As we grow older, the concern over the possible need for long-term care seems to increase with every year. According to the U.S. Department of Health and Human Services, there’s a nearly 70 percent chance you’ll require some form of long-term care by the time you reach sixty-five. Whether it’s in-home assistance or care at an assisted living facility, discussing your preferences and creating a financial plan is crucial.
Generally speaking, there are only a handful of ways to pay for long term care costs. Some individuals opt for long-term care insurance policies, however, these policies can be expensive and come with eligibility criteria that make them difficult to purchase as we grow older. Similarly, some individuals are able to purchase life insurance policies with a special rider that allows them to draw on the policy to pay for long term care costs. But again, the cost of these policies can put them out of reach for most. As a result, many people will create a plan for self-funding their long term care through personal savings, investments, or the sale of assets. If these options are unrealistic, we can look towards government assistance programs that can help cover the cost.
Government Benefits and Long-Term Care
When it comes to covering the costs of long-term care, three government benefits come into play:
- Medicare: Only covers up to one hundred days of care in certain situations, and even then it’s quite limited. To qualify, specific criteria must be met, making it imperative to explore additional options.
- Veterans Benefits: Veterans signed up for VA healthcare can qualify for long-term care benefits through the U.S. Department of Veterans Affairs, provided the VA deems it necessary.
- Medicaid: The primary source for long-term care benefits for the majority. Medicaid eligibility varies by state, taking into account both assets and income. It is a needs-based program, meaning that you can only qualify for Medicaid assistance if you are of limited assets and income.
Qualifying for Long-Term Care Medicaid
Medicaid, a joint federal-state program, requires careful consideration of both assets and income. Asset limitations are typically around $2,000, with some exceptions for specific assets. There are also income limits, usually capped at about $2,700 per month, which if exceeded means that the excess must be paid to the nursing home as a cost of care.
The Look-Back Period
All states have a look-back period for their long-term care Medicaid programs. This period is typically sixty months (5 years). During the look-back period, any transfer of assets for less than fair market value may result in a penalty period, rendering the applicant ineligible for Medicaid benefits. Understanding the implications of the look-back period is crucial in planning for long-term care needs, and makes it that much more important to be proactive in your financial planning to mitigate potential penalties and secure a stable future.
Proactive Planning is Key
Being proactive in planning for potential long-term care needs is essential. Waiting until a crisis arises limits your options. Proactive planning allows for the transfer of assets outside the look-back period, providing more flexibility. Consider options like Medicaid Asset Protection Trusts (MAPTs), which are irrevocable trusts designed to shield assets from eligibility assessments. MAPTs offer peace of mind, ensuring your life savings are preserved for your care needs without sacrificing crucial tax benefits.
In a proactive planning case, funding assets into a MAPT can be a strategic move. If planning during a crisis, various state-specific strategies, such as promissory notes or annuities, may be explored. No matter your situation, understanding the options available and being proactive in your planning can make a significant difference in securing your financial well-being during potential long-term care needs. If you’d like to discuss any of these issues, don’t hesitate to reach out to Beaupre Law.