Keiber Retirement Solutions, Inc.
Partnership and Asset Protection
How a Partnership Policy Protects Assets for a Single Person
Historically when a single person becomes incapacitated and applies for Medicaid to pay for their long term care, strict financial rules apply. In most states the required spend down of assets is to $2,000 in order to qualify for assistance. Now under the new rules, home equity in most states must be below $500,000 for that single person to qualify for Medicaid.
If the single, incapacitated person has a Partnership Qualified long term care policy, they are now able to protect an equivalent of assets above their $2,000 allowance as received in benefits from their policy. This protection comes into play once the policy benefits are exhausted and it is called "Dollar for Dollar" protection.
Let us assume the person has $300,000 in assets and has become incapacitated and starts receiving qualified long term care services. Over a period of several years they receive $289,500 in benefits from their Partnership Qualified LTC policy and then exhaust their policy benefits. This person may now apply for state Medicaid benefits, protect $289,500 in assets, plus receive their $2,000 allowance, ($291,500 of asset protection) thus only having to spend down $8,500 in order to qualify for state Medicaid benefits, not $298,000 which would be required without the state partnership protection.
It is IMPORTANT to note, State Partnership policies only protect assets against a State Medicaid spend down, income is still subject to state specific assignment and allowances.
How a Partnership Policy Protects Assets for a Married Couple
When a Normally married, incapacitated person applies for Medicaid to pay for their long term care costs ... strict financial rules apply. The healthy spouse can keep one half of the couples combined financial assets, but not more than $110,000 in 2009. It is called the Community Spouse Resource Allowance (CSRA). They must use their excess financial assets (and some other unnecessary assets, like a vacation home) to pay for the spouse's long term care. When they have spent down the excess assets (assets in excess of the Community Spouses' CSRA) to pay for their spouse's care, only then will the state begin to contribute for care.
If the incapacitated spouse has a LTC insurance policy that qualifies under the National Partnership rules, then the Community Spouse (healthy spouse) might be able to keep much more of the assets when the policy benefits are exhausted. The law allows the community spouse to increase their CSRA by one dollar for each dollar paid out of the impaired spouse's special Partnership Qualified LTC insurance policy for their own care (called "dollar for dollar" protection). If the incapacitated spouse still needs care after the benefits of the insurance policy are exhausted, the community spouse can refrain from spending down much of their assets -- maybe none -- as would have been necessary had the impaired spouse not been covered by a Partnership Qualified LTC policy.
Let's assume a couple has $500,000 in financial assets. Assume, further, that the husband needs care. The laws allow the healthy wife to keep 1/2 of the couple's total financial assets (regardless of how they were or are titled), but not more than $110,000. The one half share of their financial assets ($500,000 / 2) is $250,000, well above the maximum CSRA of $110,000. She must spend down on his care until only $110,000 is left. Only then does he qualify for Medicaid. She has spent $390,000 for his care from savings and investments meant to provide retirement income.
If her husband had a Partnership Qualified long term care policy, they could keep much more. Assume that over the course of a few years the policy paid $365,000 for his care and then was exhausted. The healthy wife would not be required to spend down for his care the amount paid by the policy to qualify him for Medicaid. Thus, she could keep her original CSRA of $110,000 plus the $365,000 that was paid by the insurance company for a total of $475,000. In this example she would be required to spend down only an additional $25,000 for his care, not an additional $390,000.
It is IMPORTANT to note, State Partnership policies only protect assets against a State Medicaid spend down, income is still subject to state specific assignment and spousal allowances.
This site is for informational purposes only and does not constitute an offer to sell or a solicitation of an offer to buy any security which may be referenced herein. These are the views of Associates of Clifton Parks, Long-Term Care specialists, and not necessarily those of the named representative, Broker-Dealer or Investment Advisor, and should not be construed as investment advice.
Insurance products are offered through insurance companies with whom KRS associates have sales arrangements. Not all products/features may be available in your state. Check with your Accountant or Tax professional on the tax issues associated with Long-Term Care insurance.
Securities and advisory services are offered through Level Four Financial, LLC, Member FINRA/SIPC. Keiber Retirement Solutions, Inc. is not owned or operated by Level Four Financial, LLC. Nor is Associates of Clifton Parks affiliated with Level Four Financial, LLC.
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