There are four primary ways to pay for long term care:
With the cost of an Arkansas nursing home now averaging $7,000 a month for a semi-private room, and the cost of 24/7 home care averaging $17,000 a month, the vast majority of Arkansans cannot afford to privately pay for care for more than a brief period. But less than 10% of Americans have long-term care insurance. Therefore, most Arkansans in need of care beyond a brief period of rehabilitation must resort to Medicaid or the VA pension to help pay for that care. Most often, this care entails assistance with activities of daily living (“ADLs”) – matters directly related to a person’s basic functioning as an adult such as eating, toileting, ambulation (getting out of bed to a chair, out of a chair to a toilet, etc.), incontinence issues, making adjustments to a prosthetic limb, matters of personal hygiene (bathing, dressing, shaving, combing hair and otherwise maintaining a neat appearance), or providing a protective environment for one with dementia.
Many individuals reach a point in life during which they can remain at home and live independently if they can get assistance with certain incidental activities of daily living (IADLs). Help with IADLs is generally known as “companion care” and includes tasks such as:
The cost of assistance with IADLs is typically not considered a medical expense. By contrast, the cost of assistance with ADLs typically is. This distinction is critical because the amount of your unreimbursed medical expenses (UMEs) greatly affects your Medicaid and VA pension eligibility. Think of UMEs as medical expenses for which you are actually out-of-pocket – health insurance premiums, any co-pay associated with medical care, and the cost of drugs or treatments not covered by your insurance. Similarly, the cost of help with IADLs is often not covered by long term care insurance (LTCI) while the cost of assistance with ADLs typically is. Finally, ADLs for purposes of Medicaid vary slightly from ADLs for purposes of the VA Pension. We can help you understand all of this.
Keep in mind, too, that while Medicare will pay for a short-term period of rehabilitation (typically 100% for the first 20 days and 80% for the next 80 days), it will not pay for long-term care. Medicaid pays for long-term care for those who are eligible.
While some seniors require assistance with physical needs, others are physically strong but must live in a protective environment due to dementia. Companion care at home may be adequate to a point but seniors can become a danger to themselves or others by wandering off, leaving a stove turned on or putting metal in a microwave. Hallucinations can even make a senior violent toward loved ones. Once someone with dementia becomes a danger to him or herself or others, he or she may need to move to a memory care facility or a nursing home that specializes in memory care. Such protective care should be deemed to be a medical expense (for VA pension purposes) once the senior achieves a certain score on a cognitive performance test. Unfortunately, very few memory care facilities accept Medicaid.
At Corley Law Firm, our goal is to help you protect your assets while becoming eligible for Medicaid and/or VA Pension benefits. And the strategies we employ to speed benefit eligibility also help to protect you against unscrupulous people who prey on the elderly and infirm. Sadly, this is an ever-increasing concern. More detailed information about Medicaid and VA pension benefits is found below.
By planning before the need for long term care arises, you can protect and preserve almost unlimited assets, including the family farm or home, or other property you want to leave to future generations. We accomplish this by creating an irrevocable trust and then transferring your assets to that trust. In addition, we will prepare for you a General Durable Power of Attorney, Health Care Power of Attorney, HIPAA Authorization, Living Will, and other documents integral to a comprehensive estate plan. And, if properly funded, this irrevocable trust will allow you to avoid the cost, tedium and time delay required by the probate of a Will. In essence, long term care planning accomplishes everything that general estate planning does, and, in addition, it protects your assets from creditors, long term care expenses and those who prey on the elderly.
If we create an irrevocable trust for you, you will be the trust maker, often referred to as the grantor or settlor of the trust. But, unlike with a revocable trust that we create for general estate planning purposes, you cannot be a trustee or a beneficiary. Rather, you must cede complete control over all of the assets that you transfer to the trust. You can name one or more adult children, close friends or a niece or nephew as trustee, or you can name a corporate trust officer. Once created, an irrevocable trust cannot be amended or revoked. However, assets may be sold, reinvested by the Trustee and distributed consistent with the trust terms. The irrevocable trust holds assets. It will not affect your Social Security income, retirement pension and other income that you receive each month; that income will still come to you, and you will have complete control over how to spend it. And you may choose to transfer less than all your assets to a trust; however, any assets left outside the trust must then be used to pay for your care if that need arises and may delay your eligibility for benefits.
An irrevocable trust will protect assets – and make them “not countable” for Medicaid and VA pension purposes – only if it is created and funded (your assets are transferred to it) at least 60 months (5 years) before you or your spouse applies for Medicaid, or 36 months (3 years) before you or your spouse applies for the VA pension. So don’t wait until it’s too late to take the necessary actions! Medicaid ignores a pre-nuptial agreement (and VA may); Medicaid will always look at household assets irrespective of an agreement between spouses. For that reason, when mature clients come to us for a pre-marital agreement intended to protect their children’s inheritance, we sometimes recommend an irrevocable trust instead.
The highest level of income available under the VA Pension is paid pursuant to the Aid and Attendance (A&A) rating. As of December 1, 2022, the A&A pension benefit for someone with no dependent children is:
This tax-free income is paid directly to the veteran or qualifying family member so it can be used to help pay for home healthcare, assisted living, memory care or nursing home costs. Lesser pension amounts, paid for a “Basic” or “Housebound” rating, are also available.
VA Pension is different from VA Compensation. VA Compensation is awarded to any veteran who was injured, or who aggravated an injury, in the line of duty if it left the veteran with a disability rating of 10% or greater. Compensation is not dependent on the veteran’s income or assets. Corley Law Firm does not handle VA Compensation cases.
To be eligible to receive the VA Pension, the veteran must:
If a veteran meets the first three criteria above, the net worth limitations can often be satisfied by creating an irrevocable trust and transferring to that trust most of the assets owned by the veteran and his or her spouse. As discussed under Medicaid, the creation of an irrevocable trust requires giving control over your assets (but not your current income) to your children or other third parties of your choosing (who will serve as Trustees of your trust). The trust will also avoid probate, protect seniors from those who prey on the elderly, and be a major part of a comprehensive estate plan. But such a trust must be created, and the assets transferred to it, at least three years (36 months) before applying for the VA pension. With such strategic planning, assets owned by the trust will not count as part of your “net worth.” In other words, assets in the trust are not subject to any limitation.
In the absence of such strategic planning, a primary residence (with reasonable lot size up to two acres), family transportation vehicles and reasonable personal possessions are not counted toward net worth. But to calculate net worth, we must know the type and fair market value of each asset owned by the veteran and anyone in his or her household (typically just a spouse), the gross income of each member of the household, and the unreimbursed medical expenses of each person in the household. This income includes social security, retirement pension, interest, dividends, required minimum distributions from retirement plans, farm income, mineral interest income and all other income. Note that “gross” income is the amount of social security, retirement pension, or other income received from any source before any deduction for taxes, insurance premiums or other withholding.
Effective October 18, 2018, Congress enacted a three year (36 month) “lookback” period and asset transfer penalty for the VA Pension similar to the 60 month lookback period applicable to Medicaid. Therefore, we must also know about any asset transfers that anyone in your household has made in the three years before you apply for the VA pension – including the fair market value of the asset at the time of transfer, the date transferred, and the price paid for it (if any).
Your income, on its own, doesn’t matter to the VA. What matters is your IVAP, or “income for veterans’ affairs purposes.” Your IVAP is your household’s gross income less the cost of your household’s unreimbursed medical expenses (UMEs). If your social security benefits are extremely low and you have no other source of income, you may qualify for the VA Pension without UMEs. But most people have too much income to qualify until their household’s UMEs exceed or approximate the monthly income of all persons in the household. UMEs include:
ADLs include bathing, dressing and undressing, toileting and ambulation, as well as provision of a protective environment needed due to dementia.
Once the VA A&A Pension is awarded, a veteran is eligible for free eyeglasses, hearing aids, medications, medical equipment and incontinence supplies. These may be obtained at a VA hospital or by U.S. Mail.
If you are medically and financially eligible for VA Pension benefits without strategic planning, you can obtain free assistance with a VA Pension application from a veteran service officer. Most counties in Arkansas have one. The websites va.gov/pension and veteranaid.org are also quite useful.