Medicaid and Long-Term Care Planning can be very confusing because of the extensive system of rules in place. To understand the significance of the question that we are focusing on here, some background information in helpful. The majority of people over the age of 65 will need living assistance eventually, and nearly 4 out of every 10 American senior citizens will someday reside in nursing homes.
Additionally, the life expectancy for a 67-year-old man is 85 years, and that figure is 87 for a woman.
When you reach an advanced age, your ability to do things for yourself is likely to be very different than it was when you were in your 60s. There are some people who can get limited assistance from friends and family members in their own homes free of charge. However, many elders will ultimately reside in nursing homes.
You may not be concerned from a financial perspective because you will qualify for Medicare when you are 65 years of age. Though this program will provide a strong health care insurance foundation, it does not pay for the custodial care that nursing facilities provide.
Long-term care costs are high all around the country, but here in Burlington, Vermont, the numbers are higher than the national averages. According to Genworth Financial, the median annual cost for a private room in a nursing home in our area in 2018 was a whopping $137,970.
That’s a lot of money to come up with out of your pocket after having been retired for about 20 years or so. To amplify the situation, if you are married, both parties may eventually need nursing home care, so the costs may be doubled before all is said and done.
Depending on the extent of your resources, a nursing home could ultimately consume all or most of the legacy that you intended to leave to your loved ones.
Nursing Home Asset Protection
Now that we have explained the problem, we can get to the solution and the specific topic of this blog post. Medicaid is another government health insurance program that does pay for long-term care, but you are probably aware of the fact that it is only available to people with very limited financial resources.
The ceiling on countable assets is just $2000. Plus, when a married person is applying for Medicaid to pay for long-term care, their spouse can retain ownership of certain property.
People qualify for Medicaid to pay for long-term care by engaging in a process called Medicaid Planning. This will typically involve creating transfers that benefit loved ones that would be inheriting the assets someday anyway.
If you speak to an estate planning attorney, you will find out about all the advantages to be gained through the utilization of a living trust. Since it can seem as though you are separating yourself as an individual from ownership of assets in a living trust, you may assume that they would not count if you apply for Medicaid.
In fact, this is not the case. A living trust is revocable, so you would have the power to dissolve the trust and take back direct personal possession of the assets at any time. You could also act as the trustee and the beneficiary, so your control would be absolute.
Because of this arrangement, assets in a revocable living trust would typically be counted by Medicaid.
However, all is not lost, because you could convey resources into an income only Medicaid trust that would be irrevocable. The principal would not count if you apply for Medicaid, and you would be able to receive income that is earned by assets in the trust until and unless you seek Medicaid eligibility.
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We are here to help if you would like to discuss nursing home asset protection with a licensed elder law attorney. You can send us a message to request a consultation appointment, and we can be reached by phone at 802-879-7133.