For John Smith and Mary Smith
December 11, 2012
Presented by Bruce Planner
Personal Life
Resource Plan
Contents
Tab 2 – SECTION 2
Creating a Personal Long Term Care Plan
Tab 1 – SECTION 1
Preparation, Eldercare Needs, Recommendations and Strategies
Tab 3 – SECTION 3
178 Page Resource Handbook
"Understanding the Fundamentals of Life Resource Planning"
(Tab 1)
(Section 1)
This is a placeholder page. This page is to be replaced in your client's binder
with a commercial binder tab page.
1. The general goals of life resource planning 2. Your personal contact information
3. Contact information for your family representative and caregiver 4. Contact information for your children
5. Ownership and beneficiaries for insurance, property, and investments 6. Your completed survey on your preparation for your final years 7. Your completed survey on your need for eldercare
8. The potential use of reverse mortgages with life resource planning
This section addresses preparation for your final years of life.
Included here are the following.
Preparation and Eldercare Needs
for John Smith and Mary Smith – December 11, 2012
1. Death analysis 2. Asset reallocation 3. Income augmentation 4. Debt reduction
5. Changes in insurance coverage 6. Tax reduction
7. End-of-life preparation
8. Review or preparation of appropriate legal documents 9. Solutions for family dynamics with eldercare
10. Assistance needed to stay in the home 11. Relocation to a new living arrangement
1. Implementing strategies to preserve your assets for your heirs 2. Finding sources of government funding for eldercare
3. Dealing with Medicaid consequences from preserving your assets 4. Using a reverse mortgage to augment asset preservation
1. The possibility of your needing Medicaid assistance
2. Strategies used to preserve assets at the Medicaid snapshot
3. The use of a reverse mortgage to augment Medicaid crisis planning
The General Goals of Life Resource Planning
With life resource planning we attempt to examine three different planning tracks.
The first track is a general analysis of your financial, legal and environmental resources to determine your need for action with any or all of the following:
The second track of planning examines the following: II.
I.
The third track of planning examines the following: III.
Client Name John Smith
Client Address 123 Leaf Ln., Monroeville, Texas 22012 Client Date of Birth 2/20/1935
Client Age 77
Home Phone 702-631-7901
Cell Phone 702-538-6101
Email [email protected]
Spouse Name Mary Smith
Spouse Address 123 Leaf Ln., Monroeville Texas 22012 Spouse Date of Birth 6/25/1938
Spouse Age 74
Spouse Home Phone 702-631-7901 Spouse Cell Phone 702-423-1533
Spouse Email [email protected]
Client Family Representative Name and Phone Number Kevin Smith 208-789-7890 Client Caregiver Name and Phone Number Jane Angel 702-399-0855 Spouse Family Representative Name and Phone Number Kevin Smith 208-789-7890 Spouse Caregiver Name and Phone Number Jane Angel 702-399-0855
Age
Kevin Smith 208-789-7890 47 2135 Range Ave., Arthur,ID 79002 Jane Angel 702-399-0855 45 35 Yancey St., Monroeville, TX 22012 Rachel Good Body 539-466-1131 42 P.O. Box 501, Wrangell, TX 22312 Susan Forge 622-301-3967 41 5405 Greenstreet Center, IA 22012 Skip Smith 702-399-0766 37 81 N. Center St., Monroeville, TX 22012
Address
Name Phone Number
Personal Information
Personal and Contact Information
Children Names and Contact Information Eldercare Support
Primary Residence - Monroeville Home Joint Farm, Equip, Buildings, Crops - 10 Acres Rented Joint
Total All Checking / Savings Accounts joint Pay on Death
Total All Life Insurance Cash Value joint Policy Beneficiaries
Certificate of Deposit #1 - Various Banks Client Pay on Death
Reverse Mortgage Line of Credit- America One Bank client None
Savings Bonds - Series EE Savings Bonds Spouse Client
Deferred Annuity #1 - First Texas Insurance Client Spouse
Deferred Annuity #2 - Life Insurance of the US Spouse Client
Traditional IRA #1 - Bank Three Client Spouse
Traditional IRA #2 - Fidelity Spouse Spouse
New Investment #1 - Managed Account Children JOINT
County Farm Insurance Client Mary Smith
County Farm Insurance Client Mary Smith
Nuclear Insurance Spouse John Smith
New Era Insurance Spouse John Smith
John Hancock Insurance Client
John Hancock Insurance Client
John Hancock Insurance Spouse
John Hancock Insurance Spouse
New Reverse Mortgage Line of Credit CLIENT
Name of Account or Property
Ownership of Account or
Property
Primary Beneficiary of Account or Property
Ownership and Beneficiary Arrangements
Yes No Yes No
Are you considering any major home improvements? X X
Are you considering securing a home equity loan? X X
Are you considering a reverse mortgage? X X
Do you want your children to inherit your remaining investments and savings? X X Do you want remaining investments & savings to go to someone else at your death? X X
Do you own a home that you want to pass on at your death? X X
Do you have an investment property, business or farm to pass on at your death? X X For ownership interests above, do you have a plan for transferring title at death? X X Have you paid income taxes or capital gains taxes in any of the last three years? X X
Have you ever filed gift tax returns? X X
Are you counting on using the capital gains exclusion in the sale of your home? X X Have you ever considered transferring assets through charitable gifting or trusts? X X Do you rely on tax-free or tax-deferred earnings when making investment decisions? X X
Do you have prepaid funeral arrangements? X X
Do you have a cemetery plot? X X
Have you provided written instructions for your funeral and burial? X X Do you have adequate cash or life insurance for a funeral and burial? X X Do you have someone to act for you if you can't make decisions for yourself? X X Have you designated which of your special keepsakes your heirs will receive? X X Have you expressed wishes to family about how and where you want to die? X X Are you concerned about the use of heroic measures to keep you alive? X X
Have you considered the use of a Medicaid approved funeral trust? X X
Will children of a previous marriages receive an inheritance from you? X X Will stepchildren of your current marriage receive an inheritance from you? X X
Do you have a will? X X
Have you discussed your will with an attorney or your family in the last three years? X X
Do you have a living (family or inter vivos) trust? X X
If you have a living trust, have you reviewed it within the last three years? X X Do you have a living will (directive to prevent life-sustaining support)? X X Do you have a directive to physicians for medical care in the event of incapacity? X X If you don't have a directive to physicians for specific medical care do you want one? X X
Do you have an irrevocable trust? X X
If you have an irrevocable trust, have you reviewed it as up-to-date in the last 5 years? X X Do you have a list that provides the location of your important documents? X X Do you have a general or durable power of attorney agent (POA) to act for you? X X If so, does your POA allow for gifting or for real estate or for medical decisions? X X Plans, Preparations and Goals
Determining Current and Future Needs
Spouse Client
List all names on the title of your home and indicate how long those names have been on the title. John and Mary Smith for 20 years
not so for
no one will
Will your home remain vacant within the next three months or will it be rented or sold? it might be
If you own other real property, list those properties and whose names are on the titles.
Gift recipient #1-- Name or Names skip
Gift recipient #2-- Name or Names Date Amount
Mary
Gift recipient #3-- Name or Names Date Amount
John
Gift recipient #4-- Name or Names Date Amount
Ralph
Yes No Yes No
If this survey does not apply to either client or spouse, leave it blank.
Needs help with dressing or putting on or off prosthetics or orthotics X X
Needs help moving from place to place X X
Needs help getting out of bed or getting ready for bed X X
Needs help toileting, bathing or showering X X
Needs help with incontinence X X
Needs help with grooming, personal hygiene or keeping himself or herself clean X X
Cannot feed himself or herself without help X X
Needs meals prepared by others due to inability or forgetfulness to do so X X
Needs medication management due to forgetfulness or confusion X X
Needs supervision to prevent wandering, falling or other personal injuries X X
Needs supervision to prevent property damage or injury to others X X
Needs supervision or constraint because of unmanageable behavior X X
Diagnosed with Alzheimer's or other form of dementia X X
Cannot leave the residence due to mental or physical condition X X
Needs assistance -- shopping, laundry service, housecleaning or transportation X X Needs someone to answer the phone, pay bills or help with financial decisions X X
Requires a scooter or wheelchair to ambulate X X
Needs medical alert or health monitoring equipment X X
Needs frequent skilled care -- doctor, medical practitioner, physical therapist or nurse X X Currently receives long term care at home or home of someone else X X If care is provided in the home, a family member or friend will provide part or all of it X X If care is provided in the home, a care provider company will provide part or all of it X X
Currently receives assistance in an independent living facility X X
Currently receives long term care in an assisted living facility X X
Currently receives long term care in a nursing facility X X
Currently receives long term care in a setting not mentioned above X X
700 2/2/2011 500
Gifts made in the last five years of $500 or more. Include cash, investments, life insurance ownership, real estate, title to property including joint title, automobiles, Christmas, birthdays, charities. For each gift over $500 provide the total amounts or equivalent market value to each recipient within the last five years
Amount
800
Planning for Eldercare (Long Term Care)
1/1/2012 Client 900 Spouse 6/6/2009 3/3/2010
Planning for Medicaid
Has any child of yours or your spouse provided long term care services in your home to you or your spouse for a period of at least two years previous to this date? EXPLAIN
Date
Will anyone in place of you and your spouse live in your home within the next three months? Who will this be?
rental property, in trust timeshare condo, in trust
1. Pay off existing debt
2. Augment income with proceeds
3. Purchase long term care insurance or life insurance
4. Down payment on a second home
5. Down payment to move to another home
6. Cover daily living expenses
7. Home repairs and improvements
8. Medical bills and prescription drugs
9. Education and travel
10. Gifting money or goods to children
11. Cover tax debts
1. Make repairs or remodel
2. Augment income with proceeds
3. Pay for long term care
4. Create exempt income and assets for VA pension
5. Provide stable backup cash account as an alternative withdrawal option for gifted money that is invested aggressively following an asset allocation model
6. Provide personal funds to replace money that was gifted
1. 2. 3. 4. 5. 6.
7. A reverse mortgage can reduce the maximum equity value in the home that would disqualify someone for Medicaid
A line of credit reverse mortgage can be used to produce exempt resources
A community spouse with no credit rating can't use a temporary loan to make the split larger at the snapshot, but can get a reverse mortgage to do that
After the snapshot split, the community spouse can acquire more resources than the $113,640 split
A mortgage can pay off debt and thus augment the income for other maintenance needs for the community spouse
For a single beneficiary, the mortgage will provide more resources that can be gifted and then used for a reverse half a loaf or the equivalent
A cash account reverse mortgage can be used to purchase exempt assets
A reverse mortgage might fit at the Medicaid snapshot (planning track 3)
by providing any or all of the following benefits:
III.
A reverse mortgage might fit well in a general analysis (planning track 1)
by providing or paying for any or all of the following benefits:
A reverse mortgage might fit well with asset preservation planning
(planning track 2) by providing or paying for any of the following:
I.
II.
Using a Reverse Mortgage with Life Resource Planning
PART 1
Certain of the strategies and recommendations found in this part are important for you to act on as soon as possible. If these strategies and recommendations require the support of a licensed
investment advisor, a government recognized tax advisor or an attorney, you should not act on any of them unless it is under the direction of that specialist who is licensed to help you in that particular area of planning.
We will identify for you the strategies and recommendations that are important to act on now, and help you establish an order of priority in taking action.
We believe that all of our recommendations are important to your success in planning for your final years of life. The ones that don't need to be acted on right now, should still be eventually
implemented and you should seek proper counsel for those recommendations that require individuals who are licensed or who are expert in those particular areas.
PART 2
This part of the planning presentation consists of analyses and charts that provide more detail in understanding the recommendations given in Part 1. Part 2 is further divided into 3 sections. Each of these sections provides an introduction to one of three planning tracks and provides the analysis and charts relating to that planning track.
This section contains two parts. The first part consists of several
recommendations and strategies that we have given you that are
specific to your life resource plan.
The second part of this section includes charts that help you to better
understand the concepts we have given you with the recommendations
and strategies.
for John Smith and Mary Smith – December 11, 2012
Recommendations and Charts
Contents
1 Involving a Geriatric Care Specialist
2 Identifying a Family Representative and Caregiver
3 Family Support for Long Term Care in the Home
4 Paying a Member of the Family to Provide Care in the Home
5 Bridge Financing for Home Care
6 The Need for Other Private Support Services
7 Long Term Care Needs and Government Programs
8 Passing Your Property to Your Heirs or Others
9 Ownership and Beneficiaries
10 Your Will and/or Living Trust 11 Power Of Attorney
12 Advance Directives
13 Your Wishes in the Manner of Your Death 14 Preparation for Funeral and Burial
15 The Effect of Long Term Care on Assets 16 Reallocation of Assets
17 Debt Reduction or Consolidation 18 Converting Assets to Income 19 Using the Equity in Your Home 20 Using a Reverse Mortgage
21 Capital Gains and Gift Tax Concerns 22 Long Term Care and Income Taxes
23 In the Event of Your Death or Your Partner's Death 24 Long Term Care Insurance
25 Funeral and Burial Coverage 26 Preservation of Assets
27 Potential Need of Irrevocable Trust(s) for Asset Preservation 28 Reverse Mortgages in Asset Preservation Planning
29 Additional Government Income Benefit
30 Income Annuities in Asset Preservation Planning 31 Dealing with IRAs in Asset Preservation Planning 32 Strategies to Increase Government Income Benefits 33 Effect of Asset Divestment on Medicaid Eligibility 34 Impact of Gifts Made within the Last Five Years 35 Reinstate Gifts at Medicaid Application
36 Medicaid Application for a Single Individual
37 Private Pay the Medicaid Penalty or Remainder of the Look Back 38 Single Premium Life Insurance with Minimal Cash Value
39 The Use of Income Annuities with Medicaid Planning
Part 1 – Recommendations and Strategies
for John Smith and Mary Smith -- December 11, 2012
Recommendations and strategies contained in this section, pertaining to legal issues, investment advice and tax advice are to be interpreted as potential courses of action or observations for your benefit. You should not act on any recommendations and strategies that pertain to legal issues, investment advice or tax advice unless that action is undertaken with the direction of an individual who is properly licensed in that particular area of expertise.
We have identified in our analysis of your needs that you should hire one or more members of your family to provide care services at home. This is a necessary part of obtaining government services for your care as well as a potential strategy to transfer assets to your family. We will provide you the proper instructions on how to set up this arrangement as well as the tax obligations that go along with it. This arrangement also requires a contract between you and the member or members of your family providing the service. The members of your family providing this service will put their income from you into a separate account without your name on it and, if necessary, pay your bills out of this account.
Recommendations and Strategies John Smith and Mary Smith
December 11, 2012
1
The success of any long term care plan– whether for individuals who are wealthy or individuals who are not – relies on two key advisers. They are a Geriatric Care Specialist who specializes in providing assistance for the elderly and an individual who understands finances and estate planning directed towards the final years of life. The Geriatric Care Specialist has seen countless long term care scenarios and as a result has valuable experience in identifying and implementing supportive and effective care plans. Based on your needs, we highly recommend involving a Geriatric Care Specialist to help you identify your needs and solve those needs with the least cost and the most effective long term care strategies.
3 Family Support for Long Term Care in the Home
If you are receiving eldercare in your home, you will likely have a caregiver who may be a member of the family or your spouse. Being a caregiver is a tough job, but support is available to help this person with his or her burdens. You have designated Jane Angel 702-399-0855 as your caregiver. Likewise, whether care is received in the home or in a facility, a family
representative is a vital link between you and the services you receive. The family
representative also helps you with finances, with getting support from other members of your family and with making decisions when you can no longer make them. You have designated Kevin Smith 208-789-7890 as your family representative.
4 Paying a Member of the Family to Provide Care in the Home Identifying a Family Representative and Caregiver
Your information indicates that you have family members who are providing care support for you to remain in your home. Family members sometimes lack the understanding, the education and the knowledge to fully support care in the home. We provide information to you in the planning binder that will help you better understand the resources available to you. In addition, we can make arrangements to help you find the proper services in the community. Finally, we will introduce you to the concept of a family agreement so that all members of the family who are willing, can provide needed support. If needed, we will find the proper advisor to help you organize a family meeting and draft an agreement.
Involving a Geriatric Care Specialist
2
Passing Your Property to Your Heirs or Others 8
You indicate that you want to receive long term care in your home or in the home of another person. The government offers a variety of support services for individuals needing long term care and remaining in their homes. This can include caregiver support programs, meal
programs, caregiver training, respite care and a whole host of other benefits. We will make you aware of the programs that are available in your area and make sure to provide an advisor for you who can help you find the support you need. In addition, there are government programs that will help finance the cost of long term care in your home. We will help you find the appropriate programs for which you qualify.
You indicate on the survey you provided us that you wish to pass property on to your children or to other designated recipients. If you have earmarked your savings, investments and
property for your heirs, now is the time to transfer those assets. This is often done using a trust so that you can retain control over the distribution of those assets or you can simply retitle some assets. Simply changing title may be fraught with undesirable consequences and you should always consult with an attorney before doing this. In addition, changing the title on assets that have capital gains, could result in the loss of favorable capital gains treatment. We will help you find the right legal advice for these transfers.
December 11, 2012
7
The complex and detailed nature of long term care does not allow the Geriatric Care Specialist and the eldercare financial expert alone, to have the experience or knowledge to provide all services and comprehensive specific help in each of their areas of expertise. These two key advisers will work with a cadre of other providers and advisers who can help fill in the
requirements for long term care planning scenarios. The key advisers provide a gateway to an entire team of professionals for care planning, home care services, financial analysis, legal work, downsizing, moving, healthcare, home maintenance, remodeling, yard work, medical alert, fiduciary services, tax advice, insurance advice, and so on.
Recommendations and Strategies
6 The Need for Other Private Support Services
John Smith and Mary Smith
Bridge Financing for Home Care
Our analysis indicates that you could use a temporary loan to pay for professional home care services due to a pending claim for veterans benefits. You have to demonstrate to VA that you are paying at least $6,017 or more a month out-of-pocket in order to receive the benefit. The temporary loan will allow you to pay the out-of-pocket cost for the period of time in which it takes to approve a benefit. This could take anywhere from weeks to months. Once the benefit has been approved, you will receive $2,054 in additional income every month to help you cover the cost of care. You will receive a retroactive amount from the first day of the month following the effective date to cover the loan cost.
5
Long Term Care Needs and Government Programs
11 Power Of Attorney
Advance Directives
Advance directives are specific documents designed to allow you to provide direction for medical treatment or life-saving actions in the event you cannot make these decisions yourself. You indicate that you may not have these documents in place. We recommend you consult with a legal advisor to determine whether you think these particular documents would meet your needs. It is also important to remember that even though an admission to a hospital or nursing home may result in your signing a living will, the content of that living will should be reviewed by your legal advisor. Sometimes the language in these documents is not pertinent to your desires for heroic measures in keeping you alive.
It is not always necessary to have a will or living trust. If prior arrangements have been made, an intestate death may be appropriate without a will. In other cases, a will or trust, or both, are necessary due to the nature of your estate and how you want to pass on your assets and
properties. If you do not have a will, you may want to seek legal advice. You indicate that you may not have either of these documents or if you have these documents, they have not been reviewed for quite some time. If your intent is to make sure that your assets and property end up in that hands of designated heirs, it is important to update this information. A competent legal advisor should be used to review these documents.
Your Will and/or Living Trust
December 11, 2012
9 Ownership and Beneficiaries
Your survey indicates that you may or may not have designated someone to make decisions for you if you are disabled or incapacitated and cannot make those decisions yourself. If you have already set up a power of attorney, we suggest that you have that power of attorney reviewed by a competent legal advisor to make sure that it covers all of the areas of decisions that you need. Sometimes powers of attorney are deficient and don't meet the standards or the expectations of those creating them. In addition, most people desire that competent medical treatment
decisions can implemented on their behalf. In some states this might require additional documents to create this intended result.
Joint ownership arrangements and beneficiaries on certain types of insurance, savings or investment accounts take precedence over any wills or trusts that you may have devised for transferring assets at your death. It is extremely important that you review your beneficiaries or the other arrangements that are available to pass on property at your death. If you have not structured these properly, it could not only complicate resolving your estate, but could also cause a loss of money due to taxation, legal work or penalties. It is also important on accounts where contingent beneficiaries are available that you keep these updated, especially if there are children and spouses from previous marriages.
Recommendations and Strategies
10
12
John Smith and Mary Smith
December 11, 2012 John Smith and Mary Smith Recommendations and Strategies
13 Your Wishes in the Manner of Your Death
Your survey indicates that you may not have adequately prepared for your death. Preparation for death not only includes instructions for the prevention of heroic measures to keep one alive, but also includes your desires as to how and where you want to die. Too many people leave the manner of their death in the hands of other people. It is your life and you have the right to decide how you want it to end. Too many people the lack the courage to face death and instead look to medical science to help them avoid these decisions. As a general rule, doctors do not recommend life-extending treatment when death is inevitable. In addition, a decision for hospice is often delayed, and should be made earlier.
Your survey indicates that you have not fully prepared for a funeral and burial. This type of planning can include prepaid funeral and burial plans, prearranged funeral programs or life insurance specifically designated to cover the cost of funeral and burial. Unfortunately, life insurance or other money set aside for this purpose might be wiped out in the event of an application for Medicaid services. In other words, policy cash value may have to be spent first thus destroying the death benefit. In all states, money can be set aside in a Medicaid funeral trust to avoid this problem. We can help you design a plan that will protect money from Medicaid spend down, that is set aside for funeral and burial.
We have done an analysis of your savings, investments and property and would suggest that it would be an advantage to you to reallocate your assets for better earnings, better tax treatment and for estate planning purposes. You have indicated that you wish your heirs to inherit the property that you own. We have designed a plan for you to preserve some assets for your heirs and at the same time maximize your investment returns and minimize the tax burdens on those accounts. We will help you determine the best investment strategies and transfer strategies to meet your needs and the needs of your heirs. Strategies come from an appropriately licensed advisor with experience in this area of planning.
14 Preparation for Funeral and Burial
Reallocation of Assets
We provide you a chart showing how quickly long term care will eat up your assets without any planning. The cost and the need for long term care can be the most devastating event to occur to any family during their lifetime. Provision of care disrupts family relationships and quickly liquidates savings and investments. Unfortunately, there are few government programs to provide funding for long term care over an extended period of time. Medicaid is the only program that will do this for everyone. Medicaid requires that you impoverish yourself before it will provide the services. We will share strategies with you so you can preserve some or all of your property and still receive Medicaid services.
15 The Effect of Long Term Care on Assets
16
December 11, 2012 John Smith and Mary Smith
Using the Equity in Your Home
Our analysis indicates that you would benefit from reducing your debt. Reducing your debt will result in more expendable income for your needs. We will suggest a number of strategies to reduce debt which might include a reverse mortgage, using existing assets, using a debt counseling service or consolidating that debt. If you agree that this strategy would help you in the long run, we will work together to find the best solution for you. This may also require debt counseling if you are willing to participate. Since debt reduces your amount of expendable income, we also look at strategies to help you save costs and to increase your income over your lifetime. There are various strategies to accomplish this.
17 Debt Reduction or Consolidation
19
Our analysis indicates that you would profit by converting a portion of your savings and investments into a guaranteed income stream. This is done by purchasing a single premium immediate annuity from an insurance company. This can be guaranteed income stream that will continue even after you die. Or, you can create a guaranteed income for your lifetime and remove the uncertainty of outliving your assets if you happen to live too long. We have done an analysis showing you a sample conversion and the amount of income it will produce. Another advantage of converting assets to income is to stretch out the tax consequences of tax deferred earnings investments.
Recommendations and Strategies
18 Converting Assets to Income
For most people, the equity in their home is their largest single asset. Unfortunately, this equity is not available for use. One might argue that a home equity loan makes it available for use, but the loan also sets up an additional expense requiring repayment and converting the cash loan from the equity back into equity again. Home equity loans also require good credit and a source of income. The only way to get to the equity without a repayment obligation during the life of the homeowner is a reverse mortgage. A reverse mortgage also does not require a credit rating or an income source for repayment. According to the information you gave us, you could qualify for reverse mortgage proceeds of $72,040.
20 Using a Reverse Mortgage
Our analysis indicates that a reverse mortgage would be very useful to you. According to the numbers that you gave us, your home is worth $310,000. For your zip code and you and/or spouse's ages, the best reverse mortgage option would give you a net amount of $72,040. This net amount represents paying off any other debt on your home and paying for the closing costs of the mortgage. If you leave this amount in the line of credit, you would currently earn 4.35% per year on the balance. Currently, the growth on your line of credit could maintain the equity balance on your home even though the reverse mortgage amount is growing. We will explain to you other uses for this additional money.
Recommendations and Strategies John Smith and Mary Smith
December 11, 2012
Your survey and our analysis indicate that you currently are responsible for capital gains taxation or that you may be responsible for capital gains taxation in the future. Capital gains are currently taxed at very favorable rates and also receive certain exemptions. One exemption is the capital gains exclusion on your personal residence of $250,000 for a single person and $500,000 for a couple. The other exclusion is the step up in basis at death on capital assets that can essentially forgive any capital gains taxes in an inheritance situation. Any planning that you do with your assets should involve advice concerning capital gains taxation. You should not retitle capital assets without proper advice.
22 Long Term Care and Income Taxes
You currently are paying income taxes. In addition, divestment strategies may result in triggering the taxation of assets that have been growing with tax-deferred earnings such as deferred annuities or IRAs or other tax qualified retirement accounts. There is a tax deduction available to you if you are paying out-of-pocket for long term care services. In some cases, the tax deduction can completely eliminate any taxes you might owe on regular income or on divestment of tax-deferred income. The rules pertaining to this deduction are complicated and require more than just claiming them on your return. We will provide you with a competent advisor who will help you with this deduction.
21 Capital Gains and Gift Tax Concerns
You have been wise in purchasing long term care insurance. This is one of the few effective methods to cover the high cost of long term care for the final years of life. We have put
together a review of all your long term care insurance coverage. If you will be relying solely on long term care insurance to cover your costs, this insurance usually does not kick in until a waiting period has been met. The waiting period could be anywhere from 30 days to 90 days. While you are waiting for coverage to begin, it is possible to use a short-term loan from certain companies that specialize in providing this sort of funding. We can help you find this short-term funding if you need it to bridge your gap in coverage.
23 In the Event of Your Death or Your Partner's Death
We have done an analysis to show you the financial consequences from your death or from the death of your spouse. This analysis is designed to show you the remaining income and
expenses for the surviving individual. It also shows you the amount of life insurance available to pay for the costs of dying and the funeral and burial arrangements that you have made. In some instances, you may need additional life insurance and if you are eligible, you can leverage existing assets into a life insurance benefit worth much more than the value of the assets
themselves. Life insurance devoted to paying for the cost of dying may be subject to liquidation by Medicaid rules. We will help you solve this problem.
24 Long Term Care Insurance
Recommendations and Strategies John Smith and Mary Smith
December 11, 2012
You have indicated the desire to preserve your assets and pass them on to your heirs or other deserving entities. Now is the time to do this sort of planning instead of waiting until the cost of long term care has dissipated those assets. We suggest various strategies to help you
preserve these assets from costs beyond your control. These strategies may involve bringing in other advisors such as investment advisers, tax advisors and attorneys experienced in this area. This may involve additional fees. By doing this planning now, you have the potential of a better return on earnings for your gifted assets invested for others and potential tax savings that would far exceed the cost of doing this planning.
27 Potential Need of Irrevocable Trust(s) for Asset Preservation
Our analysis has determined that you may need one or more irrevocable trusts to accomplish your goals for asset preservation. An irrevocable trust is a legal arrangement that places your property into the hands of an entity that you trust to disperse that property according to your wishes. The trust is irrevocable in the sense that once you create the arrangement for handling your property, you cannot change it. Because of this, decisions to transfer your property into such an arrangement cannot be taken lightly because you cannot change your mind. The trustee of the trust may be given discretion to provide access to the property under certain conditions such that the property is not totally locked away.
25 Funeral and Burial Coverage
As part of your planning for government benefits and Medicaid, you should set aside $10,000 in a Medicaid funeral trust or trusts to cover you and your spouse – if applicable – for a funeral and burial. The most money that Medicaid will allow you to retain is $1,500 to $2,000
depending on the state. Life insurance does not count as an asset for Medicaid unless it has more than $1,500 in face value death benefit and then the cash value in the life insurance must be spent. This meager allowance does not allow you to retain any significant life insurance or cash for funeral or burial. A useful strategy that allows you to retain a significant amount of burial assistance is a Medicaid funeral trust.
26 Preservation of Assets
28 Reverse Mortgages in Asset Preservation Planning
We have determined that you are eligible for $72,040 in reverse mortgage proceeds. If you are eligible for VA pension, this is an additional argument for your doing the reverse mortgage. VA pension has an asset test and you must not have more assets than VA allows or you cannot get the pension benefit. Proceeds from a reverse mortgage are exempt from this asset test. For example, we have determined that your limit for assets is $50,000. Combining with your previous reverse mortgage holdings of $65,000, new proceeds of $72,040 and VA allowable of $50,000 you can have $122,040 that will not count against you for pension as it would if the money were in savings or investments.
John Smith and Mary Smith December 11, 2012
29 Additional Government Income Benefit
Recommendations and Strategies
31 Dealing with IRAs in Asset Preservation Planning
Our analysis for asset protection planning and the subsequent benefit of VA pension
recommends that John should convert $47,029 of his IRA assets into an income annuity paying out over 11.00 years and earning 1.10%, Mary should convert $95,680 of her IRA assets into an income annuity paying out over 17.00 years and earning 1.10%. You are already making required withdrawals out of this IRA money. Your required withdrawals will increase every year as you get older. We are simply levelising your existing required withdrawals and possibly saving you future taxes. To cash out and gift IRA money has significant undesirable consequences that we want to avoid.
32 Strategies to Increase Government Income Benefits
We have determined that you will qualify for VA pension up to the amount of $2,054 a month. This is a result of your asset protection planning for divesting $505,451 worth of assets. This divestment also includes converting a portion of these assets to income in the amount of $1,827 a month. You will retain approximately $50,000 of countable assets and still receive the pension benefit. Based on your income of $5,865 a month after divestment, and your anticipated VA deductible medical expenses of $6,017 a month, you will receive the benefit above . An accredited specialist can make sure all your medical deductions apply and will help create additional deductions, if necessary, to receive the maximum pension benefit.
30 Income Annuities in Asset Preservation Planning
As part of our recommendation for your asset protection planning and for qualifying for VA pension, we have determined that John should convert $40,000 of his assets into an income annuity paying out over 12.68 years and earning 1.20%, we have determined that Mary should convert $70,000 of her assets into an income annuity paying out over 17.00 years and earning 1.10%. We can create this extra income without gifting these assets and subjecting these assets to a potential Medicaid penalty. We can also create this extra income because VA deductible medical expenses allow us to add extra income without reducing the pension benefit that would otherwise be available.
We have determined that you need additional deductible medical costs beyond those that you are currently generating in order to receive the full VA pension benefit. We have several options to make this happen. One option is to set up a personal service arrangement with members of your family, church members or friends. If this is not possible, another option is to bring in professional home care services to generate additional expenses while you are waiting for the benefit to be approved. Once the benefit is approved, you should have enough money to cover those extra expenses. If you wish, we can help you find a specialized loan that will cover the additional costs while you are waiting for approval.
33 Effect of Asset Divestment on Medicaid Eligibility
Your asset protection strategies that involve outright gifting – either directly or in a trust – have consequences on your Medicaid eligibility. Even though Medicaid is for individuals who are impoverished and have no assets or income to pay for their care, your gifting has brought you closer to that threshold for Medicaid qualification. Medicaid may be necessary because the high cost of a nursing home or other facility may exceed your income and Medicaid is the only recourse to receive that expensive care. Gifted assets result in a penalty where Medicaid will not pay for your care until you have paid for a certain number of months out-of-pocket. We include an analysis of your Medicaid penalty.
34 Impact of Gifts Made within the Last Five Years
Recommendations and Strategies John Smith and Mary Smith
December 11, 2012
36 Medicaid Application for a Single Individual
The asset preservation strategy with life resource planning allows you to gift assets now in order to start the clock ticking on the Medicaid look back. At a certain point in the future, after you have met the look back period of time, you can apply for Medicaid without penalty. At that point, after spending down or converting remaining assets, you can qualify for Medicaid rather quickly. If you are a single individual when you apply for Medicaid and have not met the look back time period, the best strategy is to private-pay care costs, out-of-pocket, with gifted assets, for the remainder of the look back or the penalty period – whichever is shorter. We provide an analysis for you for this scenario.
You indicate that you have gifted assets or property worth at least $500 or more within recent years. You understand that for purposes of receiving Medicaid assistance, you may have created a penalty for obtaining this benefit. By gifting assets to individuals other than your spouse, you may have created a penalty with Medicaid and you may be prevented from receiving Medicaid assistance at the appropriate time you need it. We have provided you an analysis of the impact that gifting has on receiving Medicaid benefits. You should seek competent advice to help you understand how to structure your gifting program in order to retain the maximum amount of benefits for your heirs.
35 Reinstate Gifts at Medicaid Application
States generally allow reversing ownership on gifted assets to remove the Medicaid penalty caused by the gifts. When there is a married couple and Medicaid is imminent, reinstatement will eliminate the penalty caused by gifting. Reinstatement of gifts allows for distribution of a community spouse resource allowance, assignment of a minimum monthly spousal needs allowance – where advantageous – and for Medicaid crisis planning with the Medicaid recipient share of resources. If, at the time of Medicaid application, a previously married spouse is now single, reinstatement of the gifting is generally not useful for retaining assets. There are other asset preservation strategies for a single Medicaid applicant.
Recommendations and Strategies
Because of the penalty associated with gifting assets and qualifying for Medicaid, our planning that involves asset divestment includes an analysis of what happens if you were to apply for Medicaid. In most states, the penalty applies for a 5 year period after your gifting occurs but a few states only look back for 3 years. If you can get past the 5 years, there is no penalty. A common strategy is to gift assets but make those assets available to pay for the penalty or for the remainder of the five-year period. We provide analysis how to deal with Medicaid if you have gifted assets either outright or in a trust. We include a number of charts that show the analysis.
38 Single Premium Life Insurance with Minimal Cash Value
Using single premium life insurance with minimal cash value is one currently popular strategy for divesting assets for asset preservation planning while avoiding an outright gift that would result in a Medicaid penalty. There is no guarantee that Medicaid will change rules and disallow this strategy. The concept allows you to use liquid assets to purchase a single premium guaranteed issue life insurance with no cash value or to roll an existing insurance policy into one of these special policies. For example purchasing a $100,000 policy with $1,000 of cash value would create a death benefit for your heirs of $100,000. Essentially, you have transferred $100,000 to your heirs through a tax-free death benefit.
John Smith and Mary Smith December 11, 2012
37 Private Pay the Medicaid Penalty or Remainder of the Look Back
39 The Use of Income Annuities with Medicaid Planning
From our analysis, it would appear that John is the most likely person to apply for Medicaid assistance. If this is in a nursing home, we will refer to John as the nursing home spouse. Mary, who is currently healthy, is not anticipating Medicaid and Mary will be the community spouse. We have done an analysis of your assets and determined for Medicaid planning purposes, you would convert $0 of your Medicaid resources into an income annuity for Mary, paying out over 12.68 years and earning 1.00%. Subject to state-specific Medicaid rules, this is a strategy to avoid John spending this money for nursing home care and transferring the money to Mary – the community spouse – instead.
1 Death analysis 2 Asset reallocation 3 Income augmentation 4 Debt reduction
5 Changes in insurance coverage 6 Tax reduction
7 End-of-life preparation
8 Review or preparation of appropriate legal documents 9 Solutions for family dynamics with eldercare
10 Assistance needed to stay in the home 11 Relocation to a new living arrangement
1 Gifting and income strategies to preserve your assets for your spouse or your heirs 2 Finding sources of government funding for eldercare
3 Planning for Medicaid in advance by gifting assets to avoid penalty 4 Using a reverse mortgage to augment asset preservation
1 An understanding of when and how you may need Medicaid assistance 2 The general strategies used to preserve assets at the Medicaid snapshot 3 The use of a reverse mortgage to augment Medicaid crisis planning
This part of the planning presentation consists of analyses and charts that
provide more detail in understanding the recommendations given in Part 1. Part 2 is further divided into 3 sections called planning tracks. Below is a brief
description of each planning track found in Part 2.
Planning Track 1 – Analysis of Financial, Legal and Environmental Resources Charts in this section support a better understanding of the general goals of life resource planning using Planning Track 1. Those general goals are outlined below.
Planning Track 2 – Asset Preservation Planning
Charts in this section support a better understanding of the general goals of life resource planning using Planning Track 2. Those general goals are outlined below.
Planning Track 3 – Planning the Need for Medicaid
Charts in this section support a better understanding of the general goals of life resource planning using Planning Track 3. Those general goals are outlined below.
Part 2 – Charts to Support Understanding
for John Smith and Mary Smith – December 11, 20121. Death analysis
2. Asset reallocation
3. Income augmentation
4. Debt reduction
5. Changes in insurance coverage
6. Tax reduction
7. End-of-life preparation
8. Review or preparation of appropriate legal documents
9. Solutions for family dynamics with eldercare
10. Assistance needed to stay in the home
11. Relocation to a new living arrangement
Charts in this section support a better understanding of the general goals of life resource planning using Planning Track 1. Those general goals for this planning track are outlined below.
General Analysis of Financial, Legal
and Environmental Resources
Planning Track 1 – Charts
Net Value of Assets to Pay for Long Term Care, Excluding Home
Current Combined Monthly Income $4,528 Monthly Long Term Care Insurance Payments
Number of Months Insurance Payments Last
Existing Monthly Long Term Care / Medical Costs $1,117 Anticipated Long Term Care Costs $4,526 Allocate This Amount of Monthly Income to Long Term Care Costs $2,000
Number of Months to Asset Depletion> 11 Years Number of Years to Asset Depletion > 11 Years
Average Asset Earnings 4.08% Yearly Increase in Long Term Care Costs 2.50%
$620,451
Depletion of Assets with Long Term Care Costs
$0 $100,000 $200,000 $300,000 $400,000 $500,000 $600,000 $700,000 0 1 2 3 4 5 6 7 8 9 10 11 IN YEARS 22
Asset Reallocation and Debt Reduction
Current Deferred Interest Income, $2,876 New Deferred Interest Income, $0Change in Taxable Income
Current Debt, $158,324
New Debt, $340,892
Change in Household Debt
Current Average Rate of Return, 4.08% New Average Rate of Return, 4.69%
Average Rate of Return
Current Debt Payment $8,691 New Debt Payment $0
Change in Debt Payments
Net Rental and Net Farm Lease Income 4,250 4,250 8,500 8,500 4,250 4,250
Taxable Interest Income 3,787 3,787 3,787 9,077 3,594
Tax-Deferred Interest Income 1,103 1,773 2,876 2,876
Gross Social Security or Railroad Retirement 15,750 9,556 15,750 15,750 15,750 9,556 Required Withdrawals from IRAs, 401(k)s, 403bs 4,163 4,020 8,183 8,183 4,163 4,020 Withdraw of Principal from Retirement Accounts 780 820 1,600 1,600 780 820
Reverse Mortgage Lifetime Income 2,500 2,500 2,500 2,500
Pension Incm #2 - Texas Teachers Retirement 1,580 1,580 1,580
Survivor Benefit for Pension #2 above 790
32,333 22,000 43,986 44,776 36,521 23,820
Combined Income 54,332 60,341
Combined Mortgage Payments Personal Residence 1,961 1,970 1,970
Combined Annual Credit Card Payments 1,600 1,600 1,600
Combined Revolving Consumer Debt Payments 1,450 1,450 1,450
Combined Auto/Vehicle Loan Payments 3,680 3,680 3,680
Auto Homeowners Insurance 1,329 1,196 1,196 1,329
Utilities, Heating, Phones, TV Service, Internet 6,960 5,568 5,568 6,960 Transportation Expenses, Auto Repair & Gasoline 4,820 3,615 3,615 4,820
Automobile Registration and Licensing 575 518 518 575
Food, Household Supplies, Eating out 7,015 4,209 4,209 7,015
Vacations 3,256 977 977 3,256
General Gifts -- Holiday, Birthday, Etc. 1,236 989 989 1,236
Charitable Contributions 2,650 2,120 2,120 2,650
Property Taxes and Vehicle Taxes 890 801 801 890
Other Maintenance Costs / Allowances Not above 1,896 1,517 1,517 1,896
Long Term Care Insurance Premiums 3,037 1,630 3,037 1,630 3,037 1,630
Life Insurance Premiums 655 520 655 520 655 520
Health Insurance Premiums 1,500 3,000 1,500 3,000 1,500 1,400
Medicare Part B Premiums 1,195 1,195 1,195 1,195 1,195 1,195
Out-Of-PocketPrescription Drugs / Over-The-Counter 517 833 517 833 517 833 Out-Of-Pocket Doctors Office , Co-Pays, Deductibles 250 251 250 251 250 251
46,472 7,429 37,363 37,638 37,781 5,829 Total Expenses 53,901 43,610 new spouse expenses spouse alive client dies client alive spouse dies new spouse income current client available income
Expenses before and
after Adjustments
client alive spouse dies new household expenses current spouse share expenses spouse alive client dies current household expensesIncome before and
after Adjustments
Income and Expenses before and after Adjustments
current spouse available income new client income 24
Primary Residence - Monroeville Home Joint 168,450 96,410
Farm, Equip, Buildings, Crops - 10 Acres Rented Joint 200,000 8,500 200,000 4,250 4,250
Total All Checking / Savings Accounts joint 2,160 22 2,160 22
Total All Life Insurance Cash Value joint 5,650 15 5,650 15
Certificate of Deposit #1 - Various Banks Client 72,000 1,250
Reverse Mortgage Line of Credit- America One Bank client 65,000 2,500 65,000 2,500 Savings Bonds - Series EE Savings Bonds Spouse 15,000 332
Deferred Annuity #1 - First Texas Insurance Client 31,500 1,103 Deferred Annuity #2 - Life Insurance of the US Spouse 45,200 1,442
Traditional IRA #1 - Bank Three Client 88,261 3,919 88,261 3,919
Traditional IRA #2 - Fidelity Spouse 95,680 6,219 95,680 6,219
New Investment #1 - Managed Account Children JOINT 138,227 3,594 3,594
New Reverse Mortgage Line of Credit CLIENT 72,040 2,946
788,901 25,301 763,428 17,246 14,063
Combined Income from Assets 25,301 31,309
First Mortgage on Your Home 5,549 1,961 KEEP IT
Reverse Mortgage on Your Home 127,302 KEEP IT 127,302
Combined Credit Card Debt 5,923 1,600 5,923
Combined Consumer Revolving Charge Accounts 3,780 1,450 3,780
Combined Vehicle Loans 15,770 3,680 15,770
New Reverse Mortgage 213,590
158,324 8,691 25,473 340,892
new loan balance
new annual payment
Debt before and
after Adjustments
new income spouse share new income client shareAssets before and
after Adjustments
current net value of asset current combined income new net value of asset OwnerAssets and Debt before and after Adjustments
current balance current annual payment refinance pay off or reduce loan 25
Income 54,332 43,986 60,341 49,995
Expenses 53,901 37,363 28,663
Property, Savings, Investmts 788,901 788,901 835,468 835,468
Debt 158,324 158,324 158,324 340,892
Life Ins Paid to Survivors 7,000 7,000
Funeral & Burial for Mary 3,850 3,850
Income 54,332 44,776 60,341 50,785
Expenses 53,901 37,638 27,338
Property, Savings, Investmts 788,901 788,901 835,468 835,468
Debt 158,324 158,324 158,324 340,892
Life Ins Paid to Survivors 9,000 9,000
Funeral & Burial for John 10,520 10,520
John Hancock Insurance Client 537NO CHANG 537 312,075
John Hancock Insurance Client 2,500 NO CHANG 2,500 377,410
John Hancock Insurance Spouse 520NO CHANG 520 202,575
John Hancock Insurance Spouse 1,110 NO CHANG 1,110 225,980
CLIENT
Current Policy Value
Death, LTC Insurance and Life Settlements
AFTER PLANNING John and Mary Both Alive Premium Changes /// Comprehen sive New Policy Value John and Mary Both Alive Mary Dies and John is Alive John and Mary Both Alive John Dies and Mary is Alive Years Coverage
Death Analysis
Type of Coverage 202,575 John Hancock Insurance /// Client /// 90 DaysCur Daily Benefit
3 Properties, savings and investments are the net
values and include the personal residence.
John and Mary Both Alive New Premium Mary Dies and John is Alive John Dies and Mary is Alive CURRENTLY 155 Death Benefit 312,075 Inflation Protection Nursing Home Only Annuity or Cash Val
Long Term Care Insurance
Cash Value Death
Benefit Comprehen
sive
John Hancock Insurance /// Spouse /// 20 Comprehen
sive
Settlement Value WL, UL,
Term
Description of Existing Life Insurance Policy
4 259
285
Home Care Only
Life Settlement Analysis
4 185
Comprehen sive Owner
John Hancock Insurance /// Spouse /// 90 Days
377,410 John Hancock Insurance /// Client /// 20 Days
Long Term Care Insurance Policy Company, Owner and Elimination Period
New Acct Earnings /// 3 225,980 26
County Farm Insurance /// Client 6,000 1,500 360 6,000 1,500 360
County Farm Insurance /// Client 3,000 2,600 295 3,000 2,600 295
Nuclear Insurance /// Spouse 2,000 900 185 2,000 900 185
New Era Insurance /// Spouse 5,000 650 335 5,000 650 335
Corsair Supplement Client 1,500 NO CHANGE 1,500
Corsair Supplement Spouse 1,400 NO CHANGE 1,400
Medicare Part B Client 1,195 1,195
Medicare Part B Spouse 1,195 1,195
Auto HO - Allstate Auto 430 NO CHANGE 430
Auto HO - Allstate Home 899 899
New Auto - Automobil 0
New HO - Homeown 0
Prepaid Plan - McDonald's Funeral Home Client 3,000 NO CHAN 3,000
Prepaid Plan - McDonald's Funeral Home Spouse 3,000 NO CHAN 3,000
Prepaid Plot - Monroeville City Cemetery Client 850 NO CHAN 850
Prepaid Plot - Monroeville City Cemetery Spouse 850 NO CHAN 850
Other Arrangement - Headstone Client 1,670 NO CHAN 1,670
Other Arrangement - NGL Medicaid Funeral Trust Client 5,000 NO CHAN 5,000
Type Owner Medicare Insurance New Death Benefit Changes Owner Value Current Premiums NO CHANGE
Yearly Cost Changes
New Premiums Auto HO New Cash Value Premium Current Premiums Changes
Funeral Coverage New Value New Yearly Cost
Life Insurance /// Owner and Insured BenefitDeath Cash Value PremiumNew
New Premiums
Life Insurance, Medicare, Auto, HO and Funeral Coverage
A Reverse Mortgage Has Been Recommended YES
Client Date of Birth Spouse Date of Birth
ZIP Code for Determination of Available Principal Limit 22012
Estimated Market Value of the Home Estimated Principal Limit for Ages and ZIP Code above Estimated Cash from the Reverse Mortgage Reverse Mortgage Cash Needed to Pay off Existing Debt Net Proceeds from the Reverse Mortgage
Using a Reverse Mortgage For Better Financial Health
6/25/1938 2/20/1935 $310,000 $204,891 $204,891 $132,851 $72,040 $0 $0 $0 $0 $72,040 $0 $0 $0 $72,040 $132,851 $310,000 Retire Debt Expenditure #3 Expenditure #2 Expenditure #1 Reverse Mortgage Cash Account Line of Credit Currently Earning
4.09%
Apply to Asset Reallocation Income Annuity #2 Income Annuity #1 Net Mortgage Proceeds Debt against Home Value of Home
1. Gifting and income strategies to preserve your assets for your spouse or your heirs
2. Finding sources of government funding for eldercare
3. Planning for Medicaid in advance by gifting assets to avoid penalty
4. Using a reverse mortgage to augment asset preservation
Charts in this section support a better understanding of the general goals of life resource planning using Planning Track 2. Those general goals for this planning track are outlined below.
Asset Preservation Planning
Planning Track 2 – Charts
Client age of client 77 Spouse MONTHLY
age of spouse 74 Current Medical and LTC Costs 1,117 Reverse Mortgage Assets - Exempt for VA 137,040 New and Anticipated LTC Costs 4,600 VA Asset Ceiling for asset test (retained assets) 50,000 Monthly Personal Care Contract 300
Market Value of all Assets Not Counting Home 692,491 LTC Costs Covered by Insurance
Should We Count the Home Is an Asset Also? No Income after Asset Transfer 4,038 Home Market Value Combined Annuity Income below 1,827 Market Value Assets Convert or Gift w/or/w/o Home 505,451 Adjusted Income for VA Purposes (85)
Gender of Client for Income Annuity below Male VA Monthly Benefit 2,054
Gender of Spouse for Income Annuity below Female Total Income above Plus VA Income 7,919 Client Spouse Total Medical and LTC Costs 6,017 Life Expectancy for SPIA Conversion 8.29 12.68 Income Available for Maintenance 1,901
Life Expectancy for IRA Conversion 11 17 Annual Cost of Living VA Benefit 2.5%
Use Different Life Expectancy Yes Yes IRA SPIA Interest 1.1%
Type of Claim Income SPIA Interest 1.2%
State for Funeral Trust
Market Value Assets to Divest 505,451 Funeral Trust Limit = Cash Assets
= Property Assets
Gift Cash Savings & Investments 52,742 52,742 52,742
Convert Assets into a Client SPIA 40,000 64,642 5,098 8.29 YES
Convert Assets into a Spouse SPIA 70,000 101,730 5,984 12.68 YES
Convert Client IRA into a SPIA 47,029 50,482 4,589 11.00 YES
Convert Spouse IRA into a SPIA 95,680 106,342 6,255 17.00 YES
Gift Home -- All or Part Client Medicaid LE 8.29
Gift Other Property -- All or Part 200,000 Spouse Medicaid LE 12.68 200,000 200,000 Purchase A Medicaid Funeral Trust
Assets above Allocated for Transfer 505,451 323,197 21,927 252,742 252,742
Is There a Community Spouse? Yes Anticipated Long Term Care Costs 4,526 Reverse Mortgage Line of Credit 137,040 Income after Asset Transfers plus any VA Benefit 7,919 Market Value of Assets Gifted 252,742 Income Used for Medicaid Beneficiary Private Pay 4,526 Penalty for above Gifted Net Assets 55.8 Monthly $$ from Gifted Assets Used for Private Pay
Remaining Countable Medicaid Assets 50,000 Remaining Income for Community Spouse 3,393 Remaining Medicaid Exempt Assets 137,040 Yearly Increase in Monthly Income 2.40% Yearly Increase Nursing Home Cost 3.00% Number of Months after Gifting to Apply for Medicaid 20
Reallocated from Preservation Plan 505,451 227,647 237,132 252,742 252,742
Allocate Remaining to Exempt Assets 40,000
Gift Remaining Assets Life Expectancy
Use Remaining for CS Spouse SPIA CS is Spouse 12.68
Use Remaining for Funeral Trust 10,000
Remaining Assets Transferred 50,000 252,742 252,742
Value of Contable Assets Retained Medicaid Penalty in Months for All Gifted Assets 55.84
Net Value Back to Clnt/Spse Net Value of Assets Gifted Market Value of Assets Gifted
Couple / Unhealthy Veteran - Aid and Attendance Ra
John Mary Utah 7,000 Yearly Income from Remaining Assets Assets Kept/Gifted Pay Medicaid Penalty Assets Kept Pay Remaining LookBack
Using Asset Preservation to Plan in Advance for Medicaid
Asset Preservation Planning
Net Value of Assets Used Yearly Annuity Income Medicaid or Alternate Life Expcy Cash Assets = 355,451 Amt gifted = 306,409 Before NH - Market Value of Assets Gifted Net Value of Assets Creating Penalty Gifted or Remaining Assets to Transfer 30
Self-Employment, Net Rental or Net Farm Income 4,250 4,250 8,500 8,500 4,250
Taxable Interest Income 3,769 3,769 3,769 5,832 19
Tax-Deferred Interest Income 1,103 1,773 2,876 2,876
Gross Social Security or Railroad Retirement 15,750 9,556 15,750 15,750 15,750 9,556 Required Withdrawals from IRAs, 401(k)s, 403bs 4,163 4,020 8,183 8,183 4,164 4,020 Withdraw of Principal from Retirement Accounts 780 820 1,600 1,600 780
Reverse Mortgage Lifetime Income 2,500 2,500 2,500 2,500
Pension Incm #2 - Texas Teachers Retirement 1,580 1,580 1,580
Survivor Benefit for Pension #2 above 790
New Inc #1 - Client Aid and Attendance Benefit 24,228
New Inc #2 - Client SPIA 5,098
New Inc #3 - Spouse SPIA 5,984
New Inc #4 - Client IRA SPIA 4,589
New Inc #5 - Spouse IRA SPIA 6,255
32,314 22,000 43,968 44,758 67,191 27,414
Combined Income 54,314 94,605
Primary Residence - Monroeville Home Joint 96,410 96,410
Farm, Equip, Buildings, Crops - 10 Acres Rented Joint 200,000 8,500
Total All Checking / Savings Accounts joint 2,160 22 2,160 11 11
Total All Life Insurance Cash Value joint 5,650 15 5,650 8 8
Certificate of Deposit #1 - Various Banks Client 72,000 1,250
Reverse Mortgage Line of Credit - America One Bank client 65,000 2,500 65,000 2,500 Savings Bonds - Series EE Savings Bonds Spouse 15,000 332
Deferred Annuity #1 - First Texas Insurance Client 31,500 1,103 Deferred Annuity #2 - Life Insurance of the US Spouse 45,200 1,442
Traditional IRA #1 - Bank Three Client 88,261 3,919 41,232 1,831
Traditional IRA #2 - Fidelity Spouse 95,680 6,219
New Reverse Mortgage Line of Credit CLIENT 72,040 3,314
716,861 25,301 282,492 7,663 19
Combined Income from Assets 25,301 7,682
current client available income Owner current net value of assets
Income and Assets before & after Asset Preservation Planning
new client income
Income before and after Asset Preservation Planning
Assets before and after Asset Preservation Planning current spouse available income current combined income new net value of asset client alive spouse dies new income spouse share new income client share spouse alive client dies new spouse income 31
Assets before and after Asset Preservation Planning
Income before and after Asset Preservation Planning
$54,332 $72,208 -$17,876 $95,025 $72,208 $22,817
Current income Anticipated LTC costs Income after LTC costs Income after Gifting and Reallocation Anticipated LTC costs Income after LTC costs $692,491 $505,451 $50,000 $137,040
Current Assets Exposed to LTC and Medicaid
Spend down
Gifted or Converted Assets Trying to Escape
LTC and Medicaid Spend down
Countable Assets after Converting and Gifting
Exempt Assets after Converting and Gifting
Assets are gifted or converted for preservation. The home is NOT included in analysis. $692,491 is available, $505,451 is preserved, and $187,040 is retained
$0 $200,000 $0 $137,040 $50,000 $187,040
Gift Market Value Other
Property -- All or Part Retained Medicaid Exempt Assets Retained Medicaid Countable Assets Total Retained Assets $505,451 $52,742 $40,000 $70,000 $47,029 $95,680
Market Value of Assets to
Convert or Gift Transfer Savings and Investments As a Gift Convert Assets into a Client SPIA Convert Assets into a Spouse SPIA Convert Client IRA into a SPIA Convert Spouse IRA into a SPIA
Client Is Single No Client Income from Planning Track 1 3,043 Client Is Medicaid Recipient Yes Spouse Income from Planning Track 1 1,985 Exclude All IRAs Yes MMNA for Client as the Community Spouse 2,815 Exclude Community Spouse IRAs No Income for Spouse Receiving Medicaid 2,213 Gender of Medicaid Recipient Male MMNA for Spouse as the CS 2,213 Gender of Community Spouse Female Income for Client Receiving Medicaid 2,815
Interest for Medicaid Annuity 1.00% Resource Multiplier 0.50
Area for Penalty Divisor Minimum CS Resource Allowance 22,728 State for Medicaid Parameters Maximum CS Resource Allowance 113,640
State Resource Divisor 4,526 Community Spouse Medicaid Allowed Resources 113,640 Income Cap State No Medicaid Recipient Resource Spend Down Amount 205,870 Medicaid Recipient Life Expectancy 8.29 Community Spouse Life Expectancy for Medicaid 12.68
Monthly Monthly
State Medicaid Rate + Existing Costs 5,643
Inflation in LTC Costs 2.5% Income w/ no Gifting for VA Benefit 4,526 Current Average Asset Earnings 4.1% Amount of Income to Use Towards LTC 2,000 Gifted Assets Average Earnings 6.0% Net Assets (with No Transfer for VA Benefit) 620,451
VA Benefit Cost of Living Increase 2% Change Scale of Graph 3
Monthly LTC Insurance Benefit If Any
Number of Months Payments Last Income after Gifting for Preservation Incl VA Benefit 6,092 # Months Assets Are Gone w/ no VA > 11 Years Amount of Income to Use Towards LTC 4,054 # Months Gifted Assets Gone w/ VA > 11 Years Remaining Liquid Assets Used for LTC 692,491
No VA -- Current Assets Left 209,438 If>11 Years, 11 Years of Asset Depreciation Are Used
With VA-Gifted + Non-Gift Assets Left 889,980 If>11 Years, 11 Years of Asset Depreciation Are Used Long Term Care with VA Benefit
Depletion of Assets from LTC before and after Planning
Utah Utah
Long Term Care with No VA Benefit
The next page contains a larger
scale version of these graphs.
Medicaid Consequences with No Preservation Planning
0 100,000 200,000 300,000 400,000 500,000 600,000 700,000 800,000 900,000 1,000,000 From 0 100,000 200,000 300,000 400,000 500,000 600,000 700,000 800,000 900,000 1,000,000 34
After Asset Preservation Planning
Depletion of Retained Assets from LTC Costs
Before Asset Preservation Planning
Depletion of Retained Assets from LTC Costs
$0 $100,000 $200,000 $300,000 $400,000 $500,000 $600,000 $700,000 0 1 2 3 4 5 6 7 8 9 10 11 IN YEARS $0 $100,000 $200,000 $300,000 $400,000 $500,000 $600,000 $700,000 $800,000 $900,000 $1,000,000 0 1 2 3 4 5 6 7 8 9 10 11 IN YEARS 35
A Reverse Mortgage Has Been Recommended YES
Client Date of Birth Spouse Date of Birth
ZIP Code for Determination of Available Principal Limit 22012
Estimated Market Value of the Home Estimated Principal Limit for Ages and ZIP Code above Estimated Cash from the Reverse Mortgage Reverse Mortgage Cash Needed to Pay off Existing Debt Net Proceeds from the Reverse Mortgage
6/25/1938 2/20/1935
Using a Reverse Mortgage with Asset Preservation Planning
$310,000 $204,891 $204,891 $132,851 $72,040 $-$72,040 $-$72,040 $132,851 $310,000 0 0 0 Reverse Mortgage Cash
Account
Leave in Line of Credit Earning 4.60% Income Annuity #2 Income Annuity #1 Net Mortgage Proceeds Debt against Home Value of H
