Long-term care expenses are something that you should take seriously when you are planning ahead for the future. If you are like many people, you may assume that Medicare will pay for assisted-living if you need it at some point in time.
In fact, Medicare will only pay for convalescent care for up to 100 days. It will not pay for custodial care, which is the type of care that you would receive in a nursing home or assisted living community.
Medicaid is a government program that will pay for long-term care. In fact, most of the senior citizens that are residing in nursing homes are enrolled in the Medicaid program. Many of these people were qualified for Medicare coverage.
If you have financial resources to speak of you cannot qualify for Medicaid. To put it bluntly, you would have to go broke paying for long-term care out-of-pocket before you could qualify for Medicaid to pay for the rest of the care that you need.
There is another option that many people prefer. You could divest yourself of assets in a measured fashion well in advance of applying for Medicaid. When this is done effectively, you can demonstrate financial need if and when you need Medicaid coverage to pay for long-term care. This is because you have given your assets to your loved ones.
Five Year Look Back & Trusts
There is a five year look back that you must contend with when you want to engage in Medicaid planning. If you give away assets within five years of applying for the program, a penalty is imposed. This penalty delays your eligibility.
The duration of the penalty depends on the extent of the divestitures as they compare to the average cost of long-term care in the state of your residence.
If you want to divest yourself of assets in advance of applying for Medicaid, you could place them into a trust. While there is no particular type of trust that is formally called a “Medicaid trust,” this term is sometimes used to describe a trust that is created for Medicaid planning purposes.
There are revocable trusts, and irrevocable trusts. If you create a revocable trust you retain incidents of ownership because you can revoke the trust if you want to do so. For this reason, assets that have been conveyed into a revocable trust would be counted by the Medicaid program.
If you use an irrevocable trust for Medicaid planning purposes you would be surrendering incidents of ownership, so the program would not count these assets when they were determining your eligibility.
However, there are disadvantages. The primary disadvantage would be the fact that you are indeed giving up ownership of the assets when you convey them into the trust.
You may never need long-term care, and you may regret surrendering access to the resources.
Mr. Nirenstein is licensed to practice before the courts of the State of Connecticut and the United States District Court. He is a member of the Connecticut and Hartford County Bar Associations, and the Estate and Probate, Elder Law, Business Law and Real Estate Sections of the Connecticut Bar Association.
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