance with Long Term Care Rider
3. Stand Alone Long Term Care Insurance
Without diving in to which of the above options is best, it is extremely important for you to do proper due diligence. Ask questions about the various policy options, companies, and coverage limitations, and make sure that you understand what you’re purchasing. The future of your estate and welfare of you and your loved ones depends on it.
Steven J. Gibbs is a trust and estate planning attorney who provides complete Estate Planning, Trust Planning, Business Planning, Asset Protection, Elder and Medicaid Planning, Real Estate, Probate and Trust Administration legal services in Florida and California. Steve’s main offices are located in Fort Myers, Florida, and San Juan Capistrano, California. Estate planning legal services are provided statewide in these locations.
The Gibbs Law Office was founded by Steven Gibbs in January 2009 upon the commitment to provide client-centered legal services.
Steven Gibbs founded the Gibbs Law Office in January 2009, committed to providing client-centered legal services.
Steve as he would rather be called, is not your typical attorney. If you appreciate the staunch egotistical mannerism of most firms, you will be delighted with Steve’s unpretentious approach to educating and then assisting his client. Instead of giving you his complacent and lofty ideas, he would rather pursue your expec
tations with professional conversation about resolving your concerns under the Law. It’s your life and it’s his job to make your legal expectations come true while using years of his guidance and knowledge.
Steve was admitted to the Minnesota Bar in 1999, the Florida Bar in 2007 and was admitted to the California State Bar in 2014.
Along his career path, he was an associate attorney for an insurance defense law firm; an in-house real estate negotiator for Target Corporation; and corporate counsel for Civix, LLC and Vice President for North American Properties where he was responsible for various real estate transactions, including legal issues and negotiating unresolved business issues. Prior to opening Gibbs Law Office, PLLC, he was an associate with the firm of Roberts & Engvalson, P.A. where he gained his knowledge of trusts, estate planing and Wills. He opened his own firm in 2008 and now focuses on laws that will enrich the needs of his clients throughout their lives and those of their children. The firm has developed a practice dealing only with Trusts and Estate Planning, Wills, Medicaid Planning, Elder Law, Real Estate, Business Law and Probate.
Quoting from Steve “I decided to practice in areas that families will need as they progress down life’s path. To help them with a solid foundation that will carry them throughout there lives is a rewarding experience for me and my staff.”
GIBBS LAW OFFICE
Steven J. Gibbs, Esq.