When your property is passed on to your loved ones after you are gone, your legacy will live on. We all need monetary assets, but there is also a sentimental component, so these transfers are quite meaningful.
As you start to get up there in years and contemplate your legacy, asset protection should be in the forefront of your thinking, because there is a looming threat.
Long-Term Care Costs
Once you reach the age of 67, your life expectancy is 87 years if you are woman, and it is 85 years for a man. When you understand this fact, you can see why over 30 percent of senior citizens will someday reside in nursing homes.
It is logical to assume that Medicare would pay for a stay in a nursing facility since it is a health insurance program for seniors. There are those that would say that it is not fair, but in fact, Medicare does not cover the custodial care that these facilities provide.
These costs could have a devastating impact on your legacy if you have to pay out-of-pocket. You can expect to pay about $150,000 or more for a year in a private room in a nursing home in the Rochester area.
The typical stay is several years, especially with cognitive impairment, and a married couple could be forced to pay two different sets of nursing home bills.
Fortunately, there is a solution in the form of Medicaid eligibility. According to the American Association of Retired Persons (AARP), 65 percent of seniors in nursing homes are enrolled in this program.
Since Medicaid is a need-based benefit, there is a low asset limit. Here in New York, it is $15,900 in 2021, but there are some assets that are not countable for Medicaid purposes.
You can have one vehicle, and your personal effects and household items are not counted. Heirloom jewelry, wedding rings, engagement rings are not counted, and you can have a prepaid burial plot. Unlimited term life is allowed along with $1500 of whole life insurance.
Your home sometimes is another non-countable asset, but there is an equity limit. In New York in 2021, it is a rather robust $906,000. If a healthy spouse is remaining in the home, there is no equity limit.
Even though you can qualify while you are a homeowner, there is a downside. If the property is in your direct personal possession at the time of your passing, Medicaid can put a lien on the home.
If your spouse or a dependent is still residing in the home, there would be no lien. This would also apply to a sibling with an ownership interest.
Five-Year Medicaid Look-Back
You can give gifts or fund an irrevocable Medicaid trust to get assets out of your name to qualify for coverage. Depending on how you structure the trust, you can have access to income and principal, if you wish.
Timing is key, because there is a five-your look-back. For best results, you have to fund the trust at least five years before you apply for Medicaid. However, even if you did not plan at least five years ahead of time, you still can protect a majority of your assets with specialized planning.
There is an exception to this rule. If you have been able to live at home instead of entering a nursing facility because your child has been caring for you in the home for at least two years, you can give the property to your child.
The Medicaid look-back would not apply, and there would be no lien placed on the home after your passing.
Schedule a Medicaid Planning Consultation Today!
As you can see, long-term costs can take a toll, but you can protect your resources if you implement a nursing home asset protection strategy. We can gain an understanding of your financial position and help you devise a plan that will lead to future eligibility.
You can schedule a consultation if you call us at 585-374-5210, and there is a contact form on this site you can use to send us a message.