Medicaid should be on your radar even if you are going to qualify for Medicare when you reach the age of 65. Why is this the case? Medicaid may be important because Medicare does not pay for living assistance, and most people will need help with their activities of daily living eventually.
Medicaid will pick up the tab, and this is huge, because you can expect to pay about $80,000 for a year in a nursing home in the Hilton Head area. According to the United States Department of Health and Human Services, 35 percent of elders will eventually reside in nursing homes, so this is a very real possibility.
Medicaid Asset Limits
Since the Medicaid program is intended for people with sparse monetary resources, there are tight asset limits. Generally speaking, the limit is $2000, but there are some things that you may have in your possession that would not be counted if you were to apply for Medicaid to pay for long-term care.
Your home is one of these things, but there is an equity limit. In South Carolina, the limit is $636,000 in 2022. It should be noted that there is no equity limit at all if a healthy spouse will continue to remain in the home as usual. Other non-countable assets include wedding and engagement rings, heirloom jewelry, one vehicle, household effects, and personal items.
You can have up to $1500 of whole life insurance, and the same amount can be set aside for final expenses. Unlimited term life insurance is okay, and if you have a prepaid burial plot, it would not count against you.
In addition to the removal of the home equity limit, there are other concessions made for a healthy spouse. One of them is the Community Spouse Resource Allowance.
This allows the healthy spouse to keep half of the shared assets that are counted, but there is a limit. During the current calendar year, it stands at $66,480 in our state. This is much lower than the limit in most other states.
Income that is brought in by the person that is using Medicaid to pay for long-term care must be utilized to defray the costs that are being incurred. This being stated, there is an exception to the rule. If a healthy spouse relies on the income, they are entitled to a Medicaid Monthly Maintenance Needs Allowance.
This allows the healthy spouse to continue to receive all or some of the income that is earmarked for the institutionalized spouse. During the current calendar year, the maximum Community Spouse Resource Allowance in South Carolina is $3435.
Five-Year Look Back Period
When you digest all this information, a simple idea would logically pop into your mind. You could give countable assets to your loved ones if and when you find out that you need long-term care. This makes sense on the surface, but it is not a solution, because there is a five-year look back period.
If you divest yourself of assets within five years of the date of the application submission, you are penalized, and your eligibility is delayed. The duration of the penalty would be based on the amount that you gave away as it compares to the cost of nursing home care.
For example, let’s say that the state determines that the average cost for a year in a nursing home is $80,000. We will say that you gave $160,000 in gifts two years ago, and you are applying for Medicaid now. Under these circumstances, you gave away enough to pay for two years of care, so your eligibility would be delayed by two years.
Take Action Today!
Long-term care costs are definitely a threat your legacy, and a married couple may receive two different sets of bills. With the proper planning, you can position your assets wisely with future eligibility in mind. An income only Medicaid trust will be the solution in many instances in light of the look-back period.
We can explain the details if you are ready to get started. Our Bluffton, SC estate planning office can be reached at 843-815-8580, and you can fill out our contact form if you would rather send us a message.