Imagine you worked your entire life to pay off your mortgage and build a retirement fund and then your health failed to the extent that you needed to relocate to a nursing home. Due to lack of other programs and the costs, Medicaid has become the Long-Term Care planning tool for the middle class. Medicare is the single largest payer of nursing home care and is the last resort for those who have no other means to pay for long-term care. If Medicaid planning is not done, nursing home residents may spend all their assets on long-term care costs.
How Does Medicaid Planning Help with Long-Term Care?
Medicaid is a federal and a state program designed to provide medical assistance to low income individuals over 65. Each state manages its’ own Medicaid program and the program differs from state to state. Each state is required to meet the federal minimum standards but beyond the minimum standards each state is free to develop its own plan. The medical expenses covered, and the premiums paid for the coverage will vary from state to state.
When Medicaid is used to pay for nursing home care, the state must attempt to recoup benefits paid after the death of the Medicaid recipient. However, no recovery can take place until the death of the recipient’s spouse or as long as there is a child who is under age 21 or who is blind or disabled. The state will first attempt to recover from the Medicaid recipient’s probate estate, but also has the option of seeking recovery from assets that pass outside of probate.
In addition to meeting the state’s medical and functional criteria for nursing home care, assets and monthly income must fall below certain levels to qualify for Medicaid. Some assets and income may be exempt.
There are several techniques and strategies that may be used for Medicaid planning including:
- Long term care insurance
- Prepaid funeral expenses
- Transferring assets to loved ones or an irrevocable trust or an annuity
- Reduce available assets by paying off mortgage, making home improvements, paying off other debt, purchasing a vehicle for healthy spouse
When to Start Medicaid Planning
It’s important to start Medicaid planning early, while your health is still intact so that those benefits are available when you need them. There are also an estate planning implications that need to be considered and accounted for in your planning. There is a five year look back period for assets transferred out of your estate. This means you’re planning should be completed at least five years before you require long-term care.
It is extremely important to use an attorney and financial advisor who specializes in elder care to assist with Medicaid planning. There are legal, as well as, ethical issues that need to be addressed during Medicaid planning.
The key to successful planning is to do the appropriate planning at the appropriate time. TD&T can assist you, along with your attorney and financial manager in this planning.