More and more people are attaining senior citizen status because of the maturation of the baby boomers. This year, a clear picture is emerging about the major challenge that these people are facing. Long-term care is looming, it is widely misunderstood, and now is the time to get a grip on it.
Aging Changes the Playing Field
It is hard to imagine a time when you will not be able to handle your day-to-day needs. However, it is safe to say that people that are currently receiving living assistance felt this way at one time.
After you reach your late 60s, your life expectancy is well into your 80s. Many people do not get around well when they are octogenarians, and this is a harsh fact of life. This is true for folks that have no significant health problems, and the situation is magnified for those that are in more challenging situations.
Statistically speaking, just over half of people will need professional living assistance eventually. Some will be able to receive the help they need from in-home caregivers, but 35 percent of seniors will spend time in nursing facilities.
Long-Term Care Costs
Emotionally coming to grips with the fact that you need help with your activities of daily living is one hurdle. There is also a major financial element because Medicare does not pay for long-term custodial care. It doesn’t cover nursing home expenses, and it will not cover in-home care.
You are looking at a median annual charge of about $180,000 for a private room in a nursing home in the Hartford area according to Genworth Financial. For an in-home health aide, the figure was just over $66,000 last year, and this represents a 17 percent increase over the previous year.
There was also a 6.85 percent increase in the cost of a private room in a nursing home. If these figures continue to rise at this rate, the numbers could be off the charts in 10 or 20 years. This is a lot for one person to deal with, but a married couple may receive two sets of bills.
Medicaid Coverage
To sum it up, most people will need long-term care, Medicare will not pay for it, and it is quite expensive. Fortunately, there is a solution if you work with an elder care planning attorney from our firm.
Medicaid will cover custodial care, but there is a $1600 asset limit in Connecticut since it is a need-based program. Things that are not very valuable like personal effects and household belongings are not counted, and your motor vehicle, wedding ring, and engagement ring are exempt.
Your home is not a countable asset with an equity limit of $955,000 this year. That can sound like a very good thing, but there is a Medicaid estate recovery mandate. If you own your home when you die as a Medicaid beneficiary, they can place a lien on the property.
Nursing Home Asset Protection Strategy
There is another key piece of information about Medicaid eligibility. Medicaid imposes a five-year back period, so if you transfer assets out of your name, you will be ineligible for the next five years.
As a response, you have to act well in advance, but this is possible for many people. You convey your home, income producing assets, and other valuable resources into an irrevocable trust. The principal would be out of your reach, but you could accept distributions of the trust’s earnings.
When the time comes to apply for Medicaid, the assets in the trust would not count. Plus, you would not be the owner of the home even though you lived in it without interruption. As a result, it would be protected during the Medicaid estate recovery phase.
Take Action Today!
If you are going through life without a plan for aging in light of potential long-term care costs, action is required. You can schedule a consultation at our Glastonbury or Westport, CT elder law offices if you call us at 860-548-1000, and you can use our contact form to 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.