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Do I Need to Include Medicaid Planning in My Estate Plan?



When most people think of “estate planning” they think of protecting loved ones after their own death by creating a plan for the distribution of their estate assets after death. While this is certainly the primary focus of most estate plans, there are also some popular secondary goals and objectives found in most estate plans, such as Medicaid planning. If you are unfamiliar with the need for Medicaid planning, now is the time to learn as you will likely find it should be incorporated into your own estate plan.

Will You Need Long-Term Care?

Though you may prefer not to think about it, there is a very good possibility that you, or your spouse, will eventually need long-term care. Americans, in general, are living much longer than they were just a couple of generations ago. In fact, the average life expectancy of an American has almost doubled in the last 100 years. While this is certainly welcome news, living longer does not mean living without suffering the effects of the natural aging process. As a result, the longer you live the higher the odds that you will one day need long-term care. When you retire at age 65 you will stand a 50-50 chance of needing long-term care at some point prior to the end of your life. If you are still alive at age 85, those odds increase to 75-25. Moreover, if you do need long-term care you can look forward to a lengthy stay, considering the average length of stay is 2.5 years. What does all of this have to do with preserving your assets? The answer can be found in the cost of the long-term care you may very well need down the road.

How Much Will Long-Term Care Cost You?

If you have never considered what long-term care will cost you, now is the time to do so because long-term care costs could significantly diminish the value of your nest egg in a short period of time. In the United States, the cost of spending a year in long-term care, on average, will run you about $80,000. Long-term care costs in the State of North Carolina are almost on par with the national average with a year in a semi-private room running around $75,000 and a year in a private room setting you back about $82,000. An average stay of 2.5 years, therefore, will cost you around $200,000.

Won’t My Insurance Cover Long-Term Care Costs?

Before you assume your private healthcare insurance will help cover long-term care costs, think again. First, most employer sponsored insurance plans terminate when you reach retirement age. Plans that do continue into your retirement years are unlikely to cover long-term care costs unless you purchased a separate, and usually costly, long-term care coverage rider. Medicare won’t help you either because Medicare does not typically cover the costs of long-term care. Even when Medicare does cover long-term care costs it will only do so for up to 100 days. The bright light in all of this is that the Medicaid program does cover expenses associated with long-term care.The problem is that you must first qualify for Medicaid benefits.

The Problem Qualifying for Medicaid

To qualify for benefits, however, you must have income and assets below the program limits. As a retiree on a fixed income you will likely fall below the income limit; however, the value of your “countable resources” may easily exceed the asset limit, causing you to be denied for benefits until you exhaust the majority of those assets. After a lifetime of working and saving, the thought of losing everything to long-term care costs is likely a depressing thought. Worse still, Medicaid uses a five-year “look-back” period when evaluating an application. In essence, this means you cannot simply transfer assets to intended beneficiaries prior to applying in an effort to remove them from your estate. Any asset transfers within the five-year look-back period are typically ignored and the value of the assets transferred imputed back into your estate. If your assets exceed the program limits you will be expected to use those assets to help cover your long-term care costs until your assets are diminished enough for your to qualify for benefits. Medicaid planning is the answer.

What Is Medicaid Planning?

Medicaid planning uses legal tools and strategies to remove countable assets from your estate so that when you finally need to qualify for Medicaid the value of your assets will not exceed the program limits. At the same time, Medicaid planning ensures that those assets remain protected so that you can continue to benefit from them.

Contact Us

For additional information, please join us for one of our upcoming free seminars. If you have additional questions about asset protection planning in the State of North Carolina contact the experienced estate planning attorneys at The Law Offices of Cheryl David by calling 336-547-9999 to schedule an appointment.

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