70% of people aged 65 are going to use long-term care, no matter how much they insist they won’t. And because people don’t want to think about it, more than half of them haven’t planned for it. Keep in mind that long-term care doesn’t only mean the nursing home, but it can also include in-home care or assisted living. At Forks Law, our philosophy is that you should stay in your own home as long as possible – but that too can cost money, which not everyone can pay for.
That's the average cost of a nursing home in Grand Forks. Even home health care is $5,331 per month. At that rate, how long will it take before you need to start selling things you’d rather not sell? Keep in mind that your health insurance won’t pay for that – and neither will Medicare!
Long-Term Care insurance can help you pay for the care you need, whether you’re living at home, in an assisted living facility, or the nursing home. But it comes at a price. The premiums typically cost thousands of dollars per year, and the older you get, the more expensive it is. Moreover, any new policy will have a limit as to how much it’ll pay out. What do you do if it runs out?
Medicaid is a government-run program to help pay the costs of long-term care. But in order to qualify, you first need to spend most of your assets. If you’re single/widowed, you can’t keep more than $3000. If you’re married and one spouse is healthy, that spouse can keep the home, a car, and up to $123,600 – but there will be a lien against the estate for any costs incurred. And don’t think you can just give it away – any “uncompensated transfer” in the previous 5 years will disqualify you for some time.
An Irrevocable Medicaid Trust can help protect those assets while still allowing you to qualify for Medicaid. When you place assets into such a trust, you are no longer entitled to the principal – you’ve effectively given it away. But you can still control the assets, and you’re still entitled to the income. But again, you need to plan this in advance – you won’t be able to qualify for Medicaid for 5 years. Of course, if something happens during the 5 year period, all is not lost – as long as you get help from an Attorney who truly understands the Medicaid rules.
A Spousal Testamentary Special Needs Trust may be a more suitable option. This is a Trust created by a Will, and so it doesn’t go into effect until someone passes away. In essence, all assets are placed in the name of the spouse who passes away first, and are then placed in a special trust. Those assets are not counted for Medicaid purposes, and so the surviving spouse can qualify for Medicaid without needing to dispose of them. The assets are then used to pay for extras that are not covered by Medicaid. Finally, when the survivor passes away, any remaining assets go to your heirs.
Medicaid Crisis Planning is available if long-term care is imminent, or has recently started. It’s too late to save everything, but that doesn’t mean you can’t save something. There’s a lot of details involved, but typically you can save between 1/3rd and 2/3rd of your assets by splitting your assets into two piles, executing the crisis plan, and intentionally triggering the Medicaid penalty period for having given assets away.
As you can see, even if you can’t avoid the need for long-term care, there are several options to protect your assets. You worked hard for your money, shouldn’t some of it stay in your family?