When you are planning ahead for retirement, you anticipate the expenses that you expect to incur. Since you will have Medicare, you can make reasonable projections about your medical expenses. A Medicare supplement can help to fill the gaps, and you should be protected.
However, there is one gaping hole in the coverage that is not so easy to fill. Let’s take a look at this looming expense that many people do not consider until it is too late.
Long-Term Care
Medicare will not cover a stay in a nursing home, and it doesn’t pay for in-home care that is provided by a paid professional. That is a statement that should hit with a thud, because long-term care is extremely expensive. The median annual cost for a private room in the Hilton Head area was almost $110,000 last year.
You are looking at about $60,000 for 12 months of in-home-care, so that is not a truly affordable solution. Plus, a significant percentage of seniors cannot receive the level of assistance that they need in their own homes at some point in time.
Just over half of people that receive paid care rack up bills for over a year, and 13 percent receive the assistance for over five years. All of this is disconcerting enough, and the numbers can be doubled for married couples, so this is a serious matter.
What’s the Solution?
The widely embraced solution is Medicaid coverage, but you cannot qualify if you have over $2000. However, there are assets that are not countable for Medicaid eligibility purposes. One of them is your home, with an equity limit of $636,000 this year.
Lifetime Gift Giving
When you hear about Medicaid eligibility as a solution, you will naturally consider lifetime gift giving. If and when you find out that you need long-term care, you can give your loved ones their inheritances in advance.
This makes sense on the surface, but it would not be in the spirit of the program. As a result, there is a five-year look back period. If you give away assets today, you are ineligible for Medicaid coverage for five years.
Even if you could give gifts right now and qualify immediately, most seniors rely on income that is generated by their invested assets. You would not be able to maintain your standard of living if you give away the source of the income.
Irrevocable Medicaid Trust
To address all of the challenges that we have presented, you could convey resources into an irrevocable trust years before you think that you may need long-term care. You would no longer have access to the principal, but that’s the idea from a Medicaid eligibility perspective.
If you are relying on the income that you get from the investments, you would not want to touch the principal anyway. While you are living independently, you could continue to accept distributions of the earnings as usual.
Even though your home is not a countable asset, there is a Medicaid estate recovery mandate. They can place a lien on the home after your death if it is in your possession at that time. As a response, you can convey your home into the trust as well.
As long as you fund the trust at least five years before you wind up applying for Medicaid coverage, the assets will not count.
Schedule a Consultation Right Now!
Today is the day for action if you do not have a nursing home asset protection plan in place. You can schedule a consultation at our Bluffton, SC elder care planning office if you call us at 843-815-8580. If you would rather send us a message, fill out our contact form and we will respond ASAP.
Hunter is a member of the South Carolina Bar Association, the Beaufort County Bar Association, and has served on charitable and advisory boards in the Bluffton/Hilton Head area.
Hunter graduated from Hilton Head High School. He then earned his Bachelor of Science Degree in Economics from Clemson University, in Clemson, South Carolina.
Hunter graduated Cum Laude from Regent University School of Law in Virginia Beach, Virginia, having earned a Juris Doctor Degree. He also wrote his doctorial thesis on Estate Planning Dynasty Trusts.
Hunter has called Beaufort County home for since 1984, where he lives with his wife and two children.In his spare time he dabbles in automobiles, reading history, hunting and fishing.
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