Estate Planning for Assisted Living: Securing Your Family's Future
Unlocking Financial Security: How Estate Planning Shields Against Assisted Living and Long-Term Care Expenses
The prospect of assisted living for you, your spouse, or your parents is a reality many face. Understanding how to finance it is a critical but often daunting task that demands immediate attention.
In Massachusetts, the average cost of a private room in an assisted living facility exceeds $10,000 per month, and this figure is projected to rise further. It's important to note that this type of care is not covered by Medicare or standard health insurance. While long-term care insurance is an option, it has become both harder to obtain and more costly. Without long-term care insurance, the expense of $10,000 per month can swiftly deplete assets carefully accumulated over a lifetime.
Fortunately, there are proactive steps you can take to safeguard your assets for your family while still qualifying for Medicaid assistance to cover care costs. Strategies may include transferring real estate while retaining a life estate or creating an asset protection trust. However, it's crucial to act promptly, as Medicaid disregards transfers made within five years of applying for benefits.
The time to act is now, not when the need for assisted living becomes imminent. The rules governing Medicaid eligibility can be intricate, necessitating qualified legal advice to devise the right plan for your specific circumstances. Below, we provide a general overview to get you started, but remember that seeking personalized guidance is essential.
Understanding Medicaid and Assisted Living
Medicare or private health insurance only covers short-term care in a facility. If you need extended care lasting more than a month or two, you must bear the long-term care expenses yourself.
Medicaid, the federal program that assists low-income Americans, does cover long-term care costs, but eligibility is a prerequisite. Because Medicaid is a needs-based program, having excess income or assets will render you ineligible. Consequently, you may find yourself depleting the wealth you intended to leave to your family, particularly when long-term care costs exceed $10,000 per month.
The Role of a Medicaid Trust
A Medicaid trust is an irrevocable trust that places assets beyond your reach. Medicaid doesn't consider these assets as countable when applying for benefits. However, you can't revoke the trust or reclaim the assets.
Most individuals don't contemplate Medicaid eligibility planning until later in life when college tuition is no longer a concern, and retirement savings are substantial. Moreover, the younger you are, the less likely you'll require nursing home care within the next five years.
Assets in the trust can continue to generate income while remaining protected.
Revocable or Living Trusts and Asset Protection
While a comprehensive estate plan typically includes revocable or living trusts, they do not safeguard assets from long-term care costs. As long as you have the power to revoke the trust, the government won't consider the assets as genuinely given away. Consequently, these assets will count toward the Medicaid asset limit, despite being in the trust.
Assets Suitable for a Medicaid Trust
You can place various assets into the trust, often starting with those you most wish to protect. Real estate, including the family home, is a common choice. Some individuals prefer to retain liquid assets outside the trust, such as cash and unrestricted investments.
Understanding the Five Year Look Back
Medicaid assistance applications involve a five-year look-back period to determine countable assets. Any asset transfers or gifts made within these five years are considered available. It's essential to note that the look-back period has changed in the past and may change in the future.
Considering Medicaid planning a decade ahead of potential need, usually in one's mid-sixties, is a prudent approach.
Consequences of Not Planning for Long-Term Care
Without long-term care insurance and with available assets, you'll likely need to deplete those assets before Medicaid assistance becomes available. While some protections exist for a healthy spouse, the government may place a lien on the family home to recover care costs.
Additionally, not having a care plan in place can add considerable emotional and financial stress to your family's burden during an already challenging period. Addressing the need for assisted living without a financial plan can complicate an already emotionally charged situation. By taking proactive steps now, you can alleviate these concerns and ensure a more secure future for your family.
Questions About Planning for Long Term Care?
Need Help Getting Started on a Plan for Long Term Care?
Our Solutions Roadmap is a quick and easy way to share some information about your situation and your goals and receive preliminary feedback from a member of our team. Use the button below to get started- it is 100% confidential and 100% free.
How Our Estate Planning Attorneys Can Help
We are ready to help. We know it can be hard to get started thinking about these issues, and we have designed our process to be as easy as possible for you. You can use the button below to schedule your free information call, or simply give us a call at 781-784-2322.