A/B Trust – A Trust designed to make sure the personal estate tax exemption of each spouse (currently $2 million) is used to the fullest extent possible, while allowing the surviving spouse to have use of the assets of the deceased spouse during the remainder of the surviving spouse’s lifetime.
Adult Day Care – Community-based care designed to meet the needs of functionally and/or cognitively impaired adults who, for their own safety and well-being, can no longer be left at home alone during the day. Adult day care facilities such as senior or community centers offer protected settings which are normally open weekdays during business hours and include a mixture of health, social and support services. Specialized programs for individuals with Alzheimer's disease or related disorders also exist. Some facilities offer a wide range of therapeutic and rehabilitative activities as well as social activities, meals, and transportation.
Advance Directive for Health Care (Health Care Proxy and Living Will) – Prepared ahead of time, a health care advance directive is a written document that says how you want medical decisions to be made if you lose the ability to make decisions for yourself.
Annuitant – A person entitled to receive an annuity.
Annuity – A series of payments made periodically for a specific period of time. The payment amounts can be variable from payment-to-payment or fixed amounts. Many insurance companies sell a wide variety of annuity policies / contracts with payments that begin immediately upon purchase of the contract or are deferred until some time in the future. Some annuity contracts waive their surrender charges (early withdrawal penalties) in the event of a lengthy hospital stay, nursing home confinement, or terminal illness.
Assignment of Benefits – Long-term care insurance policy benefits are usually paid directly to the insured person. This policy provision allows the insured person (or his/her legal representative) to make arrangements to have all or a portion of the benefits paid directly to the provider or providers of their care.
Assisted Living Facility – A residential living arrangement that provides meals, housekeeping, transportation, individualized personal care and health services for people who require assistance with activities of daily living. The types and sizes of facilities vary from a small home to a large apartment-style complex; individual units range from single rooms to multi-bedroom apartments. They also vary in the levels of care and services that can be provided. Assisted living facilities offer a way to maintain a relatively independent lifestyle and more privacy for people who don't need the level of care provided by nursing homes. In most cases, assisted living residents pay a regular monthly rent for room and board, plus additional fees for the services they receive.
Beneficiary – A person who is entitled to receive the benefits or proceeds of a will, trust, insurance policy, retirement plan, annuity or other contract. Someone covered by Medicare is also called a beneficiary.
Benefit Period – The number of years an insurance policy will provide benefits. Many long-term care insurance policies offer buyers a choice of between three and five years; some offer lifetime benefits.
Benefit Trigger – A condition that must exist in order for an insurance company to pay benefits under a long-term care insurance policy.
Benefits – Monetary sums paid or payable to a person insured under an insurance policy, or to someone else, such as a health care provider, to whom the insured person has assigned the benefits.
Caregiver – An adult (typically a family member or friend) who provides unpaid assistance to another adult who can no longer independently attend to his or her personal needs and/or perform his or her normal activities of daily living.
Care Manager – A health care professional, typically a nurse or social worker, who arranges, monitors, or coordinates long-term care services (also referred to as a care coordinator or case manager). A care manager may also assess a patient's needs and develop a plan of care, subject to approval by the patient's physician.
Care Plan – see Plan of Care.
Cash Surrender Value – The amount of money you may be entitled to receive from the insurance company when you terminate a life insurance or annuity policy. The amount of cash value will be determined as stated in the policy.
Administrator – A Court-appointed person who manages the Estate of a deceased person who died without a Will; very similar to an Executor (see below), except the person is not named in a Will.
Attorney-in-Fact -- An individual designated in a Power of Attorney to act as the Agent of the person who executed the document.
Basic/Simple Will – A Will that normally distributes everything to your spouse, if living; otherwise to your children in equal shares. (See “Will with Trust Provisions”).
Beneficiary, Alternate or Contingent – The person or persons who will receive the proceeds of your Estate in the event that the Primary Beneficiary is not alive or is otherwise disqualified from receiving the proceeds of the Estate.
Beneficiary, Primary – generally, a person who is to receive the proceeds of your Estate upon your death. Often, the Primary Beneficiary is your spouse or may be a group of persons, such as your children.
Beneficiary, Contingent -- generally, a person or entity named to receive a gift under the terms of a will, trust or insurance policy, who will only receive that gift if a certain event occurs or a certain set of circumstances occur.
Bequest -- Gifts made to a person in a Will.
Codicil – A written amendment to a will.
Custodial Care (Personal Care) – Care to help individuals meet personal needs such as bathing, dressing, eating, and other non-medical care that most people do themselves, such as using eye drops. Someone without professional training may provide this type of care. Medicare does not pay for custodial care and Medicaid pays very little.
Daily Benefit – The insurance benefit amount (in dollars) that a person selects as the basis for their long-term care insurance. However, the daily benefit may not be the actual amount paid for each day an insured person is eligible for a benefit. There are three different methods of computing benefits; but, each insurance policy will use only one of them.
1. Expense-Incurred Method – After you qualify for benefits, the insurance will pay the lower of: (1) the expenses you incurred for eligible long-term care services, or (2) the dollar limit of your policy. Most policies bought today pay benefits using the expense-incurred method.
Some expense-incurred policies protect a covered person from the situation where expenses exceed the daily limit on some days and are less than the daily limit on other days, by setting up a weekly pool of benefits. That is, the daily benefit is multiplied by 7 to establish a weekly pool of money that can be used to pay all eligible expenses until the pool is exhausted for that week. Under the pool of money approach, any unspent money is often added to the end of the policy to extent the period of coverage. (A few policies use a monthly pool of money.)
2. Indemnity Method – This method is not based on the specific service received or on the actual expenses incurred. After you qualify for benefits and receive eligible long-term care services, the insurance company will pay a fixed amount directly to you, up to the limit of the policy. The fixed amount is pre-determined by your insurance policy.
3. Disability Method – After you qualify for benefits, you will receive your full daily benefit even if you don't receive any specific long-term care services. These benefits are yours to spend as you wish.
Deductible – The amount you must pay, usually every year, before your health insurance or Medicare begins to pay benefits.
Discharge Planner – A social worker or other health care professional who assists hospital patients and their families in transitioning from the hospital to another level of care such as rehabilitation in a skilled nursing facility, home health care in the patient's home, or long-term care in a nursing home.
D.N.R. (Do Not Resuscitate) –A directive given to healthcare providers.
Domicile – A person's permanent legal residence for tax purposes; typically, this is also the address where the person maintains his or her voter's registration.
Donee – A person or organization who receives a gift.
Donor – A person or organization who gives a gift.
Durable Power of Attorney – See Power of Attorney.
Elder Law - area of the law that deals primarily with all of the legal concerns that seniors (and their families) may have, including planning for incapacity and the availability and affordability of long term care.
Elder Law Attorney - An attorney experienced in providing legal services for seniors, especially in the areas of estate planning, Medicaid planning disability planning.
Elimination Period – The length of time an insured person must pay for covered services before the insurance company will begin to pay benefits. Unless otherwise noted in the insurance policy, no benefits are payable for any days of an elimination period.
Estate – All of a person's assets and debts at the time of his or her death which are subject to probate (administration supervised by the court) and distribution to heirs and beneficiaries.
Estate Tax – A tax levied on a person's estate after that person's death.
Exclusion – A health condition, situation, item, service or expense that an insurance policy does not cover. Medicare excludes coverage for most prescription drugs, long-term care, and custodial care in a nursing or private home.
Executor- A person named in a Will who is authorized to manage the Estate of the deceased person. The Executor will collect the property, pay off any debts and distribute property and assets according to the terms of the Will. An Executor must be approved by the court and given a “Letter of Office” (see below) before they have official authority.
Fiduciary – A person or institution that is legally responsible for (and held to a high level of care regarding) the management, investment and distribution of funds; e.g. the Trustee identified in a Trust.
Gift Tax – A tax on gifts, usually only over $12,000 (2007 amount), to non-charitable beneficiaries. For gifts that exceed the annual gift tax exclusion, the donor is required to file a gift tax return and pay all applicable taxes. The person who receives the gift does not have to pay any gift tax because of it.
Gift Tax Exclusion – The maximum amount one person is allowed to give to another person without incurring Federal gift tax. The current annual exclusion is $12,000 (2007 amount) per year per recipient. There is no limit on the number of these gifts you can make to different people in a year. A husband and wife can give a total of $24,000 ($12,000 each) to the same person each year. To qualify for the exclusion, a gift must be of a "present interest," meaning that the recipient can make use of the gift immediately, and the donor must not have any control over the asset after it is given. There are no exclusion limits on gifts given to a spouse unless the spouse is not a U.S. citizen. Generally, if a gift qualifies for the exclusion, the donor does not have to file a gift tax return. The person who receives the gift does not have to pay any gift tax because of it.
Grantor – A person who creates and transfers assets into a Trust; also called a trustor.
Grantee- A person or entity that is the recipient of a transfer.
Guardian- An individual with the legal authority to care for another, usually a minor child or disabled adult.
Guardianship- A Court-ordered relationship between a person (called a Guardian) who has been appointed to care for the financial (Guardian of the Estate) and/or personal (Guardian of the Person) matters of another (called a Ward).
Healthcare Proxy or Healthcare Power of Attorney (see also, “Powers of Attorney for Healthcare) – A written document in which an individual designates another person to make healthcare and health-related decisions in the event that the individual becomes incapacitated and is unable to do so.
Heir – Someone who inherits assets from an estate of another person who has died. The heir does not have to pay income tax or estate tax on the value of the inheritance received.
Home Health Care (Home Care) – Supportive services in the home ranging from skilled nursing care and occupational, physical, respiratory and speech therapy ... to assistance with activities of daily living and housekeeping. This support allows many older people to remain in their own homes.
Home Health Aides – Individuals who provide non-medical health care to people at home. Training or certification requirements vary from state-to-state, but typical services include assistance with activities of daily living, managing medications and some household tasks. In some states, only licensed home health aides can provide hands-on assistance.
Homemaker Services – Household services done by someone other than yourself because you are unable to do them. These services can include shopping, laundry, light cleaning, meal preparation and transportation assistance. Homemakers cannot provide hands-on care in most states.
Hospice Care – Continuous care provided for a terminally-ill person, and his or her family, during the final stages of life. (A terminally-ill person has a life expectancy of six months or less.) Hospice care can be provided at home, in a facility with a homelike setting, a hospital or a nursing home. The care includes physical care, counseling and support services, but does not attempt to cure any illness.
Incapacity (or “Incompetency”) - A person’s inability to act on his or her own behalf, e.g. the “sound mind” requirement for drafting a valid Will. A court makes a finding of incapacity, normally with the aid or input of a physician.
Inflation Protection – A policy option that automatically increases benefits to help pay for expected increases in the cost of long-term care. Two types of protection, simple or compounded, are often available; both are typically based on an inflation rate of 5% per year.
The simple method increases benefit amounts by 5% of the original amount each year. This method is less expensive, but it is also one of the least effective, especially if you don't expect to use benefits until 20 or 30 years from now. For example, in 30 years using the simple method, a $5,000 monthly benefit (today's average cost for a nursing home) will grow to $12,500 per month.
However, long-term care costs actually increase about 5% compounded annually — that is, each year's costs have been 5% higher than the prior year's cost, not 5% higher than some original cost. At 5% compounded annually, today's $5,000 monthly cost for a nursing home will grow to $21,610 in 30 years, leaving a shortage of $9,110 to pay out-of-pocket every month if you pick a policy with only simple inflation protection.
Inheritance Tax – A tax that is levied by a state or local government upon those who inherit property; paid by the recipient.
Inter Vivos Trust – A revocable trust created during someone's lifetime to hold assets during that person's lifetime, thereby removing those assets from probate at death; also called a living trust.
Intestate – A term used when a person dies without a valid Will, so that his or her Estate passes to heirs based on the laws of descent and distribution of his or her state.
Intestate Succession – The statutory schedule that determines who shall receive the proceeds of a person’s estate when that person dies without a Will.
Irrevocable Trust – A trust that, once executed, cannot be revoked or changed without the consent of the beneficiary.
Joint and Survivor Annuity – An annuity issued on two individuals under which payments continue in whole or in part until both individuals die; also called a joint life annuity.
Joint Tenancy in Common – A type of joint tenancy of property without right of survivorship. Upon the death of any joint tenant, his or her ownership interest is transferred according to the terms of his or her will that may, or may not, provide for transfer to a surviving joint tenant(s).
Joint Tenancy with Right of Survivorship – A type of ownership of property by two or more persons in which each owns an interest in the whole. Upon the death of any joint tenant, his or her ownership interest automatically passes to the surviving joint tenant(s).
Joint Tenancy with Right of Survivorship – A title that is often placed on co-owned property. At the death of one owner, the other owner will be legally entitled to sole possession of the property, regardless of what provisions are made in a Will. A husband and wife often use this form of ownership. (See also “Tenants by Entirety”).
Life Estate – Created when you transfer ownership of your house to someone else (usually your children) but reserve the right to exclusive use and occupancy for the rest of your life.
Life Tenancy - After the owner sells a home, he or she leases it back and receives a written guarantee (life tenancy) that he or she can continue to live in the home for the rest of his or her life. A life tenancy is often arranged with an annuity set up to pay the rent
Living Trust – A trust created during someone's lifetime to hold assets during that person's lifetime, thereby removing those assets from probate at death. A living trust can be either revocable or irrevocable. It avoids probate and therefore gets assets distributed significantly faster than a will. Assets that a person wants to move to a living trust, such as real estate and bank or brokerage accounts, must be retitled so that the trust becomes the owner (see also, Inter Vivos Trust).
Look-Back Period – A period of time, usually 60 months, in which the New York Department of Human Services (or other government agency) will review gifts or transfers of assets when a person applies for Medicaid (and some other government benefits). Transfers made during the look-back period are often subject to being undone, or can generate a penalty period or disqualification of benefits.
Living Will – A statutory legal document that sets forth a person's wishes regarding the use of life-sustaining treatment in the event that he or she becomes terminally ill or permanently unconscious.
Long Term Care – A variety of services provided over an extended period of time to people who need help to perform normal activities of daily living because of cognitive impairment or loss of muscular strength or control. Care may include rehabilitative therapies, skilled nursing, and palliative care, as well as supervision and a wide range of supportive personal care and social services. It may also include training to help older people adjust to or overcome many of the limitations that often come with aging. Long-term care can be provided at home, in the community, or in various types of facilities, including nursing homes and assisted living facilities. Regardless of where it is provided, most long-term care is custodial care, the type of care that is not paid for by Medicare.
Long Term Care Insurance – An insurance policy that helps pay for some long-term medical and non-medical care, like help with activities of daily living. Because Medicare generally does not pay for long-term care, this type of insurance policy may help pay for long-term care that you may need in the future. Some long-term care insurance policies offer potential tax benefits; these are called "Tax-Qualified Policies."
Marital Deduction – A federal tax deduction that allows one spouse to pass his or her Estate to the other spouse without having to pay estate or gift taxes.
Medicaid – A joint federal/state program that pays for health care for individuals and families with low incomes or very high medical bills relative to their income and assets. Coverage and eligibility requirements vary from state-to-state. Medicaid is the primary payer of nursing home care. Some states also offer some home and community-based long-term care services for eligible individuals through their Medicaid programs. These additional services are at the option of the state and are not mandated by federal law
Medicare – A federal health insurance program that provides hospital and medical care to people age 65 or older, and to some younger people who are very ill or disabled. Benefits for nursing home and short-term home health services are limited and are generally available only to people while they are recovering from an acute illness. Coverage is restricted to medical care, and does not include custodial care at home or in nursing homes.
Medicare Supplement Insurance – A private insurance policy that covers many of the gaps in Medicare coverage (also known as Medigap Insurance or Medicare Supplemental Insurance). Except in Minnesota, Massachusetts and Wisconsin, there are 12 standardized plans labeled Plan A through Plan J. (Not all insurance companies offer all 12 plans.) Medicare Supplement Insurance policies work only if you are enrolled in the Original Medicare Plan. But, they won't pay any benefits if you are enrolled in a Medicare HMO or another type of Medicare Plus plan. Medicare Supplement policies can minimize Medicare co-payments and deductibles for covered services, but generally do not offer expanded coverage such as long-term care services or prescription drugs.
Medigap – See Medicare Supplement Insurance.
Minimum Distribution – The minimum annual required distribution amount for an IRA holder reaching age 70 1/2; also called Required Minimum Distribution (RMD).
Nursing Home – A state-licensed residential facility that provides a room, meals, help with activities of daily living, recreation, and general nursing care to people who are chronically ill or unable to take care of their daily living needs. It may also be called a Long Term Care Facility.
No Will – (See “Intestate”)
Partnership Policy – A type of long-term care insurance policy that allows you to protect (keep) some of your assets if you apply for Medicaid after using your policy's benefits. Only a few states have these policies.
Per Capita - A Latin “word of art” that means basically that a distribution is being made to a beneficiary or group of beneficiaries where the beneficiary must survive in order to be entitled to the distribution. The children of a deceased beneficiary are not entitled to share that would have been received, had the beneficiary survived.
Per Stirpes - A Latin “word of art” that means basically that the children of a deceased beneficiary equally take the share that the beneficiary would have received if he or she had survived.
Pour-Over Will – A Will prepared in conjunction with a Trust that provides for all (or most) assets to be transferred into a Trust. It causes a person’s Estate to “pour-over” into the Trust.
Power of Appointment – A legal right given to a person in order to allow him or her to decide how to distribute a deceased person’s property. A “general” Power of Appointment places no restrictions on the named person, while a “limited” or “special” Power of Appointment places restrictions on who may receive distributions. Normally, the exercise of a Power of Appointment is accomplished by referencing same in a Will.
Power of Attorney for Property – A written document in which an individual (Principal) grants another person (Agent) the concurrent right to act on the Principal’s behalf regarding his or her property and / or assets. A Power of Attorney can be limited to certain acts (or property) or expanded beyond the statutory format. When a Power of Attorney is designed or designated to continue during a person’s incapacity or when a person is incompetent, it is said to be a “Durable” Power of Attorney. Normally, a Power of Attorney becomes null and void upon the death of the person who created the Power.
Power of Attorney – A written legal document in which one person (the principal) appoints another person to manage the principal's financial affairs. Even though the intent is that the power of attorney will not take effect until the principal becomes unable to handle his or her own affairs, it actually takes effect on the date it is signed, unless otherwise specified. And, unless otherwise specified, the durable financial power of attorney applies only to assets owned directly by the principal, and not to any assets transferred into a trust by the principal. Unlike an ordinary power of attorney, a durable power of attorney remains in effect even after the principal can no longer manage his or her own affairs.
Power of Attorney for Health Care – A written legal document in which one person (the principal) appoints another person to make health care decisions on behalf of the principal in the event the principal becomes incapacitated (the document defines incapacitation). This instrument can contain instructions about specific medical treatment that should be applied or withheld. While its purpose remains essentially the same from state-to-state, the name of this document can vary
Probate – A legal proceeding whereby a Court appoints a legal representative to administer the Estate of a person who cannot act for him or herself; technically, this includes decedent estates, minor estates and disabled adult estates. In the case of a decedent’s estate where a Will has been filed, the Court will review and determine whether the Will is authentic and properly executed.
Provider – A properly-licensed doctor, health care professional, hospital, or other health care facility, including a home health agency, that provides health care or related social services
QTIP Trust – A Trust designed to permit a spouse to transfer assets to his or her Trust while still maintaining control over the ultimate disposition of those assets at the spouse’s death. QTIP Trusts are particularly popular in situations where a person is married for a second time but has children from a first marriage for whom he or she wants to reserve assets.
Real Property – Real estate, land.
Revocable Trust – A trust in which a Grantor reserves the right to revoke or change. To protect the final wishes of the Grantor, a trust can become irrevocable upon the death of the Grantor
Qualified Long-Term Care Insurance Policy – A policy that conforms to federal law and, as a result, offers potential federal tax advantages for some people. Sometimes referred to as a Tax-Qualified Long-Term Care Insurance Policy.
Qualified Long-Term Care Services – Defined by federal law, these are necessary diagnostic, preventive, therapeutic, curing, treating, mitigating, and rehabilitative services, and maintenance or personal care services that are required by a chronically ill individual, and are provided pursuant to a plan of care prescribed by a licensed health care practitioner. Maintenance or personal care services means any care the primary purpose of which is to provide needed assistance with any of the disabilities as a result of which the individual is a chronically ill individual (including the protection from threats to health and safety due to severe cognitive impairment).
Skilled Care – Daily nursing and rehabilitative care that can be performed only by, or under the supervision of, skilled medical personnel. This care is usually needed 24 hours a day, must be ordered by a physician, and must follow a plan of care. Individuals usually get skilled care in a nursing home but may also receive it in other places.
Skilled Nursing Care – Skilled care that must be given or supervised by Registered Nurses. Examples of skilled nursing care are intravenous injections, tube feeding, and changing sterile dressings on a wound. Any service that could be safely done by an average non-medical person without the supervision of a Registered Nurse is not considered skilled care.
Skilled Nursing Facility (SNF) – A nursing facility (in most cases, a nursing home; sometimes a special unit inside a hospital) that has been certified by Medicare, with the staff and equipment to give skilled nursing care and/or skilled rehabilitation services and other related health services.
Spend Down – A requirement that an individual use up most of his or her income and assets to meet Medicaid eligibility requirements.
Sub-Acute Care – Typically following a stay in a hospital, this is maintenance care for serious medical conditions that are not urgent or life-threatening. Hospitals typically do not provide sub-acute care on an ongoing basis. Sub-acute care may include long-term ventilator care or other procedures provided on a routine basis either at home or by trained staff at a skilled nursing facility.
State Death or Inheritance Taxes – Taxes that may be imposed by the state where a deceased person lived, or where his or her property is located after death.
Successor Executor or Successor Trustee – The alternate person named in a Will or Trust who becomes the Executor or Trustee in the event that the person named initially fails or refuses to act in such capacity. Often several persons are named (in a particular order) to act in the event that the preceding person cannot or will not act.
Survivor – In the case of a husband and wife, the surviving spouse.
Tax Basis – The value of an asset for income tax purposes. This varies by the asset and the means by which it was acquired
Term Life Insurance – Covers a person for a period of one or more years. It pays a death benefit only if you die during that term. It generally does not build a cash value.
Testate – Dying with a legally valid will.
Testator – The person who makes a will.
Trust – A legal entity normally created by an individual (called a Grantor, Settlor or Trustor) or by a Will, that holds ownership to property/assets for the benefit of another (beneficiary), subject to the rules and/or provisions of the document that created the entity. A Trust may be created during the lifetime of the person forming the Trust, or after his or her death.
Trustee – An individual or organization designated in a trust document to manage the assets held in the trust for the benefit of the trust's beneficiary or beneficiaries.
Trustor – The person who creates a trust; also called a grantor.
Testamentary Trust – A trust created by a Will and does not actually come into existence until the death of the person creating the trust. A Testamentary Trust can be drafted so as to take advantage of the various estate planning features, such as the avoidance of some estate tax and can be used to create a Marital or Family Trust, as well.
Tenants by the Entirety – A form of joint ownership in a marital residence (which is limited to husbands and wives) that provides for the right of survivorship, but does not allow judgment creditors of one spouse to foreclose on the interests of the other spouse, but without having a judgment against both spouses.
Will – A document that directs to whom a person's Estate shall be distributed upon the death of the person who created the Will. In New York, a Will is not filed with the Court until after the death of the person who created the Will. This must be done within 30 days of the date of death.
Glossary of Terms
A/B Trust – A Trust designed to make sure the personal estate tax exemption of each spouse (currently $2 million) is used to the fullest extent possible, while allowing the surviving spouse to have use of the assets of the deceased spouse during the remainder of the surviving spouse’s lifetime.