As elder law attorneys, we counsel clients that are concerned about legal and financial matters that they may face as seniors. Without question, long-term care is at the top of the list. Medicaid is relevant to this subject, and we will explain the Medicaid look back provision in this post.
Long-Term Care and Medicare
To understand why Medicaid should be on your radar, you have to digest some background information. It is natural to assume that Medicare would pay for a stay in a nursing home, because it is a health insurance program for senior citizens. However, for whatever reason, Medicare does not cover custodial care.
This is a major source of concern, because most seniors will need paid living assistance eventually. Some will receive custodial care in their own homes from professional caregivers, and this is not covered either. Over one-third of seniors will eventually reside in nursing homes according to the United States Department of Health and Human Services.
Paying Out of Pocket Isn’t Easy
The average length of stay for seniors that are in nursing homes is one year. However, 52 percent of people that need professional assistance incur expenses for more than one year. Approximately 13 percent of these folks receive the help for more than 5 years.
The state of Connecticut has determined that the average monthly charge for nursing home care is $13,863. Clearly, the numbers can get rather large if you are in a nursing home for an extended period of time. Plus, a married couple may be forced to deal with two different sets of long-term care expenses.
Medicaid Coverage and the Look Back Provision
Now we can start to drill down to the specific point of this post. Medicaid will cover long-term care costs, but it is only available to people with very limited resources. In 2022, the asset limit in Connecticut is just $16,000.
There are some things that do not count, including your wedding and engagement rings and heirloom jewelry. Household furnishings and other items they have around the house are not counted. Personal effects are not countable assets, and one motor vehicle is exempt.
Term life insurance is in the exempt category as well, along with $1,500 of whole life insurance. The same amount can be saved in cash to cover final expenses, and burial plots are not counted.
You can give countable assets to your children to qualify, but there is a Medicaid look back provision. Let’s say that you give large gifts today without getting anything in return. Under the circumstances, you would be ineligible for five years because of this provision.
A lot of people rely on income that is generated by the lion’s share of their assets. If you are one of them, you would not be able to give away your income producing resources years before you may need long-term care.
Home Ownership
Your home is not accountable asset for Medicaid eligibility purposes. However, there is a Medicaid estate recovery mandate. If you die when you are in direct possession of the home, the program can put a lien on the property.
What’s the Solution?
How do you respond to the Medicaid look back provision? An irrevocable, income only trust can be the ideal solution. As the name suggests, you can continue to receive income that is generated by the assets of the trust. However, you would no longer have access to the principal.
If you had no intention of spending the principal anyway, this would not be an issue. You would be able to fund the trust when you are still perfectly capable of living independently. If and when you apply for Medicaid, the principal would not count.
Schedule a Consultation!
Imagine you can see, there is a looming threat to your legacy in the form of long-term care costs. However, if you take the right steps in advance, you can protect your wealth for the benefit of your loved ones.
If you’re ready to get started, you can schedule a consultation at our Westport or Glastonbury, CT elder law offices if you call us at 860-548-1000. There is also a contact form on this site you can use to send us a message.
Mr. McCann is licensed to practice before the courts of the State of Connecticut. He is a member of the American Academy of Estate Planning Attorneys.
Mr. McCann provides to his clients, trust and estate planning, and trust and estate administration services. Formerly, Mr. McCann was an adjunct professor of economics in the State of Connecticut Community College system, and a Commissioner of the Town of Simsbury Zoning Board of Appeals.
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