Steve Neher | I forgot to get long-term care insurance. Now what?

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

Understanding long-term care

Long-term care (LTC) consists of various services that help meet the medical and non-medical needs of people with a chronic illness, injury, or severe cognitive disorder who cannot care for themselves for long periods. LTC usually involves providing help with Activities of Daily Living (ADLs), which may include bathing, eating, dressing, toileting, and more. These services help people live as independently and safely as possible when they can no longer perform everyday activities on their own.

What spend down assets means and how to do itOne common strategy for those without LTC insurance is to "spend down" their assets. This process involves reducing your assets to qualify for Medicaid, a state and federally-funded program that pays for long-term care for those with limited income and resources.

Steps to spend down assetsEvaluate your assets: Make a detailed list of your assets, including savings, investments, and properties. This will help you understand what you have and what needs to be reduced.

Medicaid eligibility in Washington state: Check Washington's Medicaid eligibility requirements. Washington has specific rules about what counts as an asset and the allowable limits. Generally, you need to have very limited income and assets to qualify for Medicaid.

Permissible spend down: Spend money on permissible items and services. This might include paying off debts, making necessary home repairs, or prepaying funeral expenses. The key is to use your assets in ways that won't disqualify you from Medicaid.

Gift and transfer rules: Be aware of Medicaid's look-back period, which in most states is five years. This period checks for any asset transfers or gifts you made to others. If you transferred assets for less than their fair market value during this period (meaning you sold them for less than they were worth), you could face penalties.

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

Processes to protect your spouseIf you are married, protecting your spouse from financial hardship while planning for your long-term care is crucial. Medicaid has specific provisions to prevent impoverishing the spouse who does not require care (the community spouse).

Strategies to protect your spouseIncome and asset transfers: In some cases, transferring assets and income to the community spouse can help. However, this must be done carefully to avoid penalties and ensure compliance with Medicaid rules.

Medicaid-compliant annuities: Purchasing a Medicaid-compliant annuity can convert a countable asset into a non-countable income stream for the community spouse. This strategy requires careful planning and should be done with the assistance of a professional.

Legal documentation: Ensure all necessary legal documents are in place, such as a durable power of attorney, health care proxy, and living will. These documents will empower your spouse or another trusted person to make decisions on your behalf if you become incapacitated.

Legal separation and divorce: Although unpleasant, and not what any couple would plan for, discussion with an attorney regarding marital status changes may be necessary or an option as well.

Choosing the right strategy for youDiscovering you lack long-term care insurance can be unsettling, but there are several strategies to manage potential costs, such as spending down assets, using Medicaid provisions, and exploring other financial options.

Though preparing for unforeseen healthcare events can be daunting, it is crucial to stay informed and plan accordingly. Each solution has its pros and cons, so discuss with your advisor to find what best aligns with your financial goals.

Steve Neher is a financial advisor, managing member, accounting and attestation director at Cordell, Neher & Company PLLC, where he's worked since 2006. He enjoys living and working in the community he was raised. One of Steve's favorite parts to his day is assisting clients with identifying and reaching their goals. Although working in a broad 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 vast experience in preparing complex consolidated tax returns and the filing requirements for multi-state entities. For more information visit cnccpa.com or call 509-663-1661.