According to the Department of Health and Human Services, nearly 10 million Americans required long-term care by 2010. It is expected that 70% of people turning 65 will require long-term care at some point in their lives, with many of these individuals requiring care from a long-term care facility or nursing home. It’s never too soon to start thinking about how you’ll pay for care, protect your assets, and qualify for Medicaid.
Part 1 Paying for Long-Term Care
1. Make use of private wealth. If you have a lot of money, you might be able to pay for nursing home care or private in-home care out of your own pocket. It is unlikely that you would be able or want to reduce your wealth to the point where you could qualify for Medicaid. Long-term nursing home care costs between $6,000 and $9,000 per month on average. It might be more cost effective for you to pay for in-home care, which could cost around $21 per hour.
If you know ahead of time that you intend to use your own assets to pay for long-term care, it’s a good idea to designate those funds and set them aside before you need them.
2. Rely on your family. In 2015, 65 million people provided informal and family care to the sick, disabled, or elderly. These services not only reduced the cost of caregiving expenses, but they also kept people in their homes for longer periods of time and kept them out of nursing homes. If you only need help with a few things, consider asking a family member to assist you during the week or hiring someone to come into your home to assist you. This reduces the amount of money you’ll need to spend on long-term care.
3. You can pay with either private insurance or Medicare. You should carefully review your private insurance policy because most insurers do not cover long-term nursing home care. Most insurance policies, including Medicare, limit nursing home care to 100 days as part of post-hospital rehabilitation.
Policies typically only cover short-term nursing home stays where skilled care is required.
Your insurance plan may help cover copays or treatment for short-term skilled care, but it is unlikely to cover long-term care where you only require assistance with activities of daily living (ADL) such as bathing, dressing, or eating.
4. Purchase long-term care insurance. Individuals can purchase long-term care insurance, which reimburses the cost of long-term health care, including ADL assistance, up to a certain amount. You should keep in mind that your age and health are factors in determining the cost of this insurance, so apply for it by the time you’re in your mid-40s. Many elderly people may not qualify for this insurance, or if they do, they may not be able to afford it if they wait too long. In order to determine the cost of long-term health insurance policies, insurers consider the following factors: Your age at the time you purchase the policy.
The maximum amount that the policy will pay out per day.
The policy’s maximum number of days or years of coverage.
Whether you choose any policy add-ons, such as inflation increases.
5. You are eligible for Medicaid. Medicaid is a federal programme that each state administers for its residents. To qualify for Medicaid, you must meet certain income and asset requirements, as the programme was designed to protect low-income people. Medicaid provides the most potential support for long-term care costs for the majority of Americans.
Most states limit a person’s assets to $2,000 for an individual and $3,000 for a couple in order to qualify for Medicaid. If one spouse enters nursing care, the individual entering care can only have $2000 in non-exempt assets, while the spouse remaining at home can keep half of the total assets. Anything worth more than half of one’s assets plus $2000 must be depleted in order to qualify for Medicaid. This is referred to as the spousal impoverishment rule.
Medicaid also has monthly income limits that are set by each state. In New York, this amount is $825 per month for a single person and $1,209 per month for a couple.
Part 2 Paying Down Assets to Qualify for Medicaid
1. Hire a lawyer. Medicaid rules are complicated, and breaking them can result in disqualification from the programme. It is critical that you hire an elder law attorney with extensive experience. These attorneys are familiar with all of the Medicaid rules and can assist you in legally protecting your assets as well as providing important financial planning advice.
It is always best to begin your search for an attorney with a referral from a friend or family member who has used the attorney’s services. When meeting the attorney for the first time, a trusted recommendation will put you at ease.
The National Association of Elder Law Attorneys can help you find elder law attorneys. On their website, https://www.naela.org, you can find information about attorneys in your area, or you can contact the American Bar Association at https://www.americanbar.org/groups/legal services/flh-home/.
When you meet with your attorney for the first time, make sure to explain all of your concerns, potential sources of income, and desired outcome. The attorney can then work with you to develop a financial plan that best meets your needs while also protecting your assets in the event that you or your spouse require nursing home care.
2. Check to see if your community property is under the limit. When you apply for Medicaid, the assets of both you and your spouse (the community spouse) are totaled to determine your total asset amount (community property). There is a cap on the value of these assets that, if exceeded, prevents you from receiving Medicaid. This limit varies by state, but it can be as high as $119,200.
3. Pay off your debts to reduce your assets. If your assets exceed the Medicaid asset limit, you should try to pay them down in order to qualify for the programme. While certain assets, such as your family home or car, are not counted toward your Medicaid thresholds, you may reduce the number of assets so that one spouse can qualify for the programme. You can reduce your assets and qualify for Medicaid by doing the following:
Spend money on medical care or in-home care.
Pay for household items or expenses, such as real estate taxes.
Pay in advance for burial or funeral services.
Pay off your debts, such as your mortgage, credit cards, and student loans.
4. Reduce your assets by purchasing assets that are Medicaid-exempt. There are a number of items that Medicaid does not consider when calculating your overall asset calculation; therefore, by purchasing these items, you can reduce your assets and qualify for Medicaid. Necessary household items, such as furniture or appliances, are among the assets exempt from Medicaid.
At least one automobile.
The family home if at least one of the following people lives there: the Medicaid applicant’s spouse; a child under the age of 21; a disabled child of any age; a child who lived in the home for two years and provided in-home care to the Medicaid applicant; or a brother or sister who is a partial owner of the house.
Term life insurance policies
Part 3 Transferring Assets to Qualify for Medicaid
1. Put funds into a Medicaid Asset Protection Trust. With a Medicaid Asset Protection Trust (MAPT), you transfer all of your assets to the trust, giving up control over those funds. You can stay in your home and your income is separate from the trust, but the trust’s principal is protected and does not count against your Medicaid asset total. Also, in Missouri Case Law, trusts are subject to seizure—find Mo V. Violet J. Knight and Tommy Jones, Appellants. They were confident that this “Trust” would keep their property safe. This is not true.
It is critical that you use an attorney to establish this trust.
The trust assets are subject to the five-year “look back” period discussed below.
You would need to appoint someone other than yourself or your spouse as trustee for the trust.
2. Be cautious of the five-year rule. Medicaid closely examines all asset transfers made in the five years preceding a person’s application for Medicaid. This is referred to as the “lookback” provisions of Medicaid. If Medicaid determines that you made a non-exempt transfer, you may be penalised and barred from receiving Medicaid for a set number of years. It is critical that you consult with an elder law attorney before attempting to transfer funds in order to qualify for Medicaid.
Medicaid examines all transfers made in the five years preceding your application for Medicaid to see if any were made for “less than fair market value.” Medicaid is checking to see if you gave your money away to avoid having to pay for your own care. States have different rules about when the “lookback” period begins, and some even require children to pay for the care of their indigent parents.
The penalty period is calculated by dividing the number of assets transferred by the average cost of a private nursing home in your area. You are then limited to the number of days that your asset transfer would have paid for.
3. To avoid penalties, transfer exempt assets. There are a few exceptions to Medicaid’s lookback provision that allow you to transfer certain assets without being penalised when it comes to qualifying for Medicaid and having Medicaid pay for nursing home care. Transferring funds to your spouse for the benefit of your spouse is one of these exceptions.
Transferring assets to your disabled or blind child.
Creating a trust for your disabled or blind child.
Creating a trust for a disabled person 65 or younger, even if the trust is created for the Medicaid applicant.
As previously discussed, you can also transfer your home to certain people without being penalised. These people include your spouse; children under the age of 21, as well as blind or disabled children; Medicaid applicant’s siblings who own a portion of the home; and a child who has lived in the home for two years to care for the parent.
4. Make a life estate plan. A life estate, also known as a “Lady Bird deed,” is a type of real estate transfer in which a person gives or sells their home but retains the right to live there until death or the death of their spouse. This is used to protect the home as an asset from nursing homes and Medicaid, as well as to avoid the probate process.
While some states do not consider homes to be assets unless they are worth a certain amount, others would subject the home to a Medicaid “look back.” This means that if you transferred your home under a life estate within the last five years and do not meet any of the exceptions discussed above, you will face a Medicaid penalty.
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