The Centers for Medicare and Medicaid Services reported some time ago that most adults in the United States will eventually require long-term care, with roughly four in ten expected to spend at least some time in a nursing home. With care currently costing many thousands of dollars a month – and those costs expected to continue to rise in the foreseeable future, any prolonged period of residency in a long-term care facility can potentially cripple your finances. While there are options like long-term care insurance available, few people can afford the policies. So, the question that we should all be asking is this: do you have the plan you need to manage those future nursing home expenses?
Few of Us Plan Like We Should
The reality is that far too few of us have any real plan for the future. More than half of all American adults have less than $10,000 in retirement savings. Less than half of us have even bothered to begin basic estate planning and don’t even have a will. Even fewer have the type of long-term care planning they might need to cope with excessive nursing home costs. Though we all like to think that we’re prepared for the unknown that lies before us, the facts just don’t back up those assumptions.
And make no mistake about it; nursing home costs are not something that you can just pay for with your Social Security check. According to some estimates, the average cost of care in Florida is around $240 a day, and those costs can rise to as much $450 or more in some parts of the state. That’s an average of more than $7,000 a month – far more than most seniors in the state could ever hope to pay on their own.
Medicaid: A Lifeline for Seniors
When most people think of senior benefits, they think of things like Social Security and Medicare. In fact, there’s a natural tendency to assume that Medicare can help seniors with the costs of nursing home care. After all, we all pay into the program throughout our working years, with the expectation that it will be there to cover medical care costs when we retire. Unfortunately, though, Medicare is not designed to pay for long-term care – though it can sometimes cover a shorter facility stay of up to 100 days.
For long-term nursing home costs, however, seniors end up turning to Medicaid. And while that program was designed to provide health care to the nation’s low-income families, it has grown to become the largest payment source for America’s nursing homes. Millions of seniors rely on its benefits to cover the costs of their long-term care. Unfortunately, many of them are ill-prepared to qualify for those benefits when they need them most.
Medicaid Eligibility Challenges
The Medicaid program has very strict guidelines for those who apply for benefits, based on both income and assets. And while the income limits can be addressed using a Qualified Income Trust (Miller Trust), the asset limits can be more difficult to overcome. Since assets are limited to no more than $2,000, many seniors find themselves with too much property to qualify for the nursing home assistance they so desperately need. If they have even one dollar more than that limit, they can be denied benefits.
To address the issue of excess assets, many seniors use emergency strategies that involve a “spend-down” of assets or the purchase of an annuity. Some even try to place assets in someone else’s name, in hope of avoiding Medicaid’s watchful eye. Unfortunately, there are drawbacks to such emergency measures, and many types of asset transfers could place a senior in danger of being penalized under the Medicaid program’s lookback provision.
Moreover, those types of emergency options do little to protect a senior’s assets. Even with property that is exempt from consideration – like the senior’s home, for example – there is no guarantee that the government won’t later come in and take the home when the senior eventually dies. For families that want to keep the home in their possession, it is important to consider other options that can secure those assets from nursing home costs and possible government seizure in the future.
How Planning Can Help
The good news is that Medicaid planning can help, but it is vital to begin that planning well in advance of any nursing home need. That program lookback provision mentioned above encompasses the entire five-year period preceding your application for benefits. It empowers the government to penalize you for any asset transfers made within that period. That penalty involves a period of ineligibility for benefits that is based on the total value of the inappropriate asset transfers and the average cost of nursing home care. Worse, that penalty period doesn’t begin until the applicant starts paying for his own care.
By using early Medicaid planning, you can ensure that your assets are safeguarded in a way that protects them from the cost of nursing home care while ensuring that you qualify for the benefits you need. For example, you can use irrevocable asset protection trusts to secure your property. You can use other options like adding your adult child’s name to your home deed to protect it from later Medicaid recovery efforts – if you make that change prior to that five-year window.
The one thing that you shouldn’t do is attempt this on your own. Medicaid planning is a complex process with many pitfalls. Even small mistakes could cost you many months of ineligibility at a time when you can least afford to be denied the benefits you need. At Robert J. Kulas, P.A., Medicaid & Estate Planning Attorneys, our Medicaid planning attorneys can help you develop the plan you need to manage your future nursing home expenses. We’ll work with you to create the right strategy to safeguard assets and meet those strict asset and income limits. To find out how we can assist you with your planning needs and ensure that you preserve as much of your wealth as possible, contact us online or call us today at (772) 398-0720.
