The responsibilities that you assume as you go through life will often shift, but if you are committed to your family, they will come in a steady succession. By the time your children are grown, you may find yourself providing assistance for your aging parents.
As time goes on, they will invariably require more and more help. At some point, the level of need may exceed your capabilities, and long-term care can be the only answer.
Assisted Living Costs
If you have never thought about the subject, it would be logical to assume that Medicare will pay for the custodial care that many seniors need. Though it may seem unfair, Medicare does not cover nursing home, assisted living community, or in-home health aide costs.
Just over one third of seniors will ultimately reside in nursing homes, and you can expect to pay over $100,000 for a year in a nursing home in the Essex Junction area. The costs have been rising over recent years, so the figures may be considerable higher a decade from now.
Other types of care are also expensive. The median annual charge for a private room in an assisted living community was $48,612 last year. Home health aides are even more expensive at $52,624 for 12 months of care.
What Can You Do?
People that had health insurance through their employers before they became eligible for Medicare would have no reason to think about Medicaid. However, it can become quite relevant to many families because Medicaid will pay for the custodial care that Medicare doesn’t cover.
Since it is intended for people with considerable financial need, there is a $2000 limit on countable assets. A home (with a $595,000 equity limit) and an applicant’s personal possessions are not counted. We will get into the details with regard to non-countable assets in a different post.
The fact that a home is exempt is a bit misleading on the surface. There is a process called Medicaid estate recovery. If someone does qualify for Medicaid while they are in direct personal possession of a home, a lien could be placed on the property after the death of the Medicaid beneficiary.
People qualify for Medicaid by giving assets to their loved ones before they apply, but there is a five-year look back. You have to complete all the gift giving at least five years before you submit your application.
When it comes to a home, there is an exception to this rule. If you are living with your parent providing a level of care that keeps them out of a nursing home for at least two years, they could give you the property. The Medicaid look-back rule would not apply.
Income-Only Medicaid Trust
Direct gift giving is one way to proceed, but the creation of an income-only Medicaid trust is another option. This would be an irrevocable trust, so the grantor would surrender access to the principal.
However, they would be able to receive distributions of income that is generated by assets in the trust until they apply for Medicaid.
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