The high cost of nursing home care causes many residents to rapidly exhaust their resources. However, through Medicaid planning you can pay for your long-term care while also protecting your assets for your loved ones.
What is Medicaid?
Medicaid is a federal-state program that provides medical assistance to low-income individuals, including senior citizens (65 or older). It is the largest payer of nursing home bills in the United States and a final resort for those who have run out of ways to pay for long-term care.
Medicaid eligibility requirements vary by state, but federal minimum standards must be observed. Additionally, your assets and monthly income must fall below a minimum standard to qualify.
Medicaid planning can help you meet the minimum requirements
When assessing whether you qualify for Medicaid, many states only count the income and assets legally available to you for paying bills. Medicaid planning helps you come up with ways to make your income and assets inaccessible.
There are several strategies attorneys have devised to help you rearrange finances and legally shelter assets, although these strategies can be fairly complicated.
In addition to helping you qualify for Medicaid benefits, Medicaid planning can help you:
- Shelter countable assets
- Preserve assets for your beneficiaries
- Provide for your spouse
Exchanging countable assets for exempt assets
Each state compiles a list of exempt assets based on federal guidelines. Typically, this list includes items like the family home, prepaid burial plots, one automobile, and term life insurance.
It is possible to rearrange your finances so that countable assets are traded for exempt assets or made inaccessible to the state. For example, instead of exhausting your savings on nursing home bills, you could pay off your mortgage or purchase a vehicle for your healthy spouse.
Consult an experienced elder law attorney for more information on ways to shelter countable assets.
Irrevocable trusts help preserve assets for your loved ones
One of the reasons you don’t want to liquidate all of your assets to cover your own nursing home care is because you want to assist your loved ones financially even after you’re gone.
One way to do this is by establishing an irrevocable trust. Property placed in an irrevocable trust is excluded from your financial picture and thus not considered a countable asset when determining Medicaid eligibility.
By naming a proper beneficiary, the principal deposited into the trust is sheltered from the state and preserved for your heirs.
It is important to keep in mind that the terms of an irrevocable trust cannot be changed if you decide to end it. Also, the trust must be established and funded for a specific time period for the strategy to be effective.
An annuity can ensure your healthy spouse is provided for
Another concern when you find yourself in need of nursing home care is figuring out how to provide your healthy spouse money to live on.
When the state considers whether one spouse is eligible for Medicaid, the couple’s assets are pooled. The healthy spouse is allowed to keep a spousal resource allowance that typically amounts to half of the couple’s total assets.
The healthy spouse may want to utilize jointly owned, countable assets to purchase a single premium immediate annuity. By converting countable assets into an income stream, each spouse can keep all of his or her income rather than pooling their assets. This allows the institutionalized spouse to qualify for Medicaid while the healthy spouse still has a steady stream of income.
Medicaid planning risks
It is important to be aware of the risks and drawbacks of Medicaid planning, including potential look-back periods, disqualification for Medicaid, and estate recoveries.
To learn more about Medicaid planning, contact Cordell Planning Partners.