When you think about the legacy that you will be able to pass along to your loved ones, you can probably envision the expenses that you expect to incur during your retirement years. Obviously, there are some uncertainties, but you may have a pretty good general idea.
This being stated, you may be overlooking an enormous expense that can have a serious impact on the inheritances that you want to leave to your children.
Nobody is anxious to think about this subject, and this is understandable to some extent, but ignoring unpleasant realities does not make them go away. Most senior citizens will need help with their activities of daily living eventually, and many will reside in nursing homes.
You can expect to pay over $100,000 for a year in a nursing home in the Hilton Head area, and this is the average length of stay. A married couple could face two different sets of nursing home bills, and people sometimes spend multiple years in these facilities.
Medicare will provide a solid health insurance underpinning when you are a senior, but unfortunately, the program does not pay for the custodial care that nursing homes provide.
Medicaid covers custodial care, and in fact, most people in nursing homes are enrolled in the program. You are probably aware of the fact that Medicaid is only available to people with sparse financial resources, so there is a $2000 limit on countable assets.
This can seem like a dealbreaker, but a Medicaid planning strategy can be implemented, and it starts with an understanding of the non-countable assets. Your home is not counted, but there is an equity limit of $636,000 in South Carolina in 2022.
When a healthy spouse will be living independently while their spouse enters a nursing facility, there is no equity limit at all. However, you have to be aware of Medicaid estate recovery.
The program is required to seek reimbursement from the estates of people that were using Medicaid to pay for long-term care. As a result, when a beneficiary is in direct possession of a home at the time of their passing, Medicaid can place a lien on the property.
It should be noted that there would be no lien if a healthy spouse or a sibling with an ownership interest is still residing in the home.
Other non-countable assets include one vehicle, wedding rings, engagement rings, heirloom jewelry, household goods, personal effects, and prepaid burial plots. An applicant can have up to $1500 of whole life insurance, the same amount set aside for final expenses, and unlimited term life.
You could convey countable assets into a Medicaid trust. This would be an irrevocable trust, and you would not be able to act as the trustee or access the principal.
That’s the bad news, but the good news is that you could accept distributions of the earnings that are generated by assets in the trust. If and when you apply for Medicaid, you would no longer be able to receive the income.
It would be very simple if you could create the trust after you find out that you have to move into a nursing home, but there is a rule in place to prevent reactive divestitures. You have to fund the trust at least five years before you apply for Medicaid coverage.
Your eligibility is delayed if you violate this rule. The penalty is tied to the amount of the divestitures compared to the cost of nursing home care in South Carolina. For example, if you give away enough to pay for one year of care, your eligibility would be delayed by a year.
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As you can see, if you act in advance, you can position your assets wisely with future Medicaid eligibility in mind. We can help you devise a nursing home asset protection plan that will give you peace of mind as you live in comfort during your golden years.
You can schedule a consultation at our Bluffton, SC elder law office if you call us at 843-815-8580. There is also a contact form on this site you can use to send us a message, and if you reach out electronically, you will receive a prompt response.