Long-term care plan helps owners keep their assets

May 12, 2014 

Q: I’m interested in a long-term-care policy that would let me protect more of my assets if I eventually need to rely on Medicaid to pay for care. I’ve heard that partnership-eligible policies let you do exactly that. How do these policies work, and what happens to my policy if I move to another state?

A: Partnership-eligible long-term-care insurance programs, which most states now offer, allow you to keep some of your assets if you exhaust all of your benefits from an eligible long-term-care policy and have to rely on Medicaid. For example, if your policy provides a total benefit of $200,000 (usually your daily benefit multiplied by your benefit period), you’ll be able to protect an extra $200,000 in assets above the state’s Medicaid limits after using up all of your policy’s benefits.

State laws on how to qualify for Medicaid differ, but you generally can’t have more than $2,000 in countable assets, including investments. A spouse who lives at home can generally keep about $115,000 while the other spouse is in a nursing home or other care facility. With a long-term-care partnership policy that provides $200,000 in coverage, you’d be able to keep about $202,000 in countable assets (or the spouse at home could keep about $315,000) after you exhaust your benefits and need to sign up for Medicaid.

Medicaid eligibility rules vary by state, so there may be different rules for the partnership program if you move to a new state. Most states have reciprocity with other states’ long-term-care partnership programs. That means if you move, you’ll generally be able to protect the same amount of assets based on your policy’s total benefits, but the Medicaid eligibility rules of your new state (not the state where you originally bought the policy) will apply. A few states (such as California) do not have reciprocity, says Jesse Slome, of the American Association for Long-Term Care Insurance. See the association’s partnership page (bit.ly/ 1o3CEam) for more information about each state’s program.

Most long-term-care policies are partnership-eligible and don’t charge extra for the benefit. Most states require the policy to have some kind of compound inflation adjustment before age 61 and an automatic cost-of-living rider (not necessarily compound) from age 62 to 75. After age 75, there’s usually no requirement for a cost-of-living adjustment, says Slome.

Kimberly Lankford is a contributing editor to Kiplinger’s Personal Finance magazine. Send your questions and comments to moneypower@kiplinger.com. And for more on this and similar money topics, go to Kiplinger.com.

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