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Divorce and the Elderly
When elderly clients are considering divorce, paying for long term care may be a consideration for whether divorce is appropriate and for how equitable distribution should be accomplished. Long term care planning usually involves the review of how one could pay for long term care in the event of disability and/or incapacity. Long term care can be paid for in the following ways:
A. SELF PAY — Self pay is using savings and income to pay for long term care.
B. LONG TERM CARE INSURANCE — Long term care insurance is a policy bought to help deal the costs of long term care and to protect the insured from the risk of paying for LTC to the insurance company. It is important when considering a LTC insurance policy to compare and review policy features for several policies. It is also important to compare the costs of different policies and check on the financial strength of the companies using a rating service. Some of the purposes and uses of LTC insurance are to:
- Shift risk to the insurance carrier
- Protect a lifetime of savings
- Provide security to family
- Makes LTC choices easier
- Protect estate plans
C. MEDICARE – One is only eligible for Medicare coverage for long term care after a 3 day hospital stay, when one goes to a Medicare approved nursing home within 30 days of the hospital stay for skilled care that is restorative in nature. If one meets these initial requirements, Medicare pays for 100% of the cost for the first 20 days. As a result of Medicare’s restrictions on coverage, it covers only about 2% of all nursing home costs.
|Medicare pays for||Day 1 – 20||100%|
|Day 21 – 100||All but $137.50/day in 2010|
|Day 101 on||0|
D. MEDIGAP OR PRIVATE SUPPLEMENTAL INSURANCE – This insurance supplements Medicare coverage and only covers the coinsurance charge.
E. VETERANS BENEFITS – It is best to contact the Veterans Administration directly to inquire about the extent of these benefits since their availability depends on a number of factors, including the veteran’s classification, extent of a service related disability, discharge status, etc. Aid and Attendance Benefits can help a veteran pay for care at home or in an assisted living facility.
F. MEDICAL ASSISTANCE OR MEDICAID – Medical Assistance (Medicaid) is a joint federal and state program. In Pennsylvania, the Department of Human Services (DHS) manages Medical Assistance using local County Assistance Offices (CAOs).
It may be important to review Medical Assistance eligibility requirements and the procedures for obtaining this assistance with a family in crisis to determine if divorce is a good planning technique. Medicaid may be the sole method of paying for long term care after Medicare benefits cease. Medicaid is relied on by over half the people in long term care facilities to pay for their care. The person going into the long term care facility is known as the Applicant or the Institutionalized Spouse (IS) (if married). A spouse remaining at home is known as the Community Spouse (CS). Medical Assistance or Medicaid pays for about 1/2 of all current Nursing Home residents. It is the payor of last resort but to be eligible, one must meet three eligibility tests:
- Medical Eligibility – medically need long term care
- Income Eligibility – insufficient income to pay for long term care
- Asset Eligibility – very limited assets (under $2,400 and exempt assets only; this amount may go as high as $8,000 if monthly income is below $2,022 in 2010)
There are three (3) types of Assets:
- INACCESSIBLE – assets given away or over which one has no control
- EXEMPT – assets that are not counted for Medicaid eligibility
A home to which one intends to return
Cash of up to $2,400 for individual or Institutionalized Spouse (may be as high as $8,000 for applicant with low income)
Irrevocable burial trust account or a prepaid funeral (up to $11,250 in Allegheny County)
Household furnishings and personal effects
Life insurance – total face values below $1,500; if above, total cash values below $1,000
Property used in a trade or business which is essential for self support and can include real or personal property
IRA, 401K or Keogh plan of a Community Spouse
Community Spouse Resource Allowance – ½ of assets up to a maximum of $109,560 and down to a minimum of $21,920 in 2010
- COUNTABLE — all other assets, including bank accounts, certificates of deposit, stocks, bonds, other real estate besides the home, etc.
What causes problems for most people is the Transfer of Assets Rule (a/k/a look back rule) which involves the transfer of assets for less than fair consideration or a gift. As of February 8, 2011, this will be a sixty (60) month or 5 year look back rule. There have been changes in when the look back period starts to run, which may cause problems with Medicaid eligibility.
A transfer or gift results in a period of ineligibility for Medical Assistance purposes and is determined by dividing the value of the assets transferred by the average daily cost of nursing home care ($247.06/day). If the transfer is to a trust, the look back period was, and still is, 5 years. In order to avoid problems with this “rule”, it is important to discuss transfers and gifts with an experienced elder law attorney.
G. Doing long term care planning can result in the protection of assets as well as peace of mind when it comes to paying for long term care. Remember — While planning can be done in a crisis, it can be better to deal with these issues with an experienced elder law attorney before such a situation arises.
H. OTHER ISSUES – There are other considerations when discussing divorce with elderly clients, such as re-doing estate plans, re-titling assets, setting up trusts, choosing new agents for the Durable Financial Power of Attorney, choosing new Executors for the Last Will and Testament and changing the distribution plan, choosing a agent under the Healthcare Power of Attorney and Living Will, etc. It may be important to consider what happens to health insurance coverage for the parties. Income considerations are also part of the process of deciding if divorce is appropriate.
There may be issues about the capacity of the elderly person seeking a divorce. Is the individual able to make the decision on his or her own or is the individual being influenced by a questionable family member. There may a question of whether or not the older person is able to form an attorney-client relationship with the attorney. Decisions regarding the divorce may have to be made by an agent under a Power of Attorney. If the elderly person is incapacitated and has not prepared a Power of Attorney, a guardianship may be required. The guardian appointed by the court may end up making decisions in the divorce and in the equitable distribution of assets.