Many people will prepare for Medicaid through their estate plan. Long-term care involves not only a loss of personal autonomy; it also comes at a tremendous financial price. Proper planning can help your family prepare for the financial toll and protect assets for future generations.
Long-term care can be very expensive, especially around-the-clock nursing home care. Most people end up paying for nursing home care out of their savings until they run out, at which point they can qualify for Medicaid to pick up the cost. However, complete impoverishment is not required.
Medicaid rules require that recipients have no more than $2,000 in “countable” assets and limited income. Any excess assets need to be spent down before you can qualify for Medicaid. In addition, in order to be eligible for Medicaid, you cannot have recently transferred assets. If you transfer assets within five years of applying for Medicaid, you may be subject to a penalty period during which you cannot receive benefits. After you die, Medicaid also has the right to recover from your estate.
Careful planning in advance can help protect your estate for your spouse or children. If you make a plan before you need long-term care, you may have the luxury of distributing or protecting your assets in advance. This way, when you do need long-term care, you will quickly qualify for Medicaid benefits.
Trusts are one of most important estate planning tools you can use to protect assets. An “irrevocable” trust is a trust that cannot be changed after it has been created. In most cases, this type of trust is drafted so that the principal cannot be applied to benefit you or your spouse. Income earned by trust assets, though, can be payable to you. This way, the funds in the trust are protected and you can use the income for your living expenses. In addition, the trust can be drafted so that your home, if you choose to transfer it to the trust, is reserved for your benefit for the rest of your life.
At your death the principal is paid to the beneficiaries of your choosing. For Medicaid purposes, the principal in such trusts is not counted as a resource, provided the trustee cannot pay it to you or your spouse for either of your benefits. To avoid Medicaid’s “look-back period,” the trust must be funded at least five years before applying for benefits.
Contact the Stinson Law Firm at 317-622-8181 or www.stinsonlawfirm.com to determine whether your estate plan should include preparation for possible Medicaid eligibility.
Jeff is Certified as an Elder Law Attorney (CELA) by the National Elder Law Foundation, a distinction held by only a handful of lawyers in Indiana. For almost 20 years, he has focused on elder law, estate planning, long-term care planning, Medicaid planning, Veterans Affairs benefits planning, special needs planning, guardianships, and estate administration.