Protecting Your Legacy: Planning for Long-Term Care and Medicaid/MassHealth Assistance in Massachusetts

Caring for Your Legacy: Navigating Long-Term Care and MassHealth Planning

You've worked diligently throughout your life to provide for your loved ones and build a legacy—whether that legacy is in the form of savings, investments, or the home you've spent years paying off. However, as you grow older, it's natural to consider what might happen during your final years if you're no longer able to live independently in your own home or fully care for yourself.

Perhaps you've never contemplated the possibility of needing nursing home or assisted living care. Maybe you assume your family will take care of you at home for as long as necessary. While these are common assumptions, it's also common for circumstances to change unexpectedly. Health can deteriorate, and family members may face their own life changes that disrupt their ability to provide care as intended.

In the event that you or your spouse requires nursing home care, you could find yourself in a precarious position. Your savings, carefully accumulated over a lifetime, may be insufficient to cover the costs. Yet, you might be ineligible for Medicaid/MassHealth assistance due to the assets you intended to leave to your loved ones.

Even more concerning is the fact that Medicaid imposes a five-year "look back" period. This means that if you take measures to protect your assets, such as giving them away or placing them in an asset protection trust, those assets may still be considered yours if the transfer occurred within five years of your application for assistance.

For individuals aged 65 to 75, now is the ideal time to plan for the possibility of long-term care, especially if you do not already have long-term care insurance.
The good news is that there are methods to plan for long-term care while safeguarding some or all of your assets for your family and still qualifying for Medicaid assistance. This can involve transferring real property and retaining a life estate or establishing an asset protection trust.

Ways to Pay for Long Term Care

Traditional health insurance, such as Medicare or private insurance, typically only covers short-term stays in a care facility. If you are discharged from a hospital to recover, your insurance may cover a brief period in a care facility. However, if you require extended care, these insurance plans will not cover the costs.
This leaves three primary ways to pay for long-term care:

Paying from Your Own Assets: Paying for long-term care out of your own funds is simply not feasible for many families. Even if you possess substantial assets, like a home, the value may not translate into the cash necessary to cover care costs, which can range from $4,000 to over $10,000 per month, depending on the level of care and location.
Long-Term Care Insurance: While long-term care insurance policies are available, they can be cost-prohibitive for individuals aged 65 or older. Moreover, these policies typically have daily benefit limits that may not cover the entire cost of care.
Medicaid/MassHealth Assistance: Medicaid is a program that covers long-term care, but eligibility requires having very limited assets and income.

If paying for care out of pocket or purchasing long-term care insurance is not feasible, it is crucial to understand your options for accessing Medicaid/MassHealth assistance when needed.

MassHealth Eligibility for Long Term Care

To qualify for Medicaid/MassHealth coverage, you must meet specific income and asset criteria. Full eligibility details are available here. In summary, you need to have assets of less than $2,000 ($3,000 for a married couple) and meet certain monthly income guidelines.

If you own a home in your name or have investments or cash savings exceeding these thresholds, you are already above the eligibility limits. For most people, this means transferring assets out of their control, either by gifting them or placing them in an irrevocable trust (further details below).

What is a Medicaid or Irrevocable Trust?

A Medicaid trust, also known as an irrevocable trust, takes the assets you place into it outside of your reach. This means that Medicaid will not consider those assets as yours when you apply for benefits. Furthermore, you cannot revoke the trust or reclaim the assets.

However, you can continue to receive income generated by the assets within the trust.

Common examples of how these trusts work include:

If you own a home and place it in a Medicaid trust, you retain the right to live in it while you own it. If you decide to sell and downsize during your lifetime, the trust can sell the property and purchase a replacement property, but you cannot sell it and keep the proceeds.
If you own other real estate and transfer it to a Medicaid trust, you are still prohibited from selling or taking the property out of the trust, but you can receive rental income.
If you have investments within a Medicaid trust, you can still receive income but cannot remove the investment assets from the trust.

Are There Options Other Than a Medicaid Trust?

Yes, there are alternative options to consider when planning for long-term care while protecting your assets:

Life Estate Deeds: You can transfer the deed to your home to your heirs while retaining a "life estate." This means you have the right to live in the property for the rest of your life. While this can achieve the goal of removing the asset for MassHealth purposes, it comes with some limitations. If you need or want to sell the property during your lifetime, you would lose the asset protection.
Gifts: Another option is to give away assets during your lifetime. However, keep in mind that when you give away an asset, you typically do not retain any rights to it. This differs from a trust, where you can still receive income to support yourself.

Choosing the right strategy depends on your specific circumstances and goals.

Secure Your Legacy With Proper Planning

Planning for long-term care is a critical aspect of securing your legacy and ensuring your loved ones receive the inheritance you intend for them. Without a well-thought-out strategy, the cost of long-term care can erode your assets, leaving less for your heirs and beneficiaries.

Whether you opt for a Medicaid trust, a life estate deed, or other asset protection measures, it's essential to start planning well in advance. Medicaid has a five-year look-back period, which means that any asset transfers made within five years of applying for assistance may still be counted as your assets.

As you approach the age of 65 and beyond, it's the perfect time to assess your long-term care needs and develop a comprehensive plan that safeguards your legacy. An experienced attorney can guide you through the process, helping you make informed decisions and navigate the complexities of Medicaid eligibility.

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