When you are looking ahead toward your senior years, you should definitely take long-term care costs into account. Yes, your initial retirement years can involve golf, leisure activities, travel, and generally crossing things off your bucket list. At the same time, there are the twilight years that will follow, and it is important to address them in advance in a pragmatic manner.
If you or your spouse have worked and paid taxes for at least 10 years, you will qualify for Medicare when you reach the age of 65. This is the age of eligibility at the time of this writing, and has been for quite some time. However, there has always been chatter on Capitol Hill about raising the age of eligibility as a cost-cutting measure, so this is something to keep an eye on.
The fact that you will have health insurance through Medicare as a senior citizen is the good news, but there is also some bad news to pass along. This program will not pay for a stay in a nursing home, and these facilities are exorbitantly expensive. You can expect to pay somewhere in the vicinity of $100,000 for a single year in a nursing home, and costs have been rising year-by-year.
Crossing your fingers as you hope for the best under the assumption that it is unlikely that you will ever need long-term care is quite a gamble. In fact, according to the United States Department of Health and Human Services, seven out of every senior citizens will eventually need long-term care. Many will reside in nursing homes, so you should certainly take this possible eventuality very seriously.
Medicaid is a jointly administered federal/state government health insurance program that will pay for a stay in a nursing home. In fact, most people that are receiving nursing home care are enrolled in the program. Since it is intended for people with significant financial need, there is an asset limit that stands at just $2000.
To qualify for Medicaid to pay for long-term care, people typically engage in a process called a Medicaid spend down. They don’t necessarily spend all of their resources that exceed $2000. A spend down will usually involve giving gifts to loved ones, essentially giving them their inheritances in advance.
You cannot find out that you need to enter a nursing home today, give away assets tomorrow, and qualify for Medicaid the next day. There is a five-year look back period in place to prevent reactive divestitures. Your eligibility is delayed if you give away assets within this five-year timeframe, so you have to plan ahead in advance to gain eligibility at the right time.
When you are planning out your Medicaid spend down, you should understand the fact that some things that you own are not considered to be countable assets. The most significant asset that is exempt is your home. It would not be counted when you apply for Medicaid, but there is an equity limit. In 2018 in the state of Michigan where we practice law, the home equity limit is $572,000. However, if you are applying for Medicaid and your spouse is still capable of living at home, there would be no equity limit at all.
Your home is not the only property that is considered to be exempt from Medicaid eligibility purposes. You can maintain ownership of one vehicle that is used as a primary source of transportation, and wedding rings, engagement rings, and heirloom jewelry are not counted. Personal belongings and household goods are not countable assets, and you can have unlimited term life insurance. When it comes to whole life insurance, which is life insurance with a cash value, the limit is $1500. Burial plots that have been purchased in advance are not counted by Medicaid.
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As you can see, there is a great deal to take into consideration when you start to think about aiming toward Medicaid eligibility late in your life. We have provided some basic information in this blog post, but you can take it to the next level if you join our Medicaid lawyers at one of our upcoming free seminars. To see the schedule and obtain registration information, visit our seminar page and reserve your seat today!