Everyone understands the value of retirement planning, but a lot of people do not see the complete picture. The active retirement years can be full of travel, leisure activities, quality time with your family, and efforts to cross things off your bucket list.
This is a great reward for your hard work, but you should pragmatically address the twilight years that will inevitably follow. The majority of seniors will need help with their activities of daily living, and most elders will incur long-term care costs.
Will Medicare Help?
It would not be illogical to assume that Medicare will pay for long-term care since most seniors will need help with their activities of daily living. Unfortunately, this is not the way it works; Medicaid will cover convalescent care, but it does not extend to custodial care.
The median annual charge for a paid in-home caregiver in the Hartford area was $66,924 in 2021 according to Genworth Financial. This is an increase over the 2020 figure, so the costs are likely to be much higher if you need living assistance 20 years from now.
Nursing home charges are considerably more expensive at over $179,000 for a private room, so in-home care is preferable from a financial perspective. Plus, many if not most seniors would prefer to continue to enjoy familiar surroundings.
Aging in Place
There is a building concept called “aging in place” that can allow seniors to remain in their own homes. You can add grab bars, handrails, motion sensor lighting, door levers instead of knobs, slip resistant flooring, smart home technology, outside ramps, etc.
Once you have made your initial modifications, they can be adjusted over time as your needs change. Many adult children that are caring for aging parents will adapt their own homes to accommodate their parents, and this makes it more convenient to provide the assistance that is needed.
Medicaid Home and Community-Based Services Waiver
In some cases, family members can in fact provide the care that is necessary, but this is not always possible. An in-home caregiver may be the only option, and as we have stated, home health aides are quite expensive.
Fortunately, there is a solution in the form of the Medicaid Home and Community-Based Services Waiver. This program will pay for long-term care if you can create a financial profile that will lead to eligibility.
Since there is a $1,600 asset limit, you have to transfer assets out of your own name, and direct gift giving to loved ones is an option. However, a lot of people need income that is generated by assets that they have invested, so lifetime gift giving is not possible.
Income Only Medicaid Trust
You can address this dynamic through the utilization of an irrevocable income only trust. You would no longer have access to the principal when you fund the trust, but you could accept distributions of the trust’s earnings.
In addition to income-producing assets, you would want to convey your home into the trust as well. A place of residence is not a countable asset for Medicaid eligibility purposes, but they could place a lien on the property after your death if it is in your personal possession.
The principal would not count if and when you apply, but there is a stipulation. Since there is a five-year look back period, the funding must be completed at least 60 months before you submit your application for the Medicaid Home and Community-Based Services Waiver.
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The dates are posted on our seminar schedule page, and if you would like to join us, follow the instructions to register so we can reserve your spot.
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