Although nobody wants to think they will need nursing home care, the truth is that according to the U.S. Department of Health and Human Services someone turning 65 today has a 56% percent chance of developing a disability serious enough to require long-term care and services. To add insult to injury, long-term care often comes with a hefty price tag. If you don’t qualify for Medicaid benefits from the start, you will potentially deplete your life savings until you qualify, ultimately leaving your family with nothing to show for your years of work.
When talking about Medicaid, below are three important terms to keep in mind:
1) Medicaid Resource Limit: When you apply for long-term care Medicaid, you must meet certain eligibility conditions, and one of those conditions is that your assets (or resources) be lower than a specific amount, which varies based upon whether you’re married or single and who requires care.
2) Look-Back Period: To prevent applicants from giving away their assets in order to meet the income eligibility requirement, Medicaid reviews all asset transfers during the last 60 months, or five years, from the date of application. If any assets were transferred or given away during that timeframe, they are still counted as part of your assets for Medicaid to consider.
3) Estate Recovery: After a Medicaid recipient dies, the state goes after the recipient’s estate to recover all payments made for long-term care.
If timed right, proactive planning can be critical in helping to qualify for Medicaid benefits and to preserve your legacy. The important step, however, is that you beginning planning before you need it. By doing so, it is more likely that you will pass the 60 months test and ensure that your assets are protected for your loved ones. Below are three ways that you can prepare to apply for long-term care through Medicaid:
1. Irrevocable Trust: An irrevocable trust can be established to hold title to your assets. The trust can be structured so that you receive income from the assets while you are living, but the principal cannot be used to benefit you or your spouse. When these trusts are created and funded more than five years before applying for Medicaid, the assets are not included as part of your Medicaid Resource Limit.
2. Life Estate: A life estate is a special type of joint ownership. It allows the person with the life estate to own and use a property for the rest of his or her life, but at the death of the life estate holder, the other joint owner automatically takes possession and the property is not included in the life tenant’s estate.
3. Annuities: Annuities can also be used by married couples to help with long-term care costs. Annuities are essentially insurance contracts which require a certain sum to be paid upfront in exchange for payments to be received for the remainder of the policyholder’s life. For Medicaid purposes, when the income is in the name of the spouse who does not require long-term care, it won’t count as a resource for Medicaid.
When considering your specific circumstances and how Medicaid may fit into the picture, an individualized discussion of your assets and needs are important. To learn more about considerations when planning your estate, please view our helpful video series at TinyURL.com/SolakLegal or join Solak Legal’s next FREE online event, “Estate Planning 101,” on Wednesday, June 23rd at 4:30. A replay will be provided to all registered participants. Email ClientServices@solaklegal.com to register.
The information in this column, which was sponsored by Solak Legal as part of The Leader Expert Series, is intended to provide a general understanding of the law and not legal advice. Readers with legal questions should consult attorneys for advice on their particular circumstances. Jennifer Solak provides legal advice for families and businesses and may be contacted at firstname.lastname@example.org or 713-588-5744.