Over your lifetime, you will undoubtedly work toward amassing a sizeable enough estate to see you through your retirement years with enough left over to pass down to your loved ones when you are gone. Amassing assets, however, is only the first step. You must also protect the assets you acquire. One potential threat to your assets that you may never have considered is the cost of long-term care. To ensure that you plan accordingly, the Indianapolis asset protection attorneys at Frank & Kraft explain how protecting your assets requires planning for long-term care.
Will You Need Long-Term Care?
At around the time you retire, you will already stand better than a 50 percent chance of one day needing long-term care (LTC) and the longer you live, the better your odds will be. By age 85, for instance, your odds of spending time in a LTC facility will increase to a 75 percent chance. If you (or a spouse) do end up needing LTC, the real problem will be how to pay for that care. As a senior, you will likely depend on Medicare to cover most of your healthcare expenses; however, Medicare won’t pay for LTC except under very narrow circumstances – and even then, only for a very limited amount of time. Private health insurance is unlikely to help as well as most policies exclude LTC expenses. For 2019, the average cost of LTC in Indiana was around $100,000 per year. If you are forced to pay for that care out of pocket it could significantly diminish – if not deplete — your retirement nest egg. Not surprisingly, over half of all seniors currently in LTC turn to Medicaid for help covering their LTC expenses. Qualifying for Medicaid, however, can threaten your assets if you failed to plan ahead.
How Can the Need to Qualify for Medicaid Threaten My Assets?
Medicaid is a needs based federal healthcare program that uses both an income and an asset limit when determining eligibility. The asset limit is exceptionally low in most states. Typically, an individual applicant cannot have “countable resources” valued at over $2,000 or their application will be denied. While some assets are exempt from your countable resources, after spending a lifetime building up your assets, your countable assets are probably worth more than $2,000. If that is the case, when you apply for Medicaid your application will be denied and you will be expected to “spend-down” your resources before applying again. In other words, you will be expected to rely on those “excess” assets to pay for your LTC expenses until the value of your non-exempt assets falls below the program limit. As you can imagine, your retirement nest egg will disappear rapidly which is how the need to qualify for Medicaid can threaten your assets.
Can’t I Just Transfer Assets to My Adult Children?
The five-year look-back period imposed by Medicaid prevents you from transferring any excess assets to loved ones when you realize the need to qualify for Medicaid. The five-year look-back rule permits Medicaid to review your finances for the five-year period prior to applying for benefits to check for any asset transfers made for less than fair market value. If any were made, they could trigger a waiting period during which time you will not be eligible for Medicaid, putting right back at the point where you must rely on your assets to pay your LTC expenses.
The good news is that by incorporating asset protection planning tools and strategies into your comprehensive estate plan you can prevent the need for LTC, as well as other threats, from depleting your retirement nest egg.
Contact Indianapolis Asset Protection Planning Attorneys
For more information, please join us for an upcoming FREE seminar. If you have additional questions or concerns about protecting your assets, contact the experienced Indianapolis asset protection 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.
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