When you are planning for retirement, you probably envision the good times that await you. If you plan ahead diligently, you can go forward with the financial underpinning that you need to enjoy your retirement years to the fullest.
These are the golden years, but the twilight years will follow. A very significant percentage of people ultimately require assistance with their activities of daily living. In fact, 70 percent of people who are reaching the age of 65 will someday need living assistance according to the United States Department of Health and Human Services.
Your first thought may be that Medicare will pay for long-term care when and if you need it.
You will qualify for Medicare when you reach the age of 65 if you have paid into the program sufficiently. That’s the good news. Here’s the bad news: Medicare will not pay for long-term care. The program will pay for up to 100 days of convalescent care, but it does not cover custodial care.
Cost of Care
It is not easy to easy get out your checkbook and pay for long-term care out-of-pocket. The median annual cost for a private room in a nursing home in the greater Hartford area was over $160,000 in 2015.
According to a government survey that was done a couple of years ago, the average length of stay is around two years and three months. Ten percent of people in nursing homes remain in the facilities for at least five years.
Medicaid is the solution for many people who require long-term care late in their lives. Medicaid is a need-based government run health insurance program that will pay for living assistance. To qualify, you must stay within certain income and asset limits.
For an individual, the limit for countable assets is just $2000.
The qualifier “countable” is quite relevant, because some of the things that you own are not considered to be countable for Medicaid purposes. Without question, the most significant asset that is not counted is your home. The home is not considered to be a countable asset, but in Connecticut in 2016, there is a home equity limit of $828,000.
You do have to be aware of Medicaid recovery efforts. If you pass away while you are in direct possession of your home after using Medicaid to pay for long-term care, a Medicaid lien could be placed on the property.
A single vehicle that is used as a primary source of transportation is not counted, and you can have unlimited term life insurance. A whole life insurance policy valued at up to $1500 is also allowed.
To obtain eligibility for Medicaid, people typically give assets to their loved ones before they apply for coverage. You do have to be aware of the five-year look-back if you choose to take this route. If you give away assets within this 60 month time frame, you will be penalized, and your eligibility will be delayed.
Rights of Healthy Spouse
If you were to require long-term care while your spouse was still capable of living independently, your spouse would be referred to as the community spouse. The community spouse is entitled to certain rights under Medicaid program guidelines.
The healthy spouse can retain ownership of half of the shared countable assets, but there is a limit that stands at $119,220 in Connecticut in 2016. This is the maximum, but there is also $23,844 minimum allowance.
To explain the minimum, let’s say that a couple had $40,000 in shared countable assets. Half of that would be $20,000. However, the healthy spouse could keep $23,844 under these circumstances, because that is the minimum Community Spouse Resource Allowance.
If a person who is using Medicaid to pay for long-term care is drawing income, most of that income must go toward the cost of the care. However, if the community spouse is relying on all or some of the income for support, he or she can continue to use the income. This is called a Community Spouse Monthly Maintenance Needs Allowance.
During the current calendar year, the maximum Community Spouse Monthly Maintenance Needs Allowance in Connecticut is $2,980.50, and the minimum is $1,991.25.
Download Our Special Report
We have provided you with some basic information in this blog post, but as you can see, Medicaid program rules are rather complicated. If you would like to dig a bit deeper, we have a valuable resource that you can access free of charge through this website.
Our firm has prepared an in-depth special report on Medicaid planning and nursing home asset protection. To obtain your copy of the report, click this link and follow the simple instructions: Hartford CT Medicaid Planning.