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Four Ways the Coronavirus Pandemic May Affect Long-Term Care Insurance

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The coronavirus pandemic has had a devastating impact on the elderly, particularly those in nursing homes and other long-term care facilities. This has raised questions about how the virus has influenced the costs and provision of long-term care insurance, which covers care in facilities and sometimes at home as well.

If you have a long-term care insurance policy, you may wonder how it is affected by the pandemic. If you don’t have a policy, you may wonder if the pandemic will make it more difficult to get one. An article by US News and World Report, examines issues with long-term care insurance that have arisen in the last few months, including the following:

  • Qualifying for insurance. It is already more difficult to qualify for long-term care insurance the older you get. Because older individuals are at a higher risk for coronavirus, this can affect your long-term care application as well. Some insurers have been limiting applicants’ ages or putting additional restrictions on applicants who have been in contact with the virus. If you had a positive COVID-19 test, you may have to wait for three to six months before qualifying for insurance. These policies vary by company.
  • Premiums. Insurers can’t raise rates for customers due to individual circumstances. To raise rates, insurers must obtain approval from the state and raise them for the entire group. However, if you are considered high risk due to exposure to coronavirus, you may not qualify for the best rates when you first apply for long-term care insurance.
  • Moving out of a nursing home. If you have a policy and want to move out of a nursing home, you will need to check what your policy will pay for. Some policies pay for long-term care in a variety of settings, including home care, but others are more restrictive. On the plus side, you may be able to use your policy to reserve your bed, allowing you to keep your nursing home spot.
  • Home care. If you have a policy that was paying for home care, there may also be changes. Some home care workers are charging more for work during the pandemic, which could exceed your policy coverage. Another change may be to the number of people entering your home. You may want family to provide care, rather than an outside home health care worker. Unfortunately, most long-term care policies don’t pay for family members to provide care. However, if you aren’t using the insurance to pay for care, your coverage may last longer–depending on the policy.

There are lots of uncertainties regarding long-term care, insurance, and coronavirus.

When Buying a Medigap Policy, It Really Pays to Shop Around

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Medigap policies that supplement Medicare’s basic coverage can cost vastly different amounts, depending on the company selling the policy, according to a new study. The findings highlight the importance of shopping around before purchasing a policy.

When you first become eligible for Medicare, you may purchase a Medigap policy from a private insurer to supplement Medicare’s coverage and plug some or virtually all of Medicare’s coverage gaps. You can currently choose one of eight Medigap plans that are identified by letters A, B, D, G, K, L, M, and N (If you were eligible for Medicare before January 1, 2020, but not enrolled, you may also be able to purchase Plans C and F, but those plans  are no longer available to people who are newly eligible for Medicare). Each plan package offers a different menu of benefits, allowing purchasers to choose the combination that is right for them.

While federal law requires that insurers must offer the same benefits for each lettered plan–each plan G offered by one insurer must cover the same benefits as plan G offered by another insurer–insurers set their own prices for each plan. This means that the price of each plan varies considerably depending on the insurance company.

The American Association for Medicare Supplement Insurance compared costs of plans in the top 10 metro areas and found huge cost differences. Using the most popular plan–Plan G–for comparison, the association found that in Dallas the lowest price for a 65-year-old woman to purchase a plan was $99 a month while the highest price was $381 a month. This is a yearly difference of more than $3,000 for the exact same plan.

The association also found that no one company consistently offered the lowest or highest price. In their study, investigators discovered that 13 different companies had either the lowest or highest price. This means you can’t rely on just one company to always have the better price.

When looking for a Medigap policy, make sure to get quotes from several insurance companies. In addition, if you are going through a broker, check with two or more brokers because one broker might not represent every insurer. It can be hard work to shop around, but the price savings can be worth it.

Transferring Assets to Qualify for Medicaid

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Transferring assets to qualify for Medicaid can make you ineligible for benefits for a period of time. Before making any transfers, you need to be aware of the consequences.

Congress has established a period of ineligibility for Medicaid for those who transfer assets. The so-called “look-back” period for all transfers is 60 months, which means state Medicaid officials look at transfers made within the 60 months prior to the Medicaid application.

While the look-back period determines what transfers will be penalized, the length of the penalty depends on the amount transferred. The penalty period is determined by dividing the amount transferred by the average monthly cost of nursing home care in the state. For instance, if the nursing home resident transferred $100,000 in a state where the average monthly cost of care was $5,000, the penalty period would be 20 months ($100,000/$5,000 = 20). The 20-month period will not begin until (1) the transferor has moved to a nursing home, (2) he has spent down to the asset limit for Medicaid eligibility, (3) has applied for Medicaid coverage, and (4) has been approved for coverage but for the transfer. Therefore, if an individual transfers $100,000 on April 1, 2017, moves to a nursing home on April 1, 2018 and spends down to Medicaid eligibility on April 1, 2019, that is when the 20-month penalty period will begin, and it will not end until December 1, 2020.

Transfers should be made carefully, with an understanding of all the consequences. People who make transfers must be careful not to apply for Medicaid before the five-year look-back period elapses without first consulting with an elder law attorney. This is because the penalty could ultimately extend even longer than five years, depending on the size of the transfer.

Be very, very careful before making transfers. Any transfer strategy must take into account the nursing home resident’s income and all of his or her expenses, including the cost of the nursing home. Bear in mind that if you give money to your children, it belongs to them and you should not rely on them to hold the money for your benefit. However well-intentioned they may be, your children could lose the funds due to bankruptcy, divorce, or lawsuit. Any of these occurrences would jeopardize the savings you spent a lifetime accumulating. Do not give away your savings unless you are ready for these risks.

In addition, be aware that the fact that your children are holding your funds in their names could jeopardize your grandchildren’s eligibility for financial aid in college. Transfers can also have bad tax consequences for your children. This is especially true of assets that have appreciated in value, such as real estate and stocks. If you give these to your children, they will not get the tax advantages they would get if they were to receive them through your estate. The result is that when they sell the property they will have to pay a much higher tax on capital gains than they would have if they had inherited it.

As a rule, never transfer assets for Medicaid planning unless you keep enough funds in your name to (1) pay for any care needs you may have during the resulting period of ineligibility for Medicaid and (2) feel comfortable and have sufficient resources to maintain your present lifestyle.

Remember: You do not have to save your estate for your children. The bumper sticker that reads “I’m spending my children’s inheritance” is a perfectly appropriate approach to estate and Medicaid planning.

Even though a nursing home resident may receive Medicaid while owning a home, if the resident is married he or she should transfer the home to the community spouse (assuming the nursing home resident is both willing and competent). This gives the community spouse control over the asset and allows the spouse to sell it after the nursing home spouse becomes eligible for Medicaid. In addition, the community spouse should change his or her will to bypass the nursing home spouse. Otherwise, at the community spouse’s death, the home and other assets of the community spouse will go to the nursing home spouse and have to be spent down.

Permitted transfers

While most transfers are penalized with a period of Medicaid ineligibility of up to five years, certain transfers are exempt from this penalty. Even after entering a nursing home, you may transfer any asset to the following individuals without having to wait out a period of Medicaid ineligibility:

  • Your spouse (but this may not help you become eligible since the same limit on both spouse’s assets will apply)
  • A trust for the sole benefit of your child who is blind or permanently disabled.
  • Into trust for the sole benefit of anyone under age 65 and permanently disabled.

In addition, you may transfer your home to the following individuals (as well as to those listed above):

  • A child who is under age 21
  • A child who is blind or disabled (the house does not have to be in a trust)
  • A sibling who has lived in the home during the year preceding the applicant’s institutionalization and who already holds an equity interest in the home
  • A “caretaker child,” who is defined as a child of the applicant who lived in the house for at least two years prior to the applicant’s institutionalization and who during that period provided care that allowed the applicant to avoid a nursing home stay.

How to Avoid Problems as a Trustee

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Being a trustee is a big responsibility and if you don’t perform your duties properly, you could be personally liable. That’s why it’s important to hire the right people to guide you in this important role.

A trust is a legal arrangement through which one person (or an institution, such as a bank or law firm), called a “trustee,” holds legal title to property for another person, called a “beneficiary.” If you have been appointed the trustee of a trust, this is a strong vote of confidence in your judgment.

A trustee’s duties include locating and protecting trust assets, investing assets prudently, distributing assets to beneficiaries, keeping track of income and expenditures, and filing taxes. (For more information on a trustee’s duties, click here.) As a trustee, you have a fiduciary duty to the beneficiaries of the trust, meaning that you have an obligation to act in the best interest of the beneficiaries at all times. It also means you will be held to a higher standard than if you were just dealing with your own finances.

A trustee is usually entitled to hire an attorney (and other professionals like an accountant) to assist in trust administration. The attorney’s fees will be paid from the trust funds. While hiring an attorney will cost money, not having an attorney at all could cost a trustee much more if errors are made.

A trust can be administered without court involvement, but that doesn’t mean that the administration is simple. There are many areas where problems can arise — for example, if assets aren’t invested properly, taxes are late, or if proper records aren’t kept. If something goes wrong during the administration of the trust, the trustee can be removed and held personally liable for any costs incurred or losses suffered. Even if a spouse is the trustee, he or she should still consult with an attorney. Many couples have so-called “AB” trusts to take advantage of the maximum estate tax exemption; these trusts require special knowledge to determine whether the trusts are properly funded and the taxes filed.

Prenuptial Agreements Can Be an Estate Planning Tool

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As more and more people marry more than once, prenuptial agreements have become an important estate planning tool. Without a prenuptial agreement, your new spouse may be able to invalidate your existing estate plan. Such agreements are especially helpful if you have children from a previous marriage or important heirlooms that you want to keep on your side of the family.

A prenuptial agreement can be used in a second marriage when both parties have children. For example, suppose you get remarried and both you and your spouse have children from a prior marriage. You want your house to pass to your children, but without proper planning and an agreement in place, your spouse could inherit the house and then pass the house to her children when she dies.

It is important to make sure your prenuptial agreement is valid. Following are the major factors needed to ensure this:

  • In writing. To be valid, a prenuptial agreement must be in writing and signed by both spouses. A court will not enforce a verbal agreement.
  • No pressure. A prenuptial agreement will be invalid if one spouse is pressured into signing it by the other spouse.
  • Reading. Both spouses must read and understand the agreement. If a stack of papers is put in front of one spouse and he or she is asked to sign quickly without reading, the agreement can be invalidated. The spouse must be given time to read the document and consider it before signing it.
  • Truthful. Both spouses must fully disclose assets and liabilities. If either spouse lies or omits information about his or her finances, the agreement can be invalidated.
  • No invalid provisions. While the spouses can agree to most financial arrangements, a prenuptial agreement that modifies child support obligations is illegal. If an agreement contains an invalid provision, the court can either throw out the entire agreement or strike the invalid provision. Similarly, if the terms of the agreement are grossly unfair to one spouse, the agreement may be invalid.
  • Independent counsel. Some states require spouses to seek advice from separate attorneys before signing a prenuptial agreement. Regardless of whether it is required by state law, it is the best way to make sure each spouse’s interest is protected.

Though a prenuptial agreement is an agreement that is signed before marriage, sometimes similar agreements can be made after the wedding (called a post-nuptial agreement). To find out if a pre- or post-nuptial agreement is right for you, contact your attorney.

Make Sure Your Power of Attorney Complies with Federal Privacy Law

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A power of attorney (POA) and a health care proxy are two of the most important estate planning documents you can have, but in some instances they may be useless if they don’t comply with the federal privacy law.

A POA allows someone you designate (your “agent” or “attorney-in-fact”) to make decisions for you if you become incapacitated. A health care proxy specifies who will make medical decisions for you. For these documents to be effective, your agents may need to be able to access your medical information. However, medical information is private. The Health Insurance Portability and Accountability Act (HIPAA) protects health care privacy and prevents disclosure of health care information to unauthorized people. HIPAA authorizes the release of medical information only to a patient’s “personal representative.”

HIPAA can be a problem especially if you have a “springing” power of attorney. A springing POA doesn’t go into effect until you become incapacitated. This means your agent doesn’t have any authority until you are declared incompetent, but, under HIPAA, the agent won’t be able to get the medical information necessary to determine incompetence until the agent has authority.

To make sure your agent doesn’t get caught in this “Catch-22,” your POA and health care proxy should contain a HIPAA clause that explains that the agent is also the personal representative for the purposes of health care disclosures under HIPAA. You should also sign separate HIPAA release forms that explain what medical information can be disclosed, who can make the disclosure, and to whom the disclosure can be made.

Contact your attorney to make sure your POA and health care proxy do not conflict with HIPAA.

A Letter of Instruction Can Spare Your Heirs Great Stress

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While it is important to have an updated estate plan, there is a lot of information that your heirs should know that doesn’t necessarily fit into a will, trust or other components of an estate plan. The solution is a letter of instruction, which can provide your heirs with guidance if you die or become incapacitated.

A letter of instruction is a legally non-binding document that gives your heirs information crucial to helping them tie up your affairs. Without such a letter, it can be easy for heirs to miss important items or become overwhelmed trying to sort through all the documents you left behind. The following are some items that can be included in a letter:

  • A list of people to contact when you die and a list of beneficiaries of your estate plan
  • The location of important documents, such as your will, insurance policies, financial statements, deeds, and birth certificate
  • A list of assets, such as bank accounts, investment accounts, insurance policies, real estate holdings, and military benefits
  • Passwords and PIN numbers for online accounts
  • The location of any safe deposit boxes
  • A list of contact information for lawyers, financial planners, brokers, tax preparers, and insurance agents
  • A list of credit card accounts and other debts
  • A list of organizations that you belong to that should be notified in the event of your death (for example, professional organizations or boards)
  • Instructions for a funeral or memorial service
  • Instructions for distribution of sentimental personal items
  • A personal message to family members

Once the letter is written, be sure to store it in an easily accessible place and to tell your family about it. You should check it once a year to make sure it stays up-to-date.

What to Do and Not Do with Your Estate Planning Documents

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Creating and executing estate planning documents is just the first step. Once you have completed the documents, you need to know what to do with them.

All estate plans should include, at minimum, two important planning instruments: a durable power of attorney and a will. A trust can also be useful to avoid probate and to manage your estate both during your life and after you are gone. In addition, medical directives allow you to appoint someone to make medical decisions on your behalf. Once you have all these essential estate planning documents, you need to make sure they are stored properly and get to the right people.

Store the Documents Properly
Your estate planning documents should be stored in a safe, secure location that is accessible to your personal representative (also called an executor), the person you appoint to handle your estate’s affairs after your passing. Some law firms will store your original signed documents for you. If you want to keep them at home, you should use a water- and fire-proof safe or filing cabinet. Many people use a safe deposit box in a bank, but these can be hard for your representative to access. Often the documents giving your personal representative the right to access the safe deposit box are themselves in the box. If you do use a safe deposit box, you may want to have a joint owner on the account.

Spread the Word
It is critical that you tell your personal representative where the documents are located so that he or she can easily access them when needed. If the documents are locked away, your representative needs to know the combination or where the key is located.

You should also talk to other people who might be affected –such as your agent under a power of attorney or a health care proxy–about what you want if you are unable to communicate your wishes yourself. Doing this ahead of time will help them execute your wishes when the time comes. You may want to give family members copies of your documents. If an original document is lost, the court may accept a copy in some circumstances.

Avoid Confusion
Make sure you destroy any old estate planning documents that are no longer valid. Old documents can cause confusion among family members and could lead to litigation.

In addition, do not write on your current documents. If you want to make a change, contact your attorney to formally change the document. Handwritten additions are usually not valid and could raise questions about the document.

Three Changes You May Want to Make to Your Estate Plan Now Due to the Pandemic

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You may need to reevaluate some elements of your estate plan in light of the coronavirus pandemic. There are unique aspects of this crisis that your current estate planning documents may not be suited to handle.

The language in some estate planning documents that is fine under normal conditions may cause additional problems for you and your loved ones if you fall ill during the pandemic. Look over the following documents to see if they may need updating in order to fulfill your wishes:

  • Living will. A living will is a document that you can use to give instructions regarding treatment if you become terminally ill or are in a persistent vegetative state and unable to communicate your instructions. The living will states under what conditions life-sustaining treatment should be terminated. Many living wills contain a prohibition on intubation, which can be used to prolong life, even in a vegetative state. However, in the case of Covid-19, intubation and placement on a ventilator can actually save a patient’s life (although many patients who are intubated still die). If your living will contains a blanket prohibition on intubation, you may want to rethink that.
  • Durable Power of Attorney. A power of attorney (POA) allows you to appoint an agent to act in your place with regard to financial matters. A POA can be either current or springing. A current POA takes effect immediately, usually with the understanding that it will not be used until and unless you become incapacitated. A “springing” POA only takes affect when you become incapacitated. The problem is that springing powers of attorney create a hurdle for the agent to get over to use the document. When presented with a springing power of attorney, a financial institution will require proof that the incapacity has occurred, often in the form of a letter from a doctor. In the current chaotic environment of the coronavirus pandemic, getting a letter from a doctor will be difficult, if not impossible. Requiring your agent under a power of attorney to seek out a doctor to get a certification of incapacity will only add to their tasks and delay their ability to act on your behalf.  Consider changing the POA so that it can take effect immediately if needed.
  • Health Care Proxy. A health care proxy allows you to appoint someone else to act as your agent for medical decisions. It will ensure that your medical treatment instructions are carried out. Without a health care proxy, your doctor may be required to provide you with medical treatment that you would have refused if you were able to do so. Usually, the person who is appointed to act as your agent would confer with the doctors in person. That will likely be impossible during the coronavirus pandemic because family members often are not allowed in the hospital with sick patients. You need to make sure your health care proxy contains a provision that expressly authorizes electronic communication with your agent.

Consult with your attorney to make sure these documents and your other estate planning documents express your wishes during this time.

Staying Connected to Family Members in a Nursing Home When Visits are Banned

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The spread of the coronavirus to nursing home residents has caused the federal government to direct nursing homes to restrict visitor access, and many assisted livingfacilities have done the same. While the move helps the residents stay healthy, it can also lead to social isolation and depression. Families are having to find new ways to stay in touch.

Nursing homes have been hit hard by the coronavirus. The Life Care Center of Kirkland, Washington near Seattle was one of the first clusters of coronavirus in the United States and is one of the deadliest, with at least 35 deaths associated with the facility. In response, the Centers for Medicare and Medicaid Services (CMS) issued guidance to all nursing homes, restricting all visitors, except for compassionate care in end-of-life situations; restricting all volunteers and nonessential personnel; and cancelling all group activities and communal dining. While these actions are necessary to prevent the spread of the virus, they can leave families worried and upset and residents feeling isolated and confused.

Families are taking varying tacks to keep in contact with their loved ones, many of whom don’t fully understand why their family is no longer visiting. Nursing homes are also helping to facilitate contact. Some options for keeping in touch, include the following:

  • Phone calls. Phone calls are still an option to be able to talk to your loved one.
  • Window visits. Families who are able to visit their loved one’s window can use that to have in-person visits. You can hold up signs and blow kisses. Talking on a cell phone or typing messages on it and holding them up to the window may be a way to have a conversation.
  • Facetime and Skype. Many nursing homes are facilitating video calls with families using platforms like Facetime or Skype. Some nursing homes have purchased additional iPads, while others have staff members going between rooms with a dedicated iPad to help residents make calls.
  • Cards and letters. Sending cards and letters to your loved ones is another way to show them that you are thinking of them. Some nursing homes have also set up Facebook pages, where people can send messages to residents.

In this unprecedented time, families will need to get creative to stay in touch with their loved ones. For more articles about how families and nursing homes around the country are coping with the new restrictions, click here, here, and here.

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