Medicaid planning is something that is often overlooked, but when you consider the rapid aging of the population coupled the present state of the economy it is relevant to a high percentage of Americans.
Because of the maturation of the baby boomer generation our population is aging very rapidly. There are about 10,000 people becoming eligible for Social Security every day. Projections suggest that this number of applications is going to be submitted to the Social Security Administration on a daily basis for the next 20 years.
According to a report that has been released by the National Institute of Retirement Security entitled “The Retirement Savings Crisis: Is it Worse Than We Think?” the median amount that has been saved by people who are 10 years away from retirement is just $12,000. The report states that some 38 million American households have saved absolutely nothing for retirement.
Clearly, a lot of people are reaching retirement age, and a high percentage of them are not prepared financially.
Long-Term Care Expenses
Now that we have established the financial need that is out there, let’s look at the expenses that these people may be facing late in their lives. Most people are going to need long-term care, and Medicare doesn’t pay for it. It’s as simple as that.
In Indiana, the costs of a stay in a nursing home or a long-term care community are simply out of reach for people who have little to no retirement savings. In fact, these expenses would drain the savings of many people who are in possession of over $100,000 or more.
In 2012, the average cost for a private room in a nursing home exceeded $90,000 annually. The average length of stay is over two years.
This is where Medicaid planning enters the picture. You can apply for Medicaid in Indiana to help pay for long-term care if it becomes necessary, but your assets cannot exceed $1,500. If you plan ahead in advance by spending down your assets you can qualify for Medicaid while making sure that a significant percentage of your assets will in fact remain within your family.
When is it too late to engage in Medicaid planning? There is a five-year look back period. If you give away assets within five years of applying for Medicaid you won’t be granted eligibility until a penalty has been served.
If you wait until the day that you need to enter a long-term care facility you have in fact waited too long when it comes to effective Medicaid planning. At the same time, even at that point you can either do the right things, or do the wrong things.
The sooner you get started the better. However, in a real sense it is never too late to discuss Medicaid planning with a licensed Indianapolis elder law attorney.
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.