Like many people, it may never have occurred to you to plan for the need to qualify for Medicaid if you had employer-sponsored or privately purchased health insurance during your working years. Unfortunately, the reality is that many seniors do eventually need to qualify for Medicaid at some point to help with the high cost of long-term care. If you suddenly need to qualify for Medicaid but did not plan for that possibility, is it too late for Medicaid planning to help? A Beverly Medicaid planning attorney at DeBruyckere Law Offices discusses why it may not be too late for Medicaid planning to help you.
Why You Might Need to Qualify for Medicaid
Nationwide, the average yearly cost of long-term care was over $100,000 for 2022. If you live in Massachusetts or New Hampshire, you can expect to pay considerably more than the national average. That same year, the cost of LTC in New Hampshire and Massachusetts averaged just over $144,000 and $162,000, respectively. Considering an average stay of around three years, you could easily be facing an LTC bill of close to half a million dollars if forced to pay out of pocket.
Like most seniors, you will probably rely on Medicare to cover most of your healthcare expenses. The problem is that Medicare only covers LTC expenses under very limited circumstances, and even then, only for a very limited time. Furthermore, most basic health insurance plans also exclude LTC expenses. Therefore, unless you purchased a standalone long-term care insurance policy prior to the need for coverage, you will be faced with the prospect of covering your LTC expenses out of pocket. For the average person, an entire retirement nest egg could be lost to LTC costs if forced to pay for them out of pocket. This is where the need to qualify for Medicaid comes in because Medicaid will cover LTC costs for those who qualify.
Qualifying for Medicaid
Although Medicaid is a federal program, it is administered by individual states. For this reason, you will find some variation among the states regarding eligibility guidelines and benefits offered to participants. In every state, however, Medicaid is what is referred to as a “needs-based” program, meaning that an applicant must demonstrate a financial need to be approved for benefits.
Because Medicaid is intended to provide healthcare benefits to low-income individuals and families, eligibility for Medicaid is determined, in part, by an applicant’s income and “countable resources” which refers to the value of an applicant’s non-exempt assets. The countable resources limit is typically very low. In Massachusetts, the limit is $2,000-$3,000 while in New Hampshire the limit is $1,500-$5,000, depending on whether you file as an individual or with your spouse.
If your countable resources exceed the limit, Medicaid will deny your application until such time as your countable resources fall below the acceptable limit. Simply giving assets away, however, is not a solution because Medicaid also uses a five-year “look-back” period that allows Medicaid to review your finances for the five-year period prior to application. If you transferred assets for less than fair market value (for example, transferred title to a vacation home to an adult child), the value of the transferred asset may trigger a waiting period during which time you will be responsible for paying your LTC bills. The length of the waiting period is determined by taking the value of the asset and dividing it by the average cost of LTC in your area. By way of illustration, imagine that you live in Massachusetts where the average monthly cost of LTC is $13,535 (as of 2022) and that you transferred a vacation home valued at $500,000 to your adult child. You would incur a 37-month waiting period after dividing the value of the asset by the average cost of LTC ($500,000/$13,535 = 36.94 rounded up to 37).
Last-Minute Medicaid Planning
If you suddenly need to qualify for Medicaid and you failed to plan for that need, you may be worried that your failure to incorporate Medicaid planning into your estate plan means there is nothing that can be done to help you. The good news is that there are some perfectly legal last-minute Medicaid planning strategies that may still be able to help you. For example, you might be able to convert a non-exempt asset into an exempt asset by using cash to pay down the mortgage on your primary residence. Because your primary residence is an exempt asset (up to a limit of $688,000 in New Hampshire and $1,033,000 in Massachusetts), the cash you use to pay down your mortgage will effectively become part of that exempt asset.
If you need to qualify for Medicaid, do not just assume that you won’t. Instead, consult with an experienced Medicaid planning attorney to find out what last-minute Medicaid planning tools and strategies might be able to help.
Contact a Beverly Medicaid Planning Attorney
For more information, please join us for an upcoming FREE seminar. If you have additional questions about estate planning, contact our estate planning attorneys in our North Andover, Woburn, and Beverly offices at (978) 969-0331. Our Londonderry and Nashua, New Hampshire office can be reached at (603) 894-4141.
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