Does your future include living in a nursing home or needing long-term care? As we get older, we wonder what lies ahead. According to LongTermCare.gov, “Someone turning age 65 today has almost a 70% chance of needing some type of long-term care services for a chronic illness or disability.” 

Long-term care can be provided at home or at a long-term care center. The process of working out a plan for your care and making plans for your future is called “Estate Planning.” A good estate plan involves asset planning to save money and maximize what you have. This benefits your standard of living and increases the inheritance for your heirs.

Cost of Care

Going into a nursing care home can be expensive. The majority of us would like to have help with the financial cost of care. It can be upwards of $6,000 per month for a single room in a facility with long-term care. Home care can be even more costly with the expenses of home healthcare equipment and handicap remodeling of your residence.

If you qualify for Medicaid, you are covered for long-term care basics but there are no extras. You are dependent on the government or family/friends for your standard of living.

If you don’t qualify for Medicaid, you can “spend down” your assets or reduce your income and assets until you qualify for Medicaid but that still leaves you living your last years in near poverty.

Plan Early to Maximize Benefits and Hold Onto Assets

The best way to plan for long-term care is to start early and make a plan covering all of the issues you may face. If you start planning at least 5 years before you will need long-term care, you can maximize your financial goals, keep your standard of living, and STILL qualify for Medicaid to cover your basic health care.

Qualifying for Medicaid

Medicaid has strict limits on your income level and the value of any assets you may own. In NC, if you are 65 or older, blind, or disabled, to qualify for Medicaid, you must have:

• Income Below: $1,064/month for a household of one or $1,437/month for a household of two
• Assets in Real Property At or Below:  $2000 for 1 person or $3000 for 2 people in your household

There are other situations where you may qualify for help. If you have medical bills you cannot pay, there is a six-month period for you to meet your Medicaid deductible to qualify for aid.

There are ways to qualify for Medicaid and still hold onto your nest egg WITHOUT spending down your hard-earned retirement savings. Read on to learn about how to protect your money from nursing homes and Medicaid.

Irrevocable “Medicaid” Trust

A Medicaid Trust is a type of irrevocable trust that owns your assets in trust for you so that they don’t count against Medicaid Asset limits. Drawing up a trust like this protects and shields your assets from creditors and nursing homes while you are living, and from Medicaid Recovery Programs after you pass away. 

There are many benefits to opening this type of Trust:

• Keep Your Assets & STILL Qualify for Medicaid: An irrevocable trust like this protects your assets from a Medicaid spend-down. It allows you to qualify for long-term care at the same time your assets are safe in the trust. It also means that your assets can pass down to your spouse and children when you die. If you sell a home that is placed in a Medicaid Trust, the proceeds do not count as a resource for Medicaid eligibility.
• BEWARE 5 YEAR LOOKBACK: A Medicaid Trust allows you to qualify for Medicaid as long as you do not establish the trust within the 5 years before coverage is needed. The Medicaid program has a LookBack period where they may declare you ineligible for Medicaid if you have given away assets or hidden assets in a trust during the 5 years before you apply.
• Use Assets to Your Advantage: Drawn up properly, you may use the assets in the trust during your lifetime. This means that if you are in long-term care, you still have the money that you need for whatever is not covered by Medicaid. The Trust keeps your standard of living steady as you continue with Medicaid coverage for the basics of your long-term care.
• NO Medicaid Asset Recovery (MERP): If you are 55 years of age or older when you begin receiving long-term care through Medicaid, the state you live in is required by law to recoup the money spent for your care once you pass away. The Federal MERP program demands that states do this. With an irrevocable trust, your savings and assets are safe from MERP. As of 2020, NC has not taken on the entire expanded definitions of MERP and is not demanding payback from irrevocable trusts. With an irrevocable trust, your assets cannot be taken by a judgment or by your long-term care expenses. Medicaid Recovery cannot pull funds or assets from the trust after you die. The trust owns the assets and they can only be meted out to you or others when specified by the language of the trust.

Trust Estates

Some well-meaning friends and family may advise you to make a trust estate and give the ownership of your home and assets to adult children but retain the right to live in your home until your death. There are many problems with this arrangement.

• Divorce of Adult Child
• Bankruptcy of Adult Child
• Judgment in a Suit Against the Adult Child
• Adult Child Doesn’t Care for the House Properly

In an arrangement where your children own your property and assets, they can also lose them to a creditor’s judgment, a spousal judgment, or in a lawsuit. None of us know when someone might sue us for assets. Better to think this one through before signing.

Make Your Estate Plan Early

There are many ways to plan and save for a future that might include a need for long-term care. Some paths are better than others. The best path is all about planning early so that your benefits are maximized and your savings are safe. 

If you talk to a knowledgeable asset protection and estate planning attorney, you can see more clearly the steps to financial success as a senior. When you have an estate plan in place, you have a well-thought-out plan for any long-term care needs. Talk to us at Vail Gardner Law to learn more about how to protect and nurture your money in retirement and beyond.