How to Keep Your Last Years From Destroying Your Legacy
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You have worked hard all your life to provide for your loved ones and provide some kind of legacy to leave them- maybe it is savings or investments, or the home you have been paying off all these years.
As you age, however, you likely start to think about what happens in the last years of your life, if you are no longer able to live in your home or fully care for yourself. Maybe you have no intention of ever going into a nursing home or assisted living. Maybe your family intends to care for you at home for as long as you need it. This is normal. But it is also, unfortunately, normal that plans change. People get sicker than they expected. Family members have their own life changes that interfere with their ability to do what they intended. If you or your spouse ends up needing nursing home care, you could find yourself in a position where you do not have the funds to pay for care, but may be prevented from getting assistance from Medicaid/MassHealth because of the assets you have so careful saved to leave for your loved ones. Worse, Medicaid has a five year look back period. This means that if you take steps to protect assets, like giving them away or putting them into an asset protection trust, those assets will still be considered yours if they were transferred within five years of the time you appy for assistance. What this means for people between the ages of 65 and 75 is that now is the time to plan for the possibility of long term care, assuming you do not already have long term care insurance. 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. |
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Ways to Pay for Long Term Care
Your 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, this insurance will not cover those costs.
This leaves three ways to pay for long term care if you need it:
If paying for care yourself, or taking out long term care insurance, is not a workable option for you, it is important to understand your options for being able to access Medicaid assistance when the time comes.
This leaves three ways to pay for long term care if you need it:
- Paying for it yourself out of available funds. This is simply not an option for many families- even if they have a substantial asset, like a home, that does not translate into the cash necessary to pay for care. Depending on the level of care needed and your location, this cost can range from $4,000 to over $10,000 per month.
- Using a long term care insurance policy. These policies are available, but can be cost prohibitive if you are already 65 or older. They also typically have a set amount that they will pay per day for care, which usually does nto cover the entire cost.
- Applying for assistance from Medicaid/MassHealth. This program does cover long term care. However, you have to become eligible first, which means having a very small amount of assets and income to your name.
If paying for care yourself, or taking out long term care insurance, is not a workable option for you, it is important to understand your options for being able to access Medicaid assistance when the time comes.
MassHealth Eligibility for Long Term Care
In order to be eligible for Medicaid/Masshealth coverage, you have to be below certain income and asset thresholds. Full information about eligibility is available here. In short, you need to have less than $2,000 in assets ($3,000 for a married couple) and be below certain monthly income guidelines.
If you own a home in your name, you are already above this threshold. The same is true if you have investments or cash savings in excess of that amount.
This means for most people you will have to move assets outside of your control- either by giving them away or placing them in an irrevocable trust (see more on this below).
If you own a home in your name, you are already above this threshold. The same is true if you have investments or cash savings in excess of that amount.
This means for most people you will have to move assets outside of your control- either by giving them away or placing them in an irrevocable trust (see more on this below).
What is a Medicaid or Irrevocable 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.
You can continue to receive income from the assets in the trust even though the assets themselves are restricted.
Common examples:
You can continue to receive income from the assets in the trust even though the assets themselves are restricted.
Common examples:
- If you own a home and put it into a Medicaid trust, you retain the right to live in it while you own it. If you decide to sell during your lifetime and downsize, the trust can sell the house and by a replacement property with the proceeds, but you cannot sell it and keep the proceeds yourself.
- If you own other real property and put it into a Medicaid trust, you are still restricted from taking or selling the house out of trust, but you can receive the income from any rent that property generates.
- If you have investments and put them into a Medicaid trust, you can still receive income but cannot pull the investment assets out of trust.
What Happens if You Don't Plan for Long Term Care
If your assets are something other than your primary residence (with some exceptions), you will be expected to use them to pay for your care until they run out (commonly called "spending down" your assets).
For your primary residence, you will not be required to sell it to pay for care, but Massheath will put a lien on the property, which miust be satisfied after your passing before sales proceeds can be distributed.
This means even if the home does not have to be sold right away to pay for care, you could end up eating away all or most of the value of this asset, leaving less than you had intended for your loved ones.
For your primary residence, you will not be required to sell it to pay for care, but Massheath will put a lien on the property, which miust be satisfied after your passing before sales proceeds can be distributed.
This means even if the home does not have to be sold right away to pay for care, you could end up eating away all or most of the value of this asset, leaving less than you had intended for your loved ones.
Are There Options Other Than a Medicaid Trust?
Yes, there are. In some cases you can accomplish what you want by transferring the deed to your home to your heirs but retaining a "life estate-" basically the right to live in the property for the rest of your life. This can achieve the goal of removing the asset for Masshealth purposes, but it is far less flexible than a trust. If you should need or want to sell the property during your lifetime, you would lose the asset protection.
You can also simply give away assets during your lifetime. Keep in mind, though, that if you simply give away an asset you don't retain any rights, as compared to a trust where you can still receive income to support yourself.
You can also simply give away assets during your lifetime. Keep in mind, though, that if you simply give away an asset you don't retain any rights, as compared to a trust where you can still receive income to support yourself.
How Our Estate Planning Lawyers Can Help
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Jenna Ordway
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We are ready to help. We know these are hard things to think about, and have designed our process to make it as easy as possible for you to put the plan in place that meets your goals and protects your family. You can use the button below to schedule your free information call, or simply give us a call at 781-784-2322.
