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Why Do I Need to Include Medicaid Planning in My Estate Plan?

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A successful estate plan typically includes numerous inter-related components that work together to achieve all your estate planning goals. For many people, one of those components is Medicaid planning. If you have never relied on Medicaid to help cover your healthcare expenses, you may be wondering why you would need Medicaid when you are older. To make sure you are prepared for your retirement years, the Essex Junction Medicaid planning attorneys at Unsworth LaPlante, PLLC explain why you should include Medicaid planning in your estate plan.

What Is Medicaid?

Medicaid is predominantly funded by the U.S. federal government; however, the individual states have the option to supplement federal funds. Although Medicaid is a federal program, it is administered by the individual states. As such, both the eligibility criteria and the benefits provided to eligible participants will vary somewhat from one state to the next. Generally, however, states offer Medicaid to low-income families, pregnant women, children, the disabled and the aged.

Why Might I Need to Rely on Medicaid during My Retirement Years?

For most seniors, turning to Medicaid for help occurs when the need for long-term care becomes a reality. As you age, the odds of needing long-term care (LTC) increase dramatically. By the time you enter your retirement years, you are looking at a 50 percent chance of eventually needing LTC. If you have a spouse or partner, you are both facing the same odds. At age 85, your odds of needing LTC prior to your death will have increased to 75 percent. Nationwide, the average cost of a room in LTC was over $100,000 per year in 2021. In Vermont, LTC costs tend to run above the national average with an average annual cost of over $130,000 in 2021. With an average stay in LTC at three years, your LTC bill could be close to $400,000. Making matters worse is the fact that most health insurance plans will not cover LTC expenses nor will Medicare. Therefore, many seniors end up needing to qualify for Medicaid because Medicaid does cover LTC expenses.

Why Is Medicaid Planning Necessary?

Although Medicaid will cover LTC expenses, you must first qualify for Medicaid benefits. Because Medicaid is intended to cover low-income individuals and families, there are strict income and asset limits that cannot be exceeded by applicants. With an asset, or “countable resources,” limit of as low as $2,000 it should not be surprising that many seniors don’t initially qualify. Although some assets are exempt from consideration, it is still easy to see how the value of your assets could exceed the limit, causing your application to be denied. At that point, you will have to “spend-down” your excess assets before Medicaid will find you eligible.

Moreover, Medicaid uses a five-year look-back period that effectively prohibits you from transferring assets out of your estate for less than fair market value for the five-year period prior to applying for Medicaid. In other words, simply transferring your non-exempt excess assets to your children when you realize you need to qualify for Medicaid will not work.

Medicaid planning looks ahead to the likelihood that you will need to qualify for Medicaid in the future and uses tools and strategies that protect your assets while simultaneously ensuring that you will meet the eligibility criteria if you do need to rely on Medicaid as a senior. Because of the look-back rule, it is best to incorporate Medicaid planning into your estate plan long before you need to qualify for Medicaid benefits.

Contact Essex Junction Medicaid Planning Attorneys

For more information, please attend one of our upcoming FREE webinars. If you have questions or concerns about how to incorporate Medicaid planning into your estate plan, contact the experienced Essex Junction Medicaid planning attorneys at Unsworth LaPlante, PLLC by calling 802-879-7133 to schedule your appointment today.

Stephen Unsworth
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