Long-term care is a very serious matter to take into consideration when you are devising a retirement plan. It is an unpleasant reality to contemplate, but in fact, most elders will need help with their day-to-day needs at some point in time.
Nursing homes are extremely expensive, and assisted living communities are also costly. People often spend multiple years receiving care, so the overall expenses can add up to consume everything that you have saved for retirement, and perhaps more.
If you are thinking that Medicare will come to the rescue, you are mistaken. Medicare will pay for up to 100 days of convalescent care after surgery, but it does not pay for custodial care, which is the type of care that you receive in a nursing home or assisted living community.
Long-Term Care Insurance
It is possible to purchase insurance that would provide a benefit if you were to ever require long-term care. Long-term care insurance can provide a solution for some people, but it is very expensive. Plus, most people are not going to take out long-term care insurance while they are relatively young, and it is very expensive for senior citizens.
However, long-term care insurance can be used for a limited period of time in conjunction with a plan that leads to Medicaid eligibility. Medicaid is a government health insurance program that does pay for long-term care.
There is a low asset limit of $2,000 that you must stay within to qualify for Medicaid, because it is a need-based program. When you hear this, you would logically think that you could give gifts to your loved ones to get assets out of your own name if you ever find out that you need long-term care.
This type of reactive gift giving is not effective, because there is a five-year look-back. You have to pay for long-term care out-of-pocket for a prescribed period of time if you do not complete your gift giving at least five years before you apply for Medicaid.
To account for this, you could potentially give assets to your loved ones and take out a long-term care insurance policy for five years. Though the coverage may be expensive, you could keep enough in your possession to absorb the costs for five years, and you could subsequently qualify for Medicaid if you need long-term care after the five year interim.
Elder Law Consultation
Long-term care costs loom large for elder Americans. It takes careful planning to preserve resources for the benefit of your loved ones as you brace yourself for these expenses.
If you would like to discuss nursing home asset protection strategies with a licensed professional, our firm can help. We offer free consultations, and you can contact us through this page to set up an appointment: Indianapolis IN Elder Law Attorneys.
Mr. Kraft assists clients primarily in the areas of estate planning and administration, Medicaid planning, federal and state taxation, real estate and corporate law, bringing the added perspective of an accounting background to his work.
- Updated Federal Gift and Estate Tax Figures for 2023 - January 26, 2023
- Why Estate Planning Is Important for Multi-National Couples - January 24, 2023
- When Do I Need to Update a Trust Agreement? - January 19, 2023
