A lot of people look at estate planning as the act of leaving instructions with regard to how your assets will be distributed after you are gone. They think that this is the long and short of it, but there is another facet to take into consideration.
This is a blunt way of putting it, but your estate plan won’t matter very much if there is little to nothing to pass along. With this in mind, you should consider certain threats to your legacy, and it starts with long-term care costs.
Medicare Gap
It is logical to assume that Medicare will cover all your health care related needs when you are a senior. Yes, there are out-of-pocket costs for treatments and services, but the program is designed to make them affordable.
Unfortunately, logic does not apply when it comes to long-term care. If you need paid living assistance that falls under the category of custodial care, Medicare will not cover any portion of the costs.
Connecticut Nursing Home Costs
Unless you have very deep pockets, it is not easy to comfortably pay for a stay in a nursing home when you have been retired for years. The state of Connecticut has determined that the average cost for a month in a nursing home is $14,524 at the present time.
The average length of stay is a year, but more than half of people that need paid care receive assistance for more than a year, and 13 percent incur costs for more than five years.
This can add up considerably, and a married couple may be saddled with two different sets of long-term care bills.
Elder Care Planning
We are not trying to paint a gloom and doom scenario because it is possible to devise a practical elder care plan that is right for you and your family. The best way to proceed will depend on the circumstances, but Medicaid eligibility will typically be part of the equation.
This program will pay for long-term care, but of course, people that retire with some resources would not qualify because it is a need-based program. There is a $1,600 limit on countable assets.
When you put all this together, you would naturally come to the conclusion that you can give your children their inheritances while you are still living after you find out that you need long-term care. You could then qualify for Medicaid right away and your legacy would be preserved.
The government does not want people to be able to do this, so a five-year look-back period has been installed. If you give large gifts today, you would not be eligible for Medicaid for another five years.
Medicaid Trust
At this point, a lot of people will throw up their hands because they cannot give away their income-producing assets five years before they may need long-term care. They rely on the money to make ends meet.
Fortunately, there is a solution in the form of an income-only, irrevocable Medicaid trust. You can convey assets into the trust when you are still fully capable of living independently, and you can receive distributions of the trust’s earnings.
You would not be able to access the principal, but you probably would never use the principal anyway because it is a source of income that you need. Your home could also go into the trust, and this is important because of the Medicaid estate recovery mandate.
The program is required to seek reimbursement from a deceased beneficiary’s estate. Your home is not a countable asset for Medicaid eligibility purposes, so you can qualify as a homeowner. However, Medicaid could place a lien on the home after your death.
If you convey it into the trust, it would be protected during the recovery phase, and ownership would be transferred to a beneficiary that you name when you establish the trust.
Take Action Today!
Our doors are open if you would like to work with an attorney to put a nursing home asset protection plan in place. We provide elder care planning assistance everywhere in Connecticut. We have two offices in Westport and Glastonbury, CT, and you can schedule an appointment if you call us at 860-548-1000. If you would rather send us a message, fill out our contact form and we will get back in touch with you promptly.
Mr. Horowitz was awarded his Juris Doctor degree with honors from the University of Connecticut School of Law. While attending law school, Mr. Horowitz received the American Jurisprudence Award in Legal Ethics and the Nathan Burkan Award.
After graduation from law school, Mr. Horowitz continued his legal education at New York University School of Law where he received a Post Doctorate Law Degree in Taxation. He has also recently received a national achievement award.
Mr. Horowitz is admitted to practice before all the state courts in the State of Connecticut and the United States District Court.
Mr. Horowitz was selected for Super Lawyers in 2021.