Following on the heels of MetLife's announcement last November that it was going out of the Long-Term Care Insurance business, Berkshire Life -- the subsidiary of Guardian Life that writes LTC policies -- has announced that it too will stop issuing LTC policies by the end of 2011.
As noted in this article, the LTC insurers have been plagued by a common problem: too few policyholders have dropped the policies after issuance, and too many people (at least from the insurers' standpoint) are filing claims. Essentially, the actuaries improperly evaluated these policies, leaving them under priced and underfunded.
So, what does this mean to the consumer? LTC policies will be harder to come by, and will surely be more expensive at any age range.
This unwelcome development makes proactive Elder Law planning, guided by an experienced Elder Law attorney, all the more important. Under current law, a well-drafted and appropriately funded Medicaid Asset Protection Trust is the premier long-term care planning tool in the Elder Law attorney's tool box. A Medicaid Asset Protection Trust will render assets funded into the Trust as "exempt" for Medicaid spend-down purposes five years after the assets are funded into the trust. The "Trustmaker" may retain all income derived from the trust assets, while they will not have access to the principal assets. Principal assets, however, may be distributed to the Trustmaker's children or other designated beneficiaries during the Trustmaker's lifetime and after his or her death.
A primary residence is often an ideal asset for funding into a Medicaid Asset Protection Trust. The Trustmaker may retain (a) lifetime occupancy rights, (b) property tax exemptions under New York State law (and likely in many other jurisdictions) and (c) the capital gains tax exemption (currently $250,000 for an individual and $500,000 for a married couple) if the residence is sold during the Trustmaker's lifetime. While our clients often elect to fund liquid assets into a Medicaid Asset Protection Trust, it is especially helpful to fund real estate and other illiquid assets into these trusts, as it is much more difficult to engage in "crisis" Medicaid planning with illiquid assets than with liquid assets.