With the lifespan of the average American approaching 80 years, long-term care and nursing home care have become commonplace components of the senior experience. Such care can be extremely expensive, and only if the patient falls below a certain level of wealth is it covered by the most common form of extended-care insurance for senior citizens, Medicaid. Regardless of age or health status, as long as you have assets and an income that can be counted as your own, the options may be limited when it comes to securing long-term care.
By following the strategies outlined below, you can protect and pass on your own assets while availing yourself of Medicaid to pay expensive long-term care and nursing home bills.
1. Transfer assets to the at-home spouse. Your eligibility for Medicaid depends on your own assets, not those of your spouse. Even if your spouse is a millionaire, you can still qualify for Medicaid as long as your own assets and income are below a certain threshold, which varies from state to state and can be found by consulting your local Medicaid representative. Before applying for Medicaid, remove your name from any joint assets such as houses, cars, and checking accounts and ensure that these assets belong solely to your spouse or partner. There is no penalty for doing so.
2. Transfer assets to your family. For many people, the goal of asset protection is to ensure that they can pass on resources to their children, grandchildren, or other relatives and friends. This is why the first step is not enough. You have to think about what will happen when your spouse, too, is incapacitated or has to enter a nursing home. Unfortunately, if you transfer assets to your family within less than 60 months of applying, Medicaid will disqualify you from membership for a period calculated by dividing the value of the assets by the average monthly cost of nursing home care in a given state.
For example, let's say you transfer $100,000 in cash to your children, and the state in which you live deems the cost of monthly nursing home care to be $5,000. In this case, you will be ineligible to apply for Medicaid for 20 months after the transfer of the assets. Thus, you should think about transferring assets to family members as early as possible, not when your health has already begun to deteriorate. Give yourself enough time to escape the period of Medicaid ineligibility.
3. For Medicaid purposes, don't rely on trusts. While there are some exceptions, Medicaid considers trusts as assets. Therefore, as long as you have a certain amount in trust, Medicaid will refuse to cover you. Following the two steps outlined above, make sure to transfer your assets to your loved ones instead of keeping anything in a trust for yourself.
4. Consider consulting a lawyer. The laws governing Medicaid are complex. Before making any decisions regarding your assets, it may be a good idea to talk with an experienced lawyer to explore your options.
Once you qualify for Medicaid, you'll have to give up most of your assets and subsist on an income of less than $2,000 a month. But the good news is that, if you have loved ones that you trust, your assets will at least be protected. Trust is, of course, an extremely important consideration when you transfer your assets. Legally, once you make a gift, you are powerless to decide what will actually happen to it, so you must have the utmost trust in the recipients of your assets.