The Medicaid program is a government run health insurance program. It is jointly administered by the federal government and each respective state government. It is a need-based program.
Because Medicaid is a need-based program, there are asset and income limits. The program is theoretically designed to assist those who are financially needy. However, it is relevant to many senior citizens who were never poor.
Long-Term Care & Medicare
Most people are going to qualify for Medicare when they reach the age of 65. You become eligible for Medicare by earning retirement credits while you are working and paying taxes. It is possible to accrue a maximum of four credits each year. You become eligible for Medicare when you earn 40 retirement credits.
Medicare will certainly help with your health care costs when you are a senior citizen, but there are limitations. The Medicare program will pay for convalescent care after surgery for up to 100 days, but it will not pay for long-term custodial care. If you ultimately reside in a nursing home or assisted living community, you will receive no assistance from the Medicare program.
The Medicaid Solution
Medicaid will pay for long-term care. Most of the seniors who are living in nursing homes rely on this program for assistance.
If you retired with decent income and a retirement nest egg, you may wonder how you can qualify if it is a need-based program. People qualify for Medicaid through a process called a Medicaid spend down. This is a measured divestiture of countable assets.
You could spend down by living it up and crossing things off your bucket list. Another option would be to essentially give your children their inheritances in advance. Some people do a little bit of both.
It is also possible to create a particular type of trust to remove countable assets from your financial profile. There are revocable trusts, and irrevocable trusts. Assets that have been conveyed into a revocable trust would be counted by the Medicaid program, because you retain control of the resources.
On the other hand, assets that you have conveyed into an irrevocable trust would not be countable. There are certain types of irrevocable trusts that are used for Medicaid planning purposes.
Most people are going to need long-term care at some point in time, so you should certainly take the matter seriously.
Medicaid Planning Special Report
In this post we have taken a brief look at the important of Medicaid for many people who incur long-term care costs. To learn more about the subject, download our special report. The report is being offered free of charge, and you can obtain access right now through this page: Medicaid Planning Report.
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.