Before we get to the question that serves as the title this blog post, there are some people that don’t understand why they would ever have to worry about Medicaid coverage. We will provide a brief explanation to make that clear, and then we will move on to the subject at hand.
Medicare and Long-Term Care
Most Americans are going to qualify for Medicare when they reach the age of 65 under currently existing laws. Since this program was conceived as a source of health insurance for senior citizens (with some exceptions), it would be logical to assume that it would pay for nursing home care.
After all, about 35 percent of seniors will eventually reside in these facilities, and seven out of every 10 people that are 65 years of age and older will need some form of long-term care.
Many would say that it’s not fair, but in fact, Medicare will not pay for the custodial care that you would receive in a nursing home. It does not cover assisted-living communities, and you can’t count on Medicare to pay for it in-home health aide.
Medicaid Can Provide a Solution
The reason why Medicaid is relevant is because it will pay for long-term care. Of course, you are probably aware of the fact that Medicaid is only available to people with very limited resources.
In our state, the limit on countable assets is just $1600, but the word “countable” is quite operative. There are some things that you probably own that are not counted, including your home with an equity limit of $893,000. This is the limit in 2020, but there are annual adjustments to account for inflation.
One motor vehicle is not counted, along with furniture and other household items and your personal effects. Wedding rings, engagement rings, heirloom jewelry are not counted, and you can have unlimited term life insurance. Up to $1500 of whole life insurance is permitted, and Medicaid does not count prepaid burial plots.
When a married person is applying for Medicaid to pay for long-term care, and their spouse is still capable of independent living, the healthy spouse is entitled to certain allowances. One of them is the Community Spouse Resource Allowance.
This gives the healthy spouse the ability to maintain ownership of half of the shared assets that are countable, but there is a limit. In Connecticut in 2020, the limit is $128,640, and there is a minimum allowance of $25,728.
Income that is brought in by the spouse that will be in a nursing home must go toward the cost of the care unless the healthy spouse needs the income to get by. If it is needed, the community spouse can qualify for a Monthly Maintenance Needs Allowance that maxes out at $3216. The minimum this year is $2113.75 a month.
Assets In a Trust
Now we can get to the point. Revocable living trusts are very widely utilized for a number of reasons, and part of the appeal is the ongoing control. If you establish a living trust, you can act as the trustee and the beneficiary while you are living, so you have total access to the resources.
As the name would indicate, if you ever want to revoke the trust entirely and take back direct personal possession of the property, you can do so at any time. This arrangement can be a good thing, but because you retain incidents of ownership, the assets would count if you apply for Medicaid.
However, all is not lost. You could establish an irrevocable income-only Medicaid trust to aim toward future Medicaid eligibility. Though you would not have access to the principal, you would be able to receive income that is generated by assets in the trust until and unless you qualify for Medicaid.
If you go this route, you have to be mindful of the five-year look back period, which is why we used the “future” qualifier. The funding of the trust must be completed at least five years before you apply for Medicaid.
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We would be glad to help you put a nursing home asset protection plan in place if you are ready to take action. You can send us a message to request a consultation appointment, and we can be reached by phone at 860-548-1000.