You probably put a lot of thought into your financial future with your retirement in mind. This is as it should be, but many people that are diligent overlook an expense that can have a devastating impact on your legacy.
An Inconvenient Truth About Medicare
It’s natural to assume that Medicare will take care of most of your long-term care costs when you become eligible. Everyone knows that there are some out-of-pocket expenses, but they are usually going to be relatively modest. Plus, there are Medigap plans that can fill in these gaps.
All of the above is well and good, but there is a major expense that is not covered by Medicare or the gap filling plans. If you have to stay in a nursing home late in your life, you will not be covered, and an extended stay can cost you a lot of money.
Connecticut Long-Term Care Costs
The state of Connecticut has determined that the average cost for a month in a nursing home in our state is $13,863. If you get out a calculator, you will find that this is more than $166,000 a year, and this is the average length of stay.
One set of nursing home bills is more than enough, but a married couple may to pay the expenses twice. This can definitely consume all or most of the inheritances that you have always intended to leave to your children.
In many cases, adult children will work with parents that need long-term care. When they gain an understanding of the facts with regard to the costs involved, it can be a rude awakening.
Medicaid Eligibility
Since we have entered a new year, we are urging people to take action to preserve their wealth. Medicaid will cover long-term care if you can gain eligibility, but it is a need-based program, so we have a $1600 asset limit in Connecticut.
That may sound like a dealbreaker, but there is a pathway to eligibility without losing anything in the process. You cannot give gifts to your loved ones today and qualify for Medicaid tomorrow, because there is a five-year look back period.
If you divest yourself of assets, you will not be eligible for 60 months. For this reason, advance planning is key. A lot of people will say that they cannot part with almost all of their assets years before they may need long-term care because they rely on the income that is generated.
This is understandable, but there is a solution. You could convey income-producing assets into an irrevocable, income only Medicaid trust. As the name would indicate, you could accept distributions of the earnings while you are living independently.
You would not be able to reach the principal, but you would not be spending that money anyway because you rely on its earning power. After five years, the assets that are left in the trust would not count, so there would be nothing standing in your way.
Home Ownership
A home is not a countable asset for Medicaid eligibility purposes, but there is an equity limit. It was $906,000 last year, and it has been increased $955,000 in 2022. Even though you can qualify as a homeowner, this is not a good course of action.
There is a Medicaid estate recovery mandate. The program is required to go after assets that remain in your estate after you are gone in an effort to obtain reimbursement. Your home would be available to them if it is in your direct personal possession at the time of your passing.
With this in mind, you can convey your home into the trust. Nothing changes with regard to your ability to live in the home as usual, but it would be protected during the estate recovery phase.
Schedule a Consultation Today!
As you can see, this is a very serious matter, and you should address it sooner than later if you are unprepared. If you are ready to get started, we can help you develop a plan that gives you the ability to live in comfort as you set the stage for future Medicaid eligibility.
You can schedule a consultation at our elder care planning offices in Glastonbury or Westport, CT 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 as soon as we can.
