A new year can motivate you to take care of responsibilities that you have been neglecting for one reason or another. People have a tendency to avoid unpleasant subjects, and this is understandable to some extent, but sticking your head in the sand is not the solution.
As elder law attorneys, we advise people about the potential impact of long-term care costs. The majority of senior citizens will require paid long-term care at some point in time. Over 30 percent will move into nursing homes, the bills can be staggering.
Medicare does not pay for the custodial care that you would receive in a nursing home, and it doesn’t cover in-home care that is provided by a home health aide. This is the reality, and you should face it head-on and take the appropriate steps to prepare yourself.
There are those that question the fairness of this arrangement, but Medicaid will cover long-term custodial care. Of course, you cannot qualify if you have a reasonable store of assets because there is a $2000 limit.
If you could give assets to your loved ones after you find out that you need long-term care and gain eligibility immediately, there would be a simple solution. Unfortunately, the matter is complicated by the five-year look back period.
You are ineligible for Medicaid for five years after you give large gifts. For this reason, advance planning is necessary.
Irrevocable Medicaid Trust
A lot of people rely on income that they receive from assets that are invested, and if you are in this position, you can’t give them away before you need long-term care. You can however convey resources into an irrevocable, income only Medicaid trust.
After you fund the trust, you would no longer be able to access the principal, but you could accept distributions of the trust’s earnings. If you have no intention of spending the money anyway, your retirement plan would not be disrupted at all.
When five years have passed, you can apply for Medicaid if you need it, and the assets in the trust would not count.
It is very important to understand the Medicaid rules that apply to home ownership. The value of your home is not counted when Medicaid is determining your eligibility status. There is an equity limit, and it stands at $636,000 in Ohio in 2022.
While you can qualify as a homeowner, there is a very good reason why you should avoid this dynamic. Medicaid is required to seek reimbursement from the estates of deceased beneficiaries. If you are a beneficiary and you own a home, they could place a lien on the property after your death.
As a response, you can transfer your home into the trust, and you would no longer be the direct owner of the property.
We should point out the fact that there are some exceptions to the rule with regard to the Medicaid estate recovery lien. If your spouse is still living in the home at the time of your death, Medicaid will not go after the property.
There is also a child caregiver exemption. If one of your adult children has been caring for you in the home for at least two years, you can transfer ownership to the child and there will be no recovery attempts.
Take Action Today!
You may be fortunate enough to avoid long-term care expenses, but it is always better to be safe than sorry. When you take action in advance, you can maintain your lifestyle during your retirement years secure in the knowledge that long-term care costs will not obliterate your legacy.
We can gain understanding of your situation and your objectives and help you implement a plan that is ideal for you and your family. If you are ready to get started, you can schedule a consultation at our Cincinnati elder care planning office if you call us at 513-721-1513.