ALTCS Planning

The Second stage of non-crisis planning:  Those ages 55 to 65 years old:

Now your children are out of college and are working full-time, and you do not have to support them or pay for college.

You are still relatively healthy enough to buy long-term care insurance. Even though the premiums for long-term care insurance (LTCi)  are higher in this age group, your disposable income is greater than when you had children in college.

You can still develop a non-crisis Medicaid or ALTCS plan. [ Get a quote ]

The Third stage of non-crisis ALTCS Planning: Individuals between 66 and 70:

Beginning at age 66, premiums for LTCi start to rise exponentially, and by age 71, even if you are still healthy enough to buy long-term care insurance, the premiums for many are unaffordable for a traditional long-term care plan.

Yet there may still be long-term care insurance options over age 70,  it is a hybrid long-term care plan.

A hybrid long-term care plan uses an annuity or life insurance policy with a long-term care rider. The underwriting for these types of programs is simpler than that of a traditional plan.

They are generally single premium plans or paid up in ten years or less and created a bucket of money to pay for long-term care.

Because of the Pension Protection Act, you can use an existing annuity or life policy to fund it too. If you have assistance using the 1035 exchange, you can transfer a current in-force policy to a hybrid long-term care policy, and the benefits become tax-free.

There is still medical underwriting, but the health requirements to qualify are much lower than a traditional LTCi policy.

[ See Pension Protection Act ]

The final stage of non-crisis ALTCS Planning is to transfer assets to wealth transfer tools.

The first word of warning, transferring assets to a family member like an adult child, is not only a bad idea, it is a terrible idea, don’t do it!

Here’s why.

It is common to make a transfer of assets to a loved one to qualify quickly for ALTCS in a crisis; setting up trusts and other tools takes time. During that time, you will not be able to qualify for  ALTCS because of being over-resourced or because your assets are above the limit.

So temporarily transferring an asset to a loved one can make some logic. Beware, a transfer of assets will cause a penalty period of ineligibility based on the current divisor.

Then various asset protection strategies can then be used to protect the assets from creditors.

But when it comes to non-crisis ALTCS Planning Arizona, it is a big mistake.

When you transfer assets to an adult child, it is now legally their money, not yours!

The assets are subject to creditors, liability claims, lawsuits, and IRS liens and seizures.

I learned of a situation where assets were transferred to an adult child to qualify for Veterans Pension benefits, and the IRS seized the assets almost immediately. The son claimed (again claimed) he had no knowledge of the lien the IRS had on his account.

That money was gone forever.

This can also happen due to an at-fault accident where your family member is holding your assets for you to qualify, and they don’t have adequate insurance to cover them.

A divorce could put the assets you gifted to your son at risk. Arizona is a community property state, so assets transferred to your son or daughter also belong to their spouses, too.

Again there are many pitfalls here, so unless it is a crisis situation, don’t do it.

Oh, by the way, remember when you put your daughter on your checking ad savings account? . . . . . . . . .  Think about it first.

The Smart Ways to Transfer Assets

Here are a few smart ways to transfer an asset when doing non-crisis ALTCS Planning.

• Have a legal document preparer can preparer or attorney prepare an AIAP Trust™ – ALTCS Irrevocable Asset Protection Trust to protect the assets
• Use a Medicaid Friendly type of single premium life insurance policy
• Use a Medicaid annuity to hold the assets
• Estate planning life insurance trust
• Other proven strategies contact a Certified Medicaid Planner™

These Arizona Medicaid- ALTCS strategies will cause a five-year look back before filing for Arizona Medicaid – ALTCS

What is the Long-Term Care Partnership Program?

Congress recognized that due to the misuse of your tax dollars, they needed to limit access to Medicaid long-term care insurance benefits by imposing and layering rules that will make it difficult to qualify.

They also recognized that they needed to encourage Americans to purchase private long-term care insurance. So the Long-Term Care Partnership Program was initiated, and a pilot program was funded. This funding for the study was given to the Robert Wood Johnson Foundation.

In 1992 the state of Connecticut became the first state to offer the Long-Term Care Partnership Program. Then twelve years later in 2008, Arizona became the seventeenth state to offer the Long-Term Care Partnership Program.

Currently, there are over 40 states that have approved the Long-Term Care Partnership Program. All but California have reciprocity, meaning you can move to a new state and your program is allowed.

So what is the Long-Term Care Partnership Program and how does it help you with ALTCS?

The Long-Term Care Partnership Program aims to encourage Arizonans to purchase long-term care insurance rather than rely solely on ALTCS Phoenix.

If I can qualify for ALTCS, why buy a Long-term Care Insurance policy? Here’s why.

First, not all ALTCS-approved assisted living facilities or certified ALTCS living group homes are not all the same. Some require that you private pay with your own money for up to 3 years before moving to ALTCS as the payor for care.

So a long-term care policy will open the door to the nicer ALTCS assisted living facilities and ALTCS group care homes in your area and pay through the private pay period.

Second, a Long-Term Care Partnership Program Insurance plan will allow you to have up to $300,000 of countable assets and still receive ALTCS long-term care benefits, which normally requires that you have only $2000 in total countable assets in your name to qualify.

So someone that wants to preserve up to $300,000 for an heir can purchase a state-approved Long-Term Care Partnership Program Insurance plan with $300,000 in benefits, and then their personal assets will be protected to that limit.

Now granted, you must be in good health to qualify for a Long-Term Care Partnership Program insurance plan. So the best time to buy this coverage is before the aging process takes your ability to buy long-term care insurance away.

Meaning you may have the money to buy long-term care insurance, but you also have to have the health.

Learn more about Long-Term Care Insurance here. 

Get a free quote for a policy here.

The Two Types of Crisis ALTCS Planning

Unfortunately, crisis planning is what we help clients with most of the time. For many, the need for long-term care comes suddenly and unexpectantly. A fall, a stroke, or even sudden cognitive decline will cause the need for long-term care.

The 11 signs that you should look for in your loved ones, but many ignore them, leading to a crisis ALTCS Planning situation.

ALTCS Planning Arizona takes all the available planning strategies, and a Certified Medicaid Planner develops a plan that will best fit your particular situation.

Strategies may include all or part of these:

• Set up a Gifting Plan
• Purchase a Medicaid Compliant Annuity
• Pre-pay burial expenses – Funeral Trust
• Pre-pay burial expenses for immediate family and their spouses – Funeral Trust
• Payoff debt
• Buy a new car
• Home improvements
• Pay off a mortgage
• By a larger home
• Put a home in a living trust to increase the countable assets for a married couple

Let’s break these down one by one.

Set up a Gifting Plan:

I once had an ALTCS caseworker say, “That’s Illegal,” when I said that I told someone to make a gift to a loved one to qualify.

I immediately said, “No, it is not illegal!”

She said, “Well, it causes a penalty.”

I said, “Yes, but that is not illegal!”

Gifting assets is not illegal it just causes a period of ineligibility, a period where your are approved, just not eligible until the end of the penalty period.

Let me explain:  First, gifting assets to reduce countable assets is not illegal. ALTCS has a “Divestment Penalty Divisor” that is used to determine the amount of time that an applicant will be ineligible for benefits.

Currently, the Divestment Penalty Divisor for ALTCS Phoenix or ALTCS Maricopa County is $7,867.16. For ALTCS Tucson, Pinal County, and all other counties the Divestment Penalty Divisor is $7,281.17.

Gifting Formula: Gift ÷ Divestment Penalty Divisor = Period of Ineligibility

So take a gift made to an ALTCS  Asset Protection Trust for $120,000 in Maricopa County. Take the $120,000 and divide it by $7,867.16, which is 14.94 or >15 months. Meaning your application would be approved by coverage and would not start for 14.94 months.

Now you not only know that you are approved, you know exactly when coverage will begin.

Purchase a “Medicaid Compliant Annuity” 

A Medicaid Compliant Annuity is a powerful tool that is used for ALTCS crisis planning cases.

The Medicaid Compliant Annuity is an annuity purchased with a single premium, which is called a single premium immediate annuity of SPIA (pronounced SPEEA.

The SPIA must have the following features to be compliant with ALTCS must:

• Be Irrevocable
• Be Non-Assignable
• Be Actuarially Sound
• Provide equal monthly payments
• Name the State of Arizona AHCCCS as the beneficiary ( if single). If married, the state is the contingent beneficiary, and the spouse is primary.

A Medicaid Compliant Annuity allows someone to convert a countable asset to income. With a married couple, the income is non-countable, so the asset that was countable is turned into non-countable income.

With a single applicant, the Medicaid Compliant Annuity SPIA can be used to pay through the period of ineligibility.

Pre-pay burial expenses – Funeral Trust

ALTCS allows you to pre-pay your burial expenses. In Arizona, you can put up to $15,000 in a funeral trust with a goods and services agreement.

Pre-pay burial expenses for immediate family and their spouses – Funeral Trust

ALTCS allows you to pre-pay your burial expenses for your immediate family and their spouses. So your sons and daughters and their spouses.

Pay off debt:

Paying off debt allows you to reduce countable assets and pay off outstanding debt. You can also pay family members money that you may owe for caregiving and expenses they may have incurred caring for you.

Buy a new car:

A vehicle is an exempt asset, so one way to reduce countable assets is to buy a new car.

This works even if the person that is applying for ALTCS doesn’t drive anymore. The car can be used to pick them up and take them to the doctor or other errands.

Home improvements:

Not only does this increase the value of the home but it also reduces the countable assets.

Improvements can be made to allow the person needing the care to remain at home longer before having to go to an assisted living.

Pay off a mortgage:

Paying off a mortgage will reduce countable assets to non-countable equity in a home.

By a larger home:

This might seem strange to buy a more expensive home, but as long as you do not exceed the home equity limit, it will be a smart move if your assets exceed the limits.

Put a home in a living trust to increase the countable assets for a married couple:

This is a sophisticated spend-down strategy that is used with married couples. This should be done under the direction of the CMP, Certified Medicaid Planner, or attorney.

Getting Started with ALTCS Planning.

What your Certified Medicaid Planner – CMP or attorney will need to develop an ALTCS  plan.

No two cases are exactly alike. Assets that someone has is different in the amount and the type of accounts. An IRA or 401K is handled directly than a non-qualified account.

A home is exempt, but a vacation home is not.

One car is exempt, but a boat, golf cart, or travel trailer is a countable asset.

These are just a few examples that many overlook when it comes to the planning process.

In order to prepare an ALTCS  plan, the CMP will need to have a complete picture of all assets, business interest, real estate, income, and current care costs, if any.

This is imperative that everything is disclosed in order to develop a plan. AHCCCS- ALTCS will look at all banking and financial transactions for the past five years.

Here is a worksheet that may help you to gather the needed information.

A Certified Medicaid Planner can help you a lot for ALTCS Planning which will save your Time and Money.