Steve Neher | I forgot to buy long-term care insurance. What now? – Insurance News

For many people, the realization that they may need long-term care insurance (LTCI) comes too late. Whether it’s because of procrastination, lack of information, or the assumption that good health will always be in the future, finding yourself without this safety net can be stressful. If you or a loved one find yourself in this situation, there are still steps you can take to effectively manage potential long-term care needs.

Understanding Long-Term Care

Long-term care (LTC) consists of a variety of services that help meet the medical and nonmedical needs of people with a chronic illness, injury, or severe cognitive impairment who are unable to care for themselves for an extended period of time. Long-term care typically includes assistance with activities of daily living (ADLs), which may include bathing, eating, dressing, using the toilet, and more. These services help people live as independently and safely as possible when they are no longer able to perform daily activities on their own.

What Asset Spending Means and How to Do ItOne common strategy for people without LTC insurance is to “spend” assets. This process involves reducing assets to qualify for Medicaid, a program funded by the state and federal government that pays for long-term care for people with limited income and resources.

Steps to Spend AssetsAssess your assets: Make a detailed list of your assets, including savings, investments, and real estate. This will help you understand what you have and what needs to be reduced.

Medicaid Eligibility in Washington State:Check Washington State Medicaid eligibility requirements. Washington has specific rules about what is considered an asset and allowable limits. Typically, you must have very limited income and assets to qualify for Medicaid.

Allowable Expenses: Spend the money on allowable items and services. This could include paying off debts, making needed home repairs or prepaying funeral costs. The key is to use the assets in a way that doesn’t disqualify you from Medicaid.

Gift and Transfer Rules: Be aware of the Medicaid look-back period, which is five years in most states. This period looks at any asset transfers or gifts you made to others. If you transferred assets for less than their fair market value during this period (i.e., sold them for less than they were worth), you could be subject to penalties.

Consult directly with your financial professional: Consider working with an elder law attorney or financial advisor who specializes in Medicaid planning. They can help you navigate the complex rules and make sure you’re making the best decisions for your situation.

Spouse Protection ProcessesIf you are married, protecting your spouse from financial hardship when planning for long-term care is essential. Medicaid has special rules to prevent impoverishment of the spouse who does not require care (community spouse).

Spouse Protection StrategiesTransferring Income and Assets: In some cases, transferring assets and income to a spouse in community can help. However, this must be done carefully to avoid penalties and to ensure compliance with Medicaid rules.

Medicaid-Compliant Annuities: Purchasing a Medicaid-Compliant Annuity can turn qualified assets into an uncountable stream of income for the spouse in the community. This strategy requires careful planning and should be pursued with the help of a professional.

Legal Documentation: Make sure all the necessary legal documents are in place, such as a Durable Power of Attorney, Health Care Power of Attorney, and Living Will. These documents will authorize your spouse or another trusted person to make decisions on your behalf if you become incapacitated.

Legal Separation and Divorce: While it is not a pleasant situation and no couple would choose to do it, speaking to a lawyer about changing your marital status may be necessary or an option.

Choosing the Right Strategy for You Discovering you don’t have long-term care insurance can be unsettling, but there are several strategies to manage the potential costs, such as spending assets, taking advantage of Medicaid provisions and considering other financial options.

While preparing for healthcare emergencies can be overwhelming, it’s key to be informed and plan accordingly. Each solution has its pros and cons, so talk to your advisor to find what works best for your financial goals.

Steve Neher is a financial advisor, board member, accounting and certification director at Cordell, Neher & Company PLLCwhere he has worked since 2006. He enjoys living and working in the community where he was raised. One of Steve’s favorite parts of the day is helping clients identify and achieve their goals. While he works in a wide range of areas, he specializes in providing accounting and attestation services to agricultural cooperatives, manufacturing and distribution entities, 401(k) plans, and various other industries. He has extensive experience preparing complex consolidated tax returns and filing requirements for multi-state entities. For more information, visit cnccpa.com or call 509-663-1661.