Your legacy can be approached in two different ways. You can ask yourself what you would like to be able to leave to your loved ones and act accordingly to the best of your ability. The other option is to ignore the matter and let the chips fall as they may.
If you opt for the former approach, you should consider a potential expense that could consume all or most of what you intend to leave to your loved ones.
The life expectancy for someone that is in their mid-60s is into the mid-80s, and life as an octogenarian can be challenging. Most people will need some type of paid long-term care eventually, and over 30 percent of seniors will reside in nursing homes.
According to the state of Ohio, the average cost for a month in a nursing home is $6905. The average length of stay is one year, but 13 percent of people that receive paid care require the assistance for more than five years.
If you are married, your family could receive two sets of nursing home bills, and the costs are likely to rise over the next 10 or 20 years.
Medicare is a government health insurance program for seniors, so you may assume that it would pay for long-term care. In fact, the program does not cover the custodial care that nursing homes provide, and it does not pick up the tab for in-home care.
The widely embraced solution is Medicaid. This jointly administered federal/state government health insurance program covers long-term custodial care, but it is need-based.
You cannot qualify if you have more than $2000 in countable assets in your name, but your home is not counted with an equity limit of $603,000 in Ohio in 2021.
Though it is possible to qualify as a homeowner, you have to be aware Medicaid estate recovery. If Medicaid pays for your long-term care and you own a home at the time of your death, they could place a lien on the property.
Other non-countable assets include a motor vehicle, heirloom jewelry, wedding rings, and engagement rings. Personal belongings, furniture, appliances, and other household items also fall into the non-countable category.
You can retain $1500 to help cover final expenses, and the same amount of whole life insurance is permitted. Prepaid burial plots are allowed, and you can have unlimited term life insurance because it does not have a cash value.
Spending Down and the Five-Year Look Back Period
When you digest this information, you may resolve to divest yourself of assets after you find out that you need living assistance. This is a perfectly logical notion, but reactive divestitures would not be in the spirit of the program.
There is a five-year-your look back period in place to prevent this course of action. All divestitures must be completed at least five years before you apply for Medicaid.
Irrevocable Medicaid Trust
You could give your loved ones their inheritances in advance to qualify for Medicaid, but you would be surrendering the income production. Another alternative would be the creation of an irrevocable, income only Medicaid trust.
After you establish and fund the trust, you would not be able to access the principal, and you would not serve as the trustee. However, you could receive income that is generated by assets that are held by the trust until you apply for Medicaid.
This can be the ideal course of action, because you would be covering all your bases in an efficient manner.
Schedule a Consultation Today!
Long-term care costs should definitely be addressed well in advance, and we are here to help if you are ready to get started. We can gain an understanding of your situation and your legacy goals and help you devise a plan that provides you with peace of mind.
You can schedule a consultation at our Cincinnati, Ohio elder law office if you call us at 513-721-1513. There is also a contact form on this site you can use to send us a message, and if you reach out electronically, you will receive a prompt response.