Everyone is aware that you can decide how you want your assets to be distributed after your passing when you create an estate plan. At the same time, wealth preservation is another part of the equation if you want to maximize the legacy that you will be able to pass on to your loved ones.
Nursing Home Expenses
There is a major expense looming, and many people do not think about it until it is too late. Over one third of senior citizens will spend the end of their lives a nursing homes according to the United States Department of Health and Human Services.
Medicare will pay for convalescent care when you are recovering from an illness or injury, but it does not cover a stay in a nursing home or professional in-home care. These are considered to be forms of custodial care when no recovery is anticipated.
Genworth Financial is a company that offers financial products for senior citizens, so they have a vested interest in the state of long-term care costs. As a response, the company conduct surveys that examine the costs all around the country.
The 2021 survey is still the most recent one as they are presumably still compiling information for 2022. In the Oklahoma City area, the median annual charge for a private room was $88,695 in 2021. This is a huge 27.89% increase over the 2020 figure. Semi-private room costs went up by a much lower 5.8% to reach $66,613.
Some people can remain at home while they receive the care that they need from in-home health aides. This avenue is less expensive with a $60,000 annual median cost, but it is still a lot of money to come up with late in your life.
Over half of people that receive paid living assistance incur bills for over a year, and 13 percent engage professional caregivers for over five years. The expenses can be overwhelming for one person, but a married couple may be forced to deal with two different rounds of long-term care bills.
Medicaid Eligibility
Fortunately, there is a solution because Medicaid will cover custodial care. Since it is only available to people with a significant level of financial need, there is a $2,000 asset limit.
The household items, that would not generate a great deal of cash if sold, do not count. Additionally, your one motor vehicle is exempt. Wedding and engagement rings and heirloom jewelry are exempt as well.
When a married person is applying for Medicaid, the spouse can keep half of the countable assets up to a limit. They can also receive their spouse’s income if they need it to maintain a reasonable standard of living.
Home Ownership and Medicaid Estate Recovery
You can own a home and still qualify for Medicaid, but there is a catch. Medicaid can place a lien on the home if it is in your direct personal possession at the time of your death, because there is a Medicaid estate recovery mandate.
Nursing Home Asset Protection
Now that you understand the facts, we can look at the solution. You can convey your home and income-producing assets into an irrevocable trust while you are still living independently.
The principal in the trust would be out of your reach, but you could accept distributions of the earnings. If and when you apply for Medicaid, the principal would not count. However, you would no longer be able to receive income.
This sounds easy enough, but there is a five-year look back period. You must conveyed your assets into the trust at least 60 months before you submit your application for Medicaid. If you divest yourself of assets within this period, your eligibility is delayed.
The duration of the penalty would depend on the amount that you transferred out of your name. For example, if you give away an amount that will pay for two years of nursing home care, your Medicaid eligibility would be delayed by two years.
Schedule a Consultation Today!
We are here to help if you are ready to work with an attorney to put an asset protection plan in place. You can schedule a consultation at our estate planning office in Oklahoma City if you call us at 405-843-6100. You can reach the Tulsa location at 918-615-2700.
If you would rather reach out electronically, fill out our contact form and we will get back in touch with you as soon as we can.
After helping his own family deal with a lengthy probate and the IRS following his father’s untimely death in a farm accident, Larry Parman made a decision to help families create effective estate plans designed to reduce taxes, minimize legal interference with the transfer of assets to one’s heirs, and protect his clients’ assets from predators and creditors.