Creating a successful estate plan requires you to contemplate a number of potential scenarios, including the possibility that you (or a spouse) will need long-term care in the future. Factoring this possibility into your estate plan is crucial because of the high cost of that care and the related likelihood that you will need to qualify for Medicaid to help pay for that care. If you fail to plan for the possibility that you will need to qualify for Medicaid, you could face the loss of assets as a result of the Medicaid spend-down requirements. The Carmel Medicaid attorneys at Frank & Kraft explain how incorporating Medicaid planning into your comprehensive estate plan can help you avoid Medicaid spend-down when you are older.
Planning for the Possibility that LTC Will Be Needed
Though we are living longer, on average, than we used to in the United States, we have yet to figure out a way to stop the natural aging process. Consequently, the longer you live the higher the likelihood that you will experience physical and/or mental deterioration that could eventually cause you to need long-term care (LTC). In fact, when you enter your retirement years, around age 65, you will already stand a 50 percent chance of needing some type of LTC services before the end of your life. Every year that passes those odds increase. At age 85, you will be facing a 75 percent chance of spending time in an LTC facility before the end of your life.
The cost of LTC is where the need to qualify for Medicaid comes in the picture. Nationwide, the average cost of a year in LTC was almost $90,000 for 2018. Residents of Indiana paid, on average, slightly more than the national average with a year of LTC averaging almost $100,000 that same year. If you were forced to pay for that care out of pocket it would add up quickly. Because neither Medicare nor most health insurance policies will pay LTC expenses you may very well be stuck paying out of pocket – unless you are eligible for Medicaid.
Medicaid Eligibility for Long-Term Care
Medicaid is a healthcare program that is primarily funded by the federal government but is administered by the individual states. As such, you will find differences among the states with regard to eligibility requirements and benefits offered to participants in the program. All states, however, utilize income and asset limits when determining eligibility. States also typically offer numerous different categories under which an applicant might qualify for Medicaid benefits. In most states, including Indiana, the asset limit for Medicaid eligibility is only $2,000. This means that you cannot own non-exempt assets valued over that limit at the time you apply for Medicaid or your application will be turned down and you will face the Medicaid “spend-down” requirements.
What Is Medicaid “Spend-Down?”
When an applicant’s “countable resources,” or assets, exceed the program limit the applicant will be expected to “spend-down” his/her assets until they reach the level at which the applicant will qualify for benefits. In other words, you will be expected to sell your assets and rely on the proceeds to cover your LTC expenses until the value of your assets is low enough to qualify for Medicaid. Understandably, the thought of losing all your hard-earned assets to long-term care expenses probably isn’t very appealing to you.
Avoiding Medicaid Spend-Down
If your assets exceed the limit at the time you apply for Medicaid, transferring assets to an adult child, or anyone else, is not a viable solution because of the Medicaid five-year “look-back” rule. This rule allows Medicaid to review your finances for the 60 month period prior to your application. Any asset transfers for less than fair market value may be flagged and could be cause for the imposition of a waiting period during which time you will not be eligible for benefits.
To avoid both the spend-down and look-back rules, the key is to incorporate Medicaid planning into your comprehensive estate plan now. Planning ahead allows you to use legal tools and strategies, such as creating a Medicaid trust, to protect your assets and ensure your eligibility for Medicaid when the time comes that you need the assistance.
Contact Carmel Medicaid Attorneys
For more information, please download our FREE estate planning worksheet. If you have questions or concerns related to Medicaid planning, contact the experienced Carmel Medicaid planning attorneys at Frank & Kraft by calling (317) 684-1100 to schedule an appointment.
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.