When we reach our elder years, we may find that our health is declining and our ability to care for ourselves is fading.
A nursing home or long-term care is needed by many in their later years, making it a possible future to prepare for. As such, addressing this in your estate plan should not be overlooked. Doing so can ensure your assets are protected even if you need long-term care or a nursing home.
Long-term care planning
The costs associated with nursing homes and long-term care facilities can be extensive. The bill for a year in a nursing home can be in the six figures. With costs like that, the financial security that you’ve worked so hard to establish could be quickly exhausted.
With that in mind, many people take the time to plan for potential long-term care.
Getting long-term care insurance is a viable way to cover nursing home costs without requiring Medicaid. The downside of this is that the premiums of these plans can be very costly. So, if this is not the best option for you, making estate planning moves to utilize Medicaid may be the most suitable step to take.
To qualify for Medicaid, you must have low income and limited assets. Thus, if you have more than the limit set, you will not be eligible. For those with assets exceeding this limit can avoid this issue by transferring their assets to another person or entity. However, even if you take these estate planning measures, you may not qualify. The five-year lookback rule means that the Medicaid limit must be met in the five years preceding your Medicaid application.
Protecting your assets
There are several strategies available to help protect your assets that exceed the limits for Medicaid. This includes annuities, home equity exemptions and trusts. If you seek to shield your assets with a trust, the right kind of trust needs to be established. An irrevocable Medicaid asset protection trust can provide this protection so long as the assets were transferred at least five years before Medicaid is sought. A Medicaid-compliant annuity helps generate income that is exempt from Medicaid limits; however, the principal of the annuity is likely inaccessible. If you seek to protect your home equity, a life estate transfer allows for its exclusion.
Navigating long-term care planning and other estate planning issues can be complex and overwhelming. Therefore, it is important to understand your matter as well as your legal rights and options to protect yourself and your beneficiaries