If all goes well, you will be able to live out your final years in your own home; however, there is a good chance though that you (or a spouse) will end up needing the type of care that can only be found in a nursing home setting. Failing to plan ahead for that possibility could put your assets, including your retirement nest egg, at risk. The Port St. Lucie Medicaid planning attorneys at Kulas Law Group explain how a living trust can help protect your assets from the high cost of nursing home care.
Will You Need Nursing Home Care?
There is no way to know with certainty who will need nursing home care and who won’t. The statistics, however, point to the need to plan for the possibility that you will eventually need some type of long-term care (LTC). When you reach retirement age, around age 65, you will already stand at least a 50 percent chance of needing LTC at some point in the future. Each year, those odds increase. By age 85, your odds of ending up in a nursing home will have increased to a 75 percent chance. Given those odds, it only makes sense to plan for the worst and hope for the best.
How Will You Pay for Nursing Home Care?
While no one wants to end up in a nursing home, the reason you need to plan for the possibility is the high cost of that care. Nationwide, the average cost of a year in LTC was over $100,000 for 2020. Experts estimate that in 20 years, that same year of care will cost close to $200,000. With the average length of stay of around three years, you could be facing a LTC bill of well over half a million dollars.
How Does the Cost of Nursing Home Care Threaten My Assets?
At this point you are undoubtedly wondering how the high cost of nursing home care put your assets at risk. To understand that, you must first understand that while you will likely depend on Medicare to cover most of your health care expenses as a senior, Medicare will not pay for nursing home expenses. Likewise, most health insurance policies exclude costs associated with LTC. That leaves paying out of pocket or qualifying for Medicaid as your only options. Most seniors cannot comfortably afford to pay for nursing home care out of pocket though, leaving Medicaid as the only realistic option.
Medicaid is a federal healthcare program targeted at providing healthcare services to low-income individuals and families. Because Medicaid is a “needs-based” program, the program uses both income and assets limits when determining eligibility. An applicant cannot own countable resources (assets) valued at more than the limit or the application will be turned down. As an individual applicant, your countable resources cannot exceed $2,000 in most states. If your non-exempt assets exceed the limit, your application will be turned down and you will have to “spend-down” those excess assets before applying again. In essence, the spend-down requirement means you will have to use those assets to pay for your LTC bills until the value of those assets has been sufficiently depleted to qualify for Medicaid. It is this spend-down requirement that ultimately puts your assets at risk if you need LTC in the future.
How Can a Living Trust Help?
The key to protecting your assets from the high cost of nursing home care is to incorporate Medicaid planning tools and strategies into your estate plan. Among the most common of those tools is a Medicaid trust. A Medicaid trust is a specialized irrevocable living trust. Because the trust is irrevocable, the assets held in the trust are considered trust assets and cannot be reached by creditors. Likewise, the assets held in the trust are not considered part of your estate, meaning they are not counted when determining your eligibility for Medicaid.
Contact the Port St. Lucie Medicaid Planning Attorneys
To learn more, please join us for an upcoming FREE seminar. If you have additional questions about how to protect your assets from the high cost of nursing home care, please contact the experienced Port St. Lucie Medicaid planning attorneys at Kulas Law Group by calling (772) 398-0720 to schedule a consultation.