If you are still relatively young, the idea that you may one day need to rely on Medicaid to cover your medical expenses may seem farfetched. The reality, however, is that could actually happen in the future. If you do find yourself in a position where you need to qualify for Medicaid, any recent assets transfer could be problematic. To help you understand, a North Andover Medicaid planning attorney at DeBruyckere Law Offices explains how the transfer of assets can impact Medicaid eligibility.
Why Might I Need to Turn to Medicaid?
There is a strong possibility that you, or a spouse, will need long-term care (LTC) at some point during your retirement years. Of course there is no way to know with any certainty who will, and who won’t, end up in an LTC facility; however, statistics tell us that the odds increase with each passing year. When you enter your retirement years, around age 65, you will already face a 50 percent chance of needing LTC before the end of your life. If you are fortunate enough to still be here at age 85, your chances of needing LTC will have increased to 75 percent. Nationwide, the average cost of a room in LTC was almost $100,000 per year in 2018. As a Massachusetts resident, however, you are faced with average LTC costs that ran over $150,000 in 2018. With an average length of stay of three years, you could easily be facing an LTC bill of over half a million dollars which could rapidly deplete your retirement nest egg. Although you may come to rely on Medicare to pay for your healthcare expenses as a senior, Medicare will not cover LTC expenses nor will most private health insurance policies. Consequently, over half of all seniors currently in an LTC facility depend on Medicaid to pay for the cost of their LTC.
Qualifying for Medicaid
Unfortunately, the Medicaid eligibility requirements often make qualifying problematic for those who didn’t plan ahead. Because Medicaid is a “need based” program, eligibility guidelines require an applicant to have low income and few assets. Like many seniors, however, you may have spent a lifetime building your assets and you aren’t keen on losing them. Transferring them out of your name by gifting them to adult children or other beneficiaries may seem like the obvious solution to the Medicaid eligibility guidelines. Unfortunately, the Medicaid transfer rules impose a penalty for doing just that.
The Medicaid Transfer Penalty
There was a time when Medicaid applicants simply transferred assets at the last minute to qualify under Medicaid’s countable resources limit. Today, however, if you apply for Medicaid, your finances will be subject to scrutiny for the 60 month period prior to the date of your application. Any asset transfers completed during that time period for less than fair market value could trigger a penalty in the form of a waiting period. The length of the waiting period is calculated by dividing the value of your excess assets by the average monthly cost of LTC in your area. By way of illustration, the average monthly cost of LTC in Massachusetts was just over $13,000 for 2019. Imagine that you apply for Medicaid today but a review of your finances uncovers the fact that you transferred assets valued at $200,000 to your adult children two years ago. That transfer could trigger a waiting period penalty. The length of the penalty will be determined by dividing $200,000 by $13,000 which gives you 15.38, meaning you would incur a 15 month waiting period (after rounding down) before Medicaid would start helping you pay your LTC expenses. During the waiting period, you would be responsible for paying your LTC costs. Sadly, your retirement nest egg could be significantly depleted as a result of those asset transfers that triggered the waiting period.
The key to ensuring that your assets are protected and that you qualify for Medicaid if you find that you need to down the road is to incorporate Medicaid planning into your comprehensive estate plan now.
Contact a North Andover Area Medicaid Planning Lawyer
For more information, please join us for an upcoming FREE seminar. If you have additional questions or concerns about transferring assets and how that will impact your Medicaid eligibility, or about Medicaid planning in general, contact a North Andover area Medicaid planning attorney at DeBruyckere Law Offices by calling (603) 894-4141 or (978) 969-0331 to schedule an appointment.
Absolutely. Medicaid planning makes use of existing legal strategies and estate planning tools to protect your assets.
There is no hard and fast rule; however, because you don’t know when you will need to qualify for Medicaid, starting as young as possible is usually best.
A properly drafted Medicaid trust can go a long way toward protecting your assets.