Unfortunately, neither health insurance nor Medicare covers long-term care. Medicaid could become your only option, so do what you can to plan ahead.
Planning for long-term care is important because nearly everyone will require it at some point in their lives. While we cannot predict the timing or level of care, we can take steps to prepare for an unexpected medical and financial crisis to help reduce the stress on ourselves and our family members. The cost of care continues to rise, but Medicaid planning can protect your assets, such as your home, hard-earned savings, retirement fund, or anything you wish to pass on to your loved ones.
Medicare is a federal and state program that helps seniors with limited assets and income afford long-term healthcare. Many seniors believe their only option to qualify for the program is to “spend down” their assets. However, proactive Medicaid planning can protect a substantial portion of your estate if done correctly. That means preparing at least five years before the potential need for benefits. The program’s eligibility rules are complicated, as is the application process. That’s why many people choose to hire an elder law attorney who specializes in Medicaid planning to evaluate their estate and reorganize assets over time.
Medicaid qualification requires a five-year look-back period at financial transactions in most states. The program verifies income and makes sure you haven’t gifted property to others under fair market value to reduce countable assets. Gifting assets is subject to a penalty that results in a period of ineligibility for benefits. The rules for gifting change state by state, and it’s important to know the rules where you live. If you begin early, you can ensure qualification for benefits when you really need them.
Qualifying for Medicaid Without a Penalty
A combination of options gives you the best outcome when applying for Medicaid benefits. An elder law attorney can customize a Medicaid planning strategy that works for your specific needs and goals. When you find yourself in need of long-term care services, you can receive Medicaid benefits to offset costs ranging anywhere from $60,000 to $100,000 a year.
The rising costs of long-term care can be overwhelming and unaffordable, depending on an individual’s needs. Your Medicare policy doesn’t cover long-term in-home or nursing facility services, and long-term care insurance premiums are very high. To discover more options, you’ll need a list of countable assets to determine ways to spend down that comply with Medicaid rules. It makes sense to spend down if it offers advantages:
- Make home modifications like stairlifts, wheelchair ramps, walk-in showers, and other convenient amenities
- Purchase a funeral benefits plan to cover final expenses
- Pay off debt
- Gift assets at fair market value with legal documentation
- Create caregiver agreements to compensate for care
Caregiver Agreements are formal agreements to compensate caregivers who can be relatives or friends, but they need to be carefully drafted by a professional.
Qualified Income Trust
You may still have too many assets to qualify for Medicaid benefits, but those assets can be protected from Medicaid’s Estate Recovery Program. Your elder law attorney may recommend transferring them to a trust called a Qualified Income Trust (QIT) or Miller Trust. It is an irrevocable trust managed by a trustee who has legal control of the funds. Once they are transferred, they are no longer countable assets.
Medicaid Exempt Annuities
This life insurance annuity type is common to avoid Medicaid penalties during the look-back period. An annuity is a lump sum investment by an individual in return for a monthly payment for the duration of that person’s life or a set number of years. These annuities turn assets into income, lowering the countable assets of the Medicaid candidate below the eligibility limit. However, not all annuities qualify, and your attorney will help you choose the right product.
The surest way to avoid violating a look-back period when qualifying for Medicaid is to consult a qualified Medicaid planning and elder law attorney before you gift or transfer any assets. If a violation has already occurred, they can also offer assistance to correct a problem.
Always seek professional legal advice when creating your long-term care strategy using Medicaid. Applications are rarely successful due to mistakes when filling out forms, and it can have devastating long-term consequences on a family and their finances. Begin well before you anticipate needing long-term care. Become well-informed about all your options as you go through the application process. Proactive planning and expert legal strategies can help protect your assets and offer considerable help for your long-term care costs. We hope you found this article helpful. If you’d like to discuss your particular situation, please don’t hesitate to reach out. Please contact our Cincinnati office by calling us at 513-771-2444 with any questions.