Like many people, you may have heard others discussing the need for Medicaid planning to be part of an overall estate plan and assumed it did not apply to you. After all, you may have made it through your entire life to this point without ever relying on Medicaid to help with your healthcare expenses so why would you worry about Medicaid eligibility now? While that train of thought is understandable, it can also put you and your assets at risk during your retirement years. For the average person, Medicaid planning is important. To help you understand why it is important, consider the following five reasons why Medicaid planning should be part of your estate plan:
- Your odds of ending up in a long-term care facility increase every year. No one plans to end up in a long-term care (LTC) facility; however, your odds of spending time in one are probably greater than you realize – and increasing every day. By the time you reach retirement age (age 65) you will stand about a 50 percent chance of needing LTC at some point in the future. Every year that passes will increase those odds, If you reach age 85, your odds of needing LTC before the end of your life will have increased to 75 percent. Keep in mind that if you are married, your spouse shares the same odds.
- The cost of LTC is already high and will only go up in the future. Nationwide, the average cost of a year in LTC is over $80,000 as of 2017. If you live in New Hampshire, you can expect to pay, on average, $125,000 for a year of care in a LTC facility. In 20 years, experts predict that the cost of the same year of care will run, on average, $230,000. Moreover, the average length of stay is 2.5 years, putting your potential LTC bill at over half a million dollars!
- Medicare won’t help you. Most retirees quickly learn to depend on Medicare to cover most of their healthcare expenses given the fact that almost all seniors qualify for Medicare automatically upon reaching retirement age. Unfortunately, however, Medicare will not cover LTC expenses. Neither will most basic health insurance policies in case you will continue to have private health insurance. Unless you can afford to pay out of pocket, or you purchased a separate LTC insurance policy, Medicaid is likely your only hope for help covering your LTC bill.
- Your assets will likely disqualify you for Medicaid. While Medicaid does help cover the cost of LTC, you must first qualify. Because it is intended to help low-income recipients, Medicaid uses both an income and an asset threshold that you cannot exceed if you wish to qualify. The asset limit is typically very low — $2,000 for an individual in most states. While some primary assets, such as your home or a single vehicle, are exempt, most seniors who have been saving for decades have assets that exceed the limit. If that is the case with you, Medicaid will deny your application and you will be forced to “spend-down” your hard-earned assets until their combined value drops below the asset threshold for Medicaid eligibility.
- Waiting until you actually need LTC could put your assets at risk. This is one of the most common mistakes people make – and it can cost you dearly. There was a time when you could simply transfer valuable non—exempt assets into someone else’s name when you realized the need to qualify for Medicaid; however, changes in the Medicaid eligibility rules now prevent that option. The five-year look-back rule allows Medicaid to check for transfers within the last five years for less than fair market value. If any are found, Medicaid may impose a waiting period during which time you will not be eligible for Medicaid benefits.
Contact a Medicaid Planning Attorney
For more information, please download our FREE estate planning worksheet. If you have additional questions or concerns about the need for Medicaid planning, contact the experienced Medicaid planning attorneys at DeBruyckere Law Offices by calling (603) 894-4141 or (978) 969-0331 to schedule an appointment.
Daniel DeBruyckere
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