You may have heard people talking about the importance of including “Medicaid planning” in your estate plan and wondered why you would need to plan for Medicaid. The reason centers around the strong possibility that you will need long-term care when you are older and the equally strong possibility that you will need help covering the cost of that care. Planning ahead for those possibilities is important because if you do not, you could put your hard-earned assets at risk. The following Medicaid planning guide may help you better understand the need to plan ahead and the steps you may need to take to protect yourself and your assets.
Will You Need Long-Term Care?
At the turn of the 21st century, Americans can expect to live almost twice as long as their counterparts did at the turn of the 20th century. Living longer, however, also means that your odds of needing long-term care (LTC) at some point in your life increase significantly. When you enter your retirement years you stand about a 50-50 chance that you will eventually need LTC. If you are still here at age 85 those odds will have increased to 75-25.
How Will You Pay for Long-Term Care?
The cost of LTC is high, averaging $80,000 a year across the nation. With an average length of stay running 2.5 years it quickly becomes clear that expenses related to LTC could deplete your heard-earned nest egg in short order. What about insurance or Medicare? Unfortunately, most basic health insurance policies exclude LTC costs unless you purchased a separate LTC rider at an additional cost. Medicare won’t help you either because it only covers LTC expenses under very limited circumstances, and even then only for a very short period of time.
Medicaid Can Help
If you find yourself in need of LTC the good news is that Medicaid does cover LTC expenses. The not so good news is that qualifying for Medicaid can be problematic because of the asset limit. Medicaid is a federally (predominately) funded healthcare program intended to cover low income individuals and families as well as the disabled and aged. As a senior with a fixed income you may not have a problem meeting the income limit; however, with an asset limit as low as $2,000 you could find that your assets area bar to eligibility if you failed to plan ahead. Although some assets are exempt, such as your primary residence, a vehicle, and household furnishings, you may have non-exempt assets that exceed the asset limit. If that is the case, you will be forced to endure a waiting period, during which time you will be expected to rely on those resources (known as the Medicaid “spend-down” requirement) to cover your LTC expenses. In essence, you could lose your entire nest egg to LTC costs if you failed to plan ahead.
No, You Cannot Just Transfer Assets Out of Your Name
You might think the answer is simply to transfer the problematic assets out of your name; however, the Medicaid five-year look-back rule prevents this from working. Basically, the look-back rule allows Medicaid to review your finances for the five-year period prior to your application. If any asset transfers for less than fair market value are uncovered, they will likely be ignored and the value of the assets transferred added back into your estate for purposes of determining your eligibility for benefits.
Medicaid Planning – What Can You Do?
Planning ahead is the key to protecting your hard-earned assets and ensuring that you will qualify for Medicaid benefits if you need them in the future. By including a Medicaid planning component in your comprehensive estate plan early on, you can work with your estate planning attorney to move asset out of your estate where they will be removed early enough and protected from the spend-down requirements.
For more information, please join us for an upcoming FREE seminar. If you have additional questions about Medicaid planning, contact the experienced North Dakota estate planning attorneys at German Law by calling 701-738-0060 to schedule an appointment.
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