At the beginning of a new year, we all take stock in our lives and make health care plans. Americans continue responding to the ever-present threat of COVID-19 in its many iterations, and we are identifying that which is most important in our lives to preserve our health and financial future best.
For many, the mere mention of long-term care health insurance congers up images of twilight years seemingly far removed from our daily lives. However, the reality is that you may find yourself in need of long-term care due to a sudden disease or illness or as the result of an accident. The US Department of Health and Human Services statistics currently show that about seventy percent of individuals over the age of 65 will require some long-term care during their lives. Genworth’s latest statistics show that a full thirty-seven percent of these long-term care recipients are, in fact, under sixty-five years of age.
Regardless of your age or cause, when long-term care becomes a requirement, it is important to know and plan for your options regarding funding the care you need, where and how you prefer to receive it. Your planning today can make a huge difference in your financial solvency and those caregivers (mostly family) who participate in the financial burden of your care.
Naturally, the best scenario is having prepared for the future by having healthy balances saved in your retirement programs and health savings accounts. If the funding is available to cover long-term care costs for yourself or a loved one, it is prudent to do so. Perhaps you can only make part of the funding happen, in which case you may have to ask loved ones for help. They may have the financial where with all to finish covering premium costs. Paying some out-of-pocket for an aging parent early on means less of a toll emotionally, physically, and financially, should a family member have to assume becoming a full-time caregiver.
The IRS considers long-term care insurance as a medical expense. As long as the policy is qualified, it is deductible. IRS rules state the policy must have been issued on or before January 1, 1997, and adhere to certain requirements. Policies purchased before this date may qualify to become grandfathered if the state’s insurance commissioner approves the selling of the policy. The IRS rules from 2021 to 2022 are little changed, most notably in age categories from sixty to seventy years old the IRS reduced the deduction by ten dollars.
Note these tax deductions are, for the most part, not available in hybrid policies. These policies combine life insurance and annuity policies with a long-term care benefit. Hybrid policies are becoming particularly popular because if long-term care is not a requirement, the individual’s heirs may receive a death benefit. Your medical expenses need not exceed a certain percentage of your income to be tax-deductible. As long as you earn a profit, you may take the amount of your long-term care insurance as a deductible.
Public programs are becoming more heavily leveraged for lower-income individuals to plan for long-term care services. There is nothing wrong with taking advantage of these programs; however, most Americans do not understand the differences between Medicare and Medicaid, what and who they fund, and for how long. The answers are complex as there are physical and financial thresholds to qualify for benefits, and these may vary from state to state. Here is a general overview of qualifications and limitations in coverage and choices of care facilities.
Sometimes referred to as Medicaid crisis planning, an elder law attorney can guide you through the process of sheltering some of your assets. Medicaid is a federal/state program helping low-income seniors with limited income and assets afford healthcare and long-term care. Many seniors believe their only option to qualify for the program is to “spend down” their assets. While this is true in some cases, proactive Medicaid planning can protect a substantial portion of your assets if done correctly.
The program’s eligibility rules are complicated, as is the application process, so it is best to navigate the process with a specialized Medicaid planning elder law attorney well before you need to tap the benefits. Always seek professional legal advice when creating your long-term care strategy using Medicaid. Applications are rarely successful as a do-it-yourself project, and mistakes can have devastating long-term consequences on a family and their finances.
Options for long-term care exist; however, finding the best solution for your financial circumstances is complex. As 2022 is upon us, it behooves us all to look to the future of our healthcare and prioritize proactive planning, ensuring there will be a plan in place when we encounter the likelihood of a long-term care requirement. Please contact us today at (631) 686-6500 to schedule a consultation to discuss your legal matters.