Planning for the “Let’s Hope It Never Happens”
Some things are unavoidable. Death and taxes are two items that fit nicely into that category. It’s almost ironic that estate planners deal largely with precisely those two issues (was Benjamin Franklin secretly an estate planning attorney?). Unfortunately, the job of an estate planning attorney is not so cut and dried. We often have to deal with the uglier side of life and address things like disability, incapacity, and even long-term elder care in less than ideal situations.
Medicaid and Planning Your Estate
One issue that seems to be recurring is that of using Medicaid to pay for long-term care in an assisted living facility. In many cases, people are simply advised that they must first use whatever assets they have saved to pay for care, and only after such assets are exhausted will Medicaid begin to “pick up the tab.”
The thought of exhausting the nest egg—the thought of spending a lifetime of accumulated wealth on nursing home care rather than leaving it to loved ones—is simply too much for most people to bear. It makes the decision to accept assisted living as a necessity much more difficult, and it’s very heartbreaking.
The truth is that there are smart ways to arrange an estate so that many assets can be passed on to loved ones or held in trust while still allowing for an elderly person to maintain Medicaid eligibility. The rules differ drastically depending on whether one or both spouses need assistance, and there are completely different rules for unmarried people.
Generally speaking, a husband and wife can have a pretty substantial asset value and still qualify one person for Medicaid. Specifically, a husband and wife can jointly have about $115,000 in “permitted assets” and still have Medicaid pay for the nursing home costs for one spouse. Besides that, some assets are excluded entirely from the calculation of permitted assets.
For example, necessities such as clothing, furniture, vehicles, burial plots, and more than $750,000 in home equity are exempt from the calculation of permitted assets. That’s great news for elderly people who don’t have extensive real estate investments or many liquid assets, but it is a very real psychological burden on people who are above the permitted asset threshold or have very illiquid investments. What should you do if you fall into that category?
Giving It Away
It is possible to give assets to your loved ones prior to requiring Medicaid assistance for nursing home care, but there is five-year “look back.” That means that if you’ve gifted assets within five years of needing Medicaid assistance, you might not qualify. There are, however, ways to reduce or eliminate the penalty period through the use of very specific types of trusts designed just for Medicaid planning.
That’s Where We Might Be Able to Lend a Hand
Nobody wants to think about putting their loved ones into a nursing home or about possibly ending up in one personally, but it’s a possibility that can’t be ignored, especially given the cost of care in assisted living facilities.
We are here to help you make the best decisions regarding your health and your assets. We’ve seen lots of scenarios where people are convinced that they have to spend their hard earned assets on long-term care rather than leave or gift those assets to loved ones. The truth is that some careful planning can help achieve quality care and a generous estate. Call our office today to schedule your Family Wealth Planning Session™. If you mention this article by name and you’re one of the first two people to call, we’ll waive our customary $750 consultation fee and meet with you for free.
