When you hear that many elders rely on Medicaid to pay for long-term care, you may become alarmed. Most people are aware of the fact that Medicaid is only available to people who are financially needy. If a high percentage of seniors are on Medicaid late in their lives, they must be impoverished, right?
Unfortunately, there are people who wind up spending all of their resources paying for long-term care because they did not plan ahead effectively. However, if you are proactive about the implementation of a Medicaid planning strategy, you may never directly experience any financial hardships.
To qualify for Medicaid, your countable assets cannot exceed $14,850. People typically give assets to their loved ones before they apply for Medicaid, but you have to act in advance and get the right legal advice to make sure that you are complying with the Medicaid rules.
There is a five-year look back. You have to complete your gift giving at least five years before you submit your application to obtain eligibility.
Divesting yourself of assets is not necessarily going to result in poverty during this five-year interim. Your home is not considered to be a countable asset, so you would not have to dispossess yourself of ownership. (There is however an $828,000 equity limit in New York in 2015.)
Medicaid would not count the vehicle that you use for transportation, and you can maintain ownership of your personal effects and household belongings. Wedding rings, engagement rings, and heirloom jewelry would not be counted either.
You could continue to draw income during your spend down, so that would not be interrupted. Plus, if you are in a position to do so, you could create an income-only Medicaid trust.
The assets that you convey into the trust would not be counted for Medicaid purposes, and this can be an effective way to divest yourself of direct ownership of assets. Though you could not take back those assets, you could receive income from the earnings of the trust, and this could help you maintain your lifestyle.
Relevant to Everyone
Most seniors will need long-term care eventually, and it is difficult to pay out-of-pocket, so Medicaid planning is relevant to just about everyone.
Nursing home care is very expensive, and in New York the costs are particularly high. If you have to stay in a nursing home for two years, the bill can exceed $280,000, and some people stay longer. About 10 percent of nursing home residents remain in the facilities for at least five years.
If you take the right steps, you can potentially qualify for Medicaid without losing everything that you intended to leave to your loved ones.
Download Our Free Report
To learn more about Medicaid planning, download our special report. This in-depth report is free, and you can access your copy through this page: Medicaid Planning Report.