You are probably aware of the fact that Medicaid is a jointly administered federal/state government health insurance program that is intended for people with very limited financial resources. If you are on solid financial footing as someone who will qualify for Medicare as a senior, you may not understand how Medicaid could be relevant to you toward the end of your life. Though it comes as a surprise to many people, the Medicaid program can actually help you preserve your legacy for the benefit of your loved ones.
Eye Opening Statistics
Before we get into the matter of Medicaid planning, we have to set the stage with some important statistics. The United States Department of Health and Human Services maintains a very useful website called LongTermCare.gov. You can find a lot of interesting facts about aging and living assistance if you spend some time exploring the site.
According to this website, seven out of every 10 senior citizens will someday need help with their day-to-day activities. In some cases, family members, friends, and/or neighbors may be able to provide the necessary assistance. However, some elders require the type of help that only a trained, licensed in-home health aide can provide. Other people will require full-time residence in an assisted living community or nursing home.
The Big Gap
A lot of folks are under the impression that Medicare will take care of all your health care needs when you reach the age of 65. In fact, there are significant out of pocket costs. There is a monthly premium that must be paid for Part B, which is the portion of the program that pays for visits to doctors and outpatient care, and there is a prescription drug plan premium as well. There are also co-payments and deductibles across-the-board. It is important to be cognizant of these expenses and prepare for them when you are developing your retirement budget.
For many, these costs will be manageable, but there is one enormous gap in Medicare coverage that is not easily filled. This program will not pay for living assistance, and as we have stated, most people will need help with their activities of daily living eventually. In-home care, assisted living facilities, and nursing homes are extremely expensive. As a result, long-term care costs can potentially consume everything that you have always intended to leave to your family members after you are gone.
Now we can come full circle and get back to the relevance of Medicaid for senior citizens that were never financially needy. This program will pay for custodial care if you can obtain eligibility. While it is true that there is a $2000 asset limit, people that take the right steps in advance can potentially qualify for Medicaid to pay for long-term care.
The low limit is the bad news, the good news is that many things that you own are not countable for Medicaid eligibility purposes. Your home is not a countable asset, but there is an equity limit that is over $800,000 in Connecticut. However, if your spouse is remaining in the home as you enter a long-term care facility, there is no equity limit at all.
One vehicle that is used as a primary source of transportation is not counted, and you can maintain ownership of your household goods and personal effects, including your wedding ring and engagement ring. An applicant can be approved with unlimited term life insurance, and $1500 of whole life insurance is allowed, along with the same amount of money set aside for burial or cremation expenses.
When it comes to the assets that are countable, you could engage in a process that is often referred to as a Medicaid “spend down,” but it doesn’t necessarily have to revolve around spending everything that you have. You could convey assets into an irrevocable Medicaid trust to get them out of your own name with future Medicaid eligibility in mind. The principal would not be accessible, but you could continue to receive income from the trust’s earnings.
The key to this strategy is to act in advance, because there is a five-year look-back. If you divest yourself of assets within 60 months of submitting your application for Medicaid, it will be denied, and a penalty period will be imposed.
Get in Touch!
We would be glad to discuss Medicaid planning with you in person if you are interested in developing a nursing home asset protection strategy. To schedule a consultation, give us a call at 860-548-1000.