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How your estate plan can help with your long-term care

On Behalf of | Nov 28, 2023 | Estate Planning And Probate

When most people consider planning their estates, they think about their will and events that will happen only after their deaths. Wills are indeed important, but estate planning tools can also help people meet important goals during their lifetimes. One area where this becomes clear is in planning for long-term care.

The costs of long-term care

When you’re young, you don’t like to think about the possibility that you may one day become unable to care for yourself, but it is a very real possibility. According to some sources, Americans ages 65 and older have a 70% chance of needing long-term care at some point in their lives.

And this care is enormously expensive. A private room in an assisted living center currently costs $54,000 or more per year. For nursing homes and other facilities that offer more extensive care, the annual cost for a private room can be well over $100,000.

Medicaid eligibility

Millions of older Americans rely on Medicare to pay for most of their medical expenses, but Medicare does not cover the costs of long-term care. Medicaid, another government program, can cover long-term care, but many Americans find that they are not eligible for it.

Medicaid was designed to provide medical care for people who cannot otherwise afford it, and so the program has strict financial eligibility requirements. Those who have more than a certain amount in income and assets are ineligible. The exact threshold for eligibility depends on a number of factors, but in all cases it may be lower than you expect.

The high cost of long-term care and the low threshold for Medicaid eligibility leaves many Arkansas residents and their families in a difficult situation. The costs of their long-term care can quickly wipe out all their savings, leaving them with nothing to pass on to their loved ones. And if their family members are paying for their care, they can easily be wiped out as well.

Medicaid planning trusts

One way around this problem is by using a trust.

When you create a trust, you place your assets under the control of a trustee, who manages the assets for the named beneficiaries. It’s common in estate plans for clients to name themselves as beneficiaries while they are alive, and then name their family members as their successor beneficiaries. in this way, the assets in the trust can provide for the a client for the rest of their life and then provide for the client’s loved ones after they are gone.

There are many advantages to this type of arrangement. For the purposes of long-term care planning, one advantage of a trust is that it helps a person maintain eligibility for Medicaid.

When you place assets in a trust, they no longer belong to you. This mans those assets won’t necessarily be counted against you when Medicaid is determining whether you are eligible. If you set up the trust carefully, the trustee can provide you with income that is below Medicaid’s threshold, so you can take advantage of the program’s long-term care coverage. After your death, your loved ones become the new beneficiaries of the trust, with the trustee managing the assets for them.