Medicaid is a health insurance program that is administered by the federal government in tandem with each respective state government. The program is intended for people who have very limited financial resources. You have to fit within very modest income and asset limits if you want to qualify for Medicaid.
Medicare is also a government run health insurance program, and for the most part, it is designed to help senior citizens, though there are limited exceptions.
This program is not based on financial need. If you earn enough retirement credits while you are working, you will qualify for Medicare when you reach the age of 65 under currently existing laws.
You can earn up to four credits per year, and you need 40 total retirement credits to qualify for Medicare.
Though most seniors will qualify for Medicare, Medicaid is relevant, because Medicare will not pay for custodial care. This is the type of care that you would receive in a nursing home or assisted living community.
Medicaid will pay for custodial care, and this is why it is relevant to many seniors.
Aiming Toward Eligibility
The Medicaid limit on countable assets is just $2,000. People who want to qualify for Medicaid typically divest themselves of assets so that they have very little left in their own names when they apply for Medicaid. This is called a Medicaid spend down.
You could give your loved ones direct gifts while you are spending down, and many people go this route. However, you have another option.
When you are aiming toward Medicaid eligibility, you could create a Medicaid trust. This would be an irrevocable trust. Because you are surrendering direct control of the assets that you convey into the Medicaid trust, they would not be counted when your eligibility status is being determined by program evaluators.
Revocable living trusts are also quite popular. These trusts facilitate efficient asset transfers to your loved ones after you pass away, because the distributions are not subject to the probate process.
When a last will is used, it must be admitted to probate. The administration of the estate would take place under the supervision of the probate court.
This process is time-consuming, and the heirs do not receive their inheritances until after the process has run its course.
If you have a revocable living trust, the assets in the trust would be counted by the Medicaid program. This is because of the fact that you do retain control of the assets that you convey into a revocable living trust. You could rescind the trust at any time, and it would no longer exist.
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