If you’re like most people, you probably haven’t given much thought to things like long-term care for yourself or your spouse. Chances are, you’re just too busy living to spend much time thinking about things that might or might not be important later on in life. If you’ve had a health scare or a recent injury, however, that dynamic may have changed. There are times in life when our own frailty and mortality can simply no longer be ignored. If you have started thinking about the possibility that you might one day need to consider long-term care, then you’ve probably already noticed that the cost of that care has risen dramatically in recent years. That, of course, can leave you more than a little confused about how you’re going to pay for the care you might need from nursing homes in Indianapolis.
Why It’s Important to Plan Ahead
You might not know this, but Medicaid – the program designed to help provide benefits to the poorest Americans – is now the single largest payment source for nursing homes around the country. That’s in large part due to the way in which long-term care costs have exploded in recent decades. Today, the average costs for care in a nursing home can range between $150 and $300 a day – an amount that can easily consume any senior’s life savings and investments in no time at all. Those costs have made it extremely challenging for anyone to plan ahead well enough to cover all of the costs of long-term care on his or her own, and forced millions of seniors to rely on the Medicaid program for assistance.
That reliance has presented other challenges, of course. Because Medicaid is a needs-based program, there are strict income and asset guidelines that must be met by applicants who hope to secure benefits. Those limits are set so low that seniors who have saved and invested their entire lives just to build up a small nest egg to leave to their loved ones are often confronted with a stark choice: spend all of their estate assets on care and impoverish themselves or find other ways to reduce the size of their estates to secure the benefits they need.
Unfortunately, if you wait too long to transfer assets from your estate, you could trigger Medicaid’s ineligibility provisions, thanks to the program’s five-year look-back period. That look-back power enables Medicaid to review all of your asset transactions during the five-year period prior to your application for benefits, and potentially count the value of transferred assets as part of your existing estate for the purposes of imposing an ineligibility penalty. That makes it imperative that you plan for Medicaid eligibility well in advance of your application for benefits.
Medicaid Planning Options
If you have few assets for one reason or another, you will likely qualify for Medicaid even without any serious planning efforts. It is more likely, however, that you will need some advance planning to ensure that you are eligible for whatever benefits you may need to cover the high cost of nursing home care. Medicaid planning can be an effective way to ensure those benefits are there for you when you need them, and can also help you to provide for your healthy spouse’s needs and even preserve some assets for your heirs.
There are different strategies to achieve these goals, of course, and what is right for one person won’t necessarily be as effective for another. Depending upon your circumstances, your individualized planning efforts may utilize a number of different options:
- You can sometimes exchange nonexempt assets for assets that Medicaid won’t count as part of your estate. That can include things like prepaid burial plots, paying off your family home, or even term life insurance.
- You can create an irrevocable trust and fund it with your existing assets. That places those assets outside of your ownership and control, and exempts them from being counted for eligibility purposes. There are certain time restrictions and rules that must be adhered to, so this is not something that you should attempt on your own.
- You can leverage an annuity to ensure that your healthy spouse is cared for when you enter a home. Since the spousal assets are pooled for Medicaid eligibility consideration, your healthy spouse is allowed to retain a resource allowance of half of the total assets. That is often not enough to provide for that spouse’s long-term needs, however, so some couples use that money to purchase an annuity. That annuity then pays the healthy spouse regular income which Medicaid does not count for eligibility purposes.
Know the Risks
Medicaid planning is definitely not without its pitfalls, though. The laws involved in gaining access to these benefits can be difficult to navigate, and that can lead to mistakes that could be costly in terms of ineligibility penalties. You have to be aware of how things like the five-year look-back period and provisions that allow the Medicaid program to seek recovery after you die could impact your planning efforts.
That’s why experts typically recommend that anyone who needs to plan for future Medicaid eligibility seek the advice of experienced attorneys who practice in the area of estate planning and elder law. Even something as simple as giving gifts to loved ones could place you in danger of being penalized by Medicaid when you finally apply for benefits.
At Frank & Kraft, Attorneys at Law, our experienced legal team can help to ensure that your Medicaid planning leaves no stone unturned in its effort to protect your assets and secure the nursing home funding you need. We’re committed to helping our clients in Indianapolis and the surrounding area navigate the complexities of the Medicaid planning process so that they can all enjoy the peace of mind that comes from knowing their future nursing home funding needs are covered. If you’d like to know more about how we can assist you with your Medicaid planning and estate plan needs, call today at (317) 684-1100, or contact us at our website.
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.