Assisted Living Planning as Part of Your Estate Plan
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The possibility of assisted living for you, your spouse, or your parents is very real. Thinking about how to pay for it can be overwhelming, but is extremely important to do.
The average cost of a private room in assisted living in Massachusetts is over $12,000 per month, and that number is expected to continue rising. This care is not covered by Medicare or regular health insurance. Though you can buy long term care insurance, those policies have become harder to get and much more expensive. If you do not have long term care insurance, it does not take long at $12,000 a month to eat away the assets you have spent a lifetime preserving for your family. The good news is that there are ways to plan for this, and to protect some or all of your assets for your family while still qualifying for Medicaid assistance with the cost of care. This could include transferring real property and retaining a life estate or creating an asset protection trust. But you cannot wait too long- Medicaid will disregard any transfers you have made within five years of applying for benefits. This means the time to act is now, not when you are facing an imminent need for assisted living. The rules can be complex, and you should get qualified legal advice about the right plan for your situation. We have provided some general information below to get you started. You can also review the answers to frequently asked questions about planning for long term care. How Medicaid and Assisted Living WorksYour health insurance (Medicare or private insurance) will only cover care in a facility if it is short term in nature. This means you may be covered for a short period of time if you are discharged from a hospital into a facility to recover. But if you need to remain there for more than a month or two, you will have to cover the long term care costs yourself.
Medicaid, the federal program that provides coverage for low-income Americans, does cover the cost of long term care. However, you have to become eligible for coverage first. Because Medicaid is a needs based program, any excess income or assets will prevent you from being eligible. That means you will have to cover the $12,000 plus per month cost out of your assets, and you may find yourself eroding almost all of the wealth you meant to leave to your family. |
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What is a Medicaid Trust?
A Medicaid trust is an irrevocable trust that takes the assets you put into it outside of your reach. This means Medicaid will not consider those to be your countable assets when you apply for benefits. It also means that you cannot revoke the trust or take the assets back out of it.
For this reason, most people do not consider planning for medicaid eligibility until later in life. If you are still paying college tuition for your children or building up your retirement nest egg, you may not want to start transferring assets out of your own reach. It is also less likely the younger you are that you will need nursing home care in five years or less.
You can continue to receive income from the assets in the trust even though the assets themselves are restricted.
For this reason, most people do not consider planning for medicaid eligibility until later in life. If you are still paying college tuition for your children or building up your retirement nest egg, you may not want to start transferring assets out of your own reach. It is also less likely the younger you are that you will need nursing home care in five years or less.
You can continue to receive income from the assets in the trust even though the assets themselves are restricted.
Will a Revocable or Living Trust Protect Your Assets?
A good estate plan will usually include one or more revocable or living trusts. These are great tools for avoiding probate and customizing how your family members will receive assets.
They do not, however, protect your assets from the costs of long term care. This is because as long as you have the power to revoke the trust, the government will not consider that you have truly given the assets away. That means the assets in these trusts will continue to count toward the Medicaid asset limit even though they are in trust.
They do not, however, protect your assets from the costs of long term care. This is because as long as you have the power to revoke the trust, the government will not consider that you have truly given the assets away. That means the assets in these trusts will continue to count toward the Medicaid asset limit even though they are in trust.
What Assets to Put Into a Medicaid Trust
You can put almost any assets into the trust. Most often, people will start with the assets they most want protected. Sometimes this is the family home or other real estate.
Many people choose to keep some amount of liquid assets outside of trust. For example, you may put real estate and some of your stock portfolio in trust but keep other cash and investments unrestricted.
Many people choose to keep some amount of liquid assets outside of trust. For example, you may put real estate and some of your stock portfolio in trust but keep other cash and investments unrestricted.
Understanding the Five Year Look Back
When you apply for Medicaid assistance, they will look back for five years to determine what is a countable asset. That means anything you gave away or transferred into a Medicaid trust within those five years will be assumed to be available to you.
It is important to remember that this look back period has changed in the past and could change in the future. As the number of people needing assisted living increases, and Medicaid resources are stretched thinner, it is entirely possible that the law will change to lengthen the look back period.
What this means is that you should be thinking about Medicaid planning as much as ten years out from when you think you may need it. For most people, addressing this in their mid-sixties is the right time.
It is important to remember that this look back period has changed in the past and could change in the future. As the number of people needing assisted living increases, and Medicaid resources are stretched thinner, it is entirely possible that the law will change to lengthen the look back period.
What this means is that you should be thinking about Medicaid planning as much as ten years out from when you think you may need it. For most people, addressing this in their mid-sixties is the right time.
What Will Happen If You Don't Plan for Long Term Care
If you do not have long term care insurance and have assets available to you, for the most part you will have to spend down those assets before the Medicaid program will help.
There are some protections for the healthy spouse. You will not be required to sell the family home to pay for care if your spouse is still living in the home. Your spouse will also be entitled to retain and use certain income and assets. If you don't have a plan for care, however, the government will later have a lien on the family home to recover the costs they paid for you.
You should also consider the pressure on your family if you do not have a plan in place. It is difficult enough to wrestle with the decisions and emotions around a family member with a need for assisted living. Adding in concern about assets and available funds is a complication that you can take off of your family's plate by making a plan in advance.
There are some protections for the healthy spouse. You will not be required to sell the family home to pay for care if your spouse is still living in the home. Your spouse will also be entitled to retain and use certain income and assets. If you don't have a plan for care, however, the government will later have a lien on the family home to recover the costs they paid for you.
You should also consider the pressure on your family if you do not have a plan in place. It is difficult enough to wrestle with the decisions and emotions around a family member with a need for assisted living. Adding in concern about assets and available funds is a complication that you can take off of your family's plate by making a plan in advance.
How We Can Help
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Jenna Ordway
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We are ready to help. We have a simple process for getting you from wherever you are now to executed and final documents. It starts with an initial consultation, which is absolutely free. You can use the button below to schedule your free information call, or simply give us a call at 781-784-2322.
