When you hear the term “Medicaid planning,” your first reaction may be confusion. Medicaid is a health insurance program for people with very sparse resources. Why would you want to hatch a plan that will put you in this position?
This is a good question, and it is at the core of the most pressing elder law matter that attorneys address.
Medicare and Long-Term Care
You will qualify for Medicare when you are 65 if you accumulate at least 40 retirement credits. The maximum annual accrual is four credits, and anyone working full time will receive the four credits. A married person that doesn’t have the credits could qualify on their spouse’s work record.
Medicare will provide a solid health insurance underpinning, but there are out-of-pocket expenses for covered medical services. They are usually manageable for most people, but there is one void in the coverage that is a very big deal.
This program does not cover the custodial care that you would receive in a nursing home. There are also in-home health aides that provide custodial care
Long-Term Care Costs
According to the United States Department of Health and Human Services, just over half of American seniors will incur long-term care expenses. About 35 percent will spend time in nursing homes, and the average length of stay is one year.
Genworth Financial has been compiling a database to keep tabs of the long-term care costs around the country for several years. They are now making projections into the future.
According to their data, the median annual charge for a private room in a Westport, Connecticut nursing home will be almost $300,000 in 2034. You are looking at a median cost of $114,000 per year for an in-home health aid ten years from now.
Medicaid Planning
Medicaid will cover long-term care, and this is what Medicaid planning is all about. In Connecticut, the Medicaid asset limit is $1,600, but there are some assets that don’t count. Your home is one of them, but there is an equity limit of $1.071 million in 2024.
Your motor vehicle, wedding and engagement rings, heirloom jewelry, household items, and basic personal belongings are not counted. You can have up to $1,500 set aside for final expenses, the same amount of whole life insurance, and unlimited term life insurance.
When it comes to assets that are counted, you could convey them to an irrevocable, income only Medicaid trust. You would not have access to the principal after you fund the trust, but you could accept distributions of the trust’s earnings before you apply for Medicaid.
With regard to a home, it doesn’t count at first, but there is a Medicaid estate recovery mandate. If you are in possession of a home at the time of your death, Medicaid could potentially put a lien on the property. For this reason, you could consider putting the home into the trust.
Timing is the key to the successful execution of the strategy. There is a five-year look back period, so you would be ineligible if you transfer assets out of your name at less than fair market value within 60 months of your application date.
Take Action Today!
We can help you preserve your resources as you develop a plan that will allow you to pass along a meaningful legacy. You can set up a consultation at our Glastonbury or Westport, CT estate planning offices by calling us at 860-548-1000, and you can fill out our contact form if you would rather send us a message.
Mr. McCann is licensed to practice before the courts of the State of Connecticut. He is a member of the American Academy of Estate Planning Attorneys.
Mr. McCann provides to his clients, trust and estate planning, and trust and estate administration services. Formerly, Mr. McCann was an adjunct professor of economics in the State of Connecticut Community College system, and a Commissioner of the Town of Simsbury Zoning Board of Appeals.