Your potential need for long-term care may be greater than you think. In fact, research shows that those age 65 and older have about a 70% chance of needing some sort of long-term care in their lifetime. And the costs associated with that care can be astronomical. Many people can’t afford a stay in a nursing home or a long-term care facility, and in-home care can also be expensive. Without a plan in place to address these costs, your hard-earned wealth can quickly deteriorate, leaving you struggling to make ends meet and with little to pass down to your loved ones.
We don’t say that to scare you, but rather to stress upon you the importance of having a plan for long-term care. One option at your disposal is to engage in Medicaid planning. Here, you reduce your assets and your income so that you meet eligibility requirements, thus securing assistance from the federal government in paying your long-term care needs. While there are certainly estate planning tools that you can use to assist with Medicaid planning, there are also some major mistakes that, if made, could put you in a difficult position where you’re denied the assistance you need.
Medicaid planning is an intricate process that has to be carefully navigated. If you make any of the following mistakes, then you could end up being denied the resources you need:
- Waiting too long: Medicaid has a five-year lookback period, meaning that if you’ve transferred wealth during that five-year period to qualify for Medicaid, then you’ll be penalized. Therefore, the earlier you start planning, the better. Otherwise, you could lose out on the assistance needed to stabilize your care and your finances.
- Misunderstanding the requirements: As mentioned above, there are strict income and assets limits when it comes to Medicaid eligibility. If you don’t understand those limits, then you could find yourself ineligible for Medicaid benefits. On the other hand, a misunderstanding of the income and asset limits could lead to unnecessary spend down of those assets, which could prove to be a waste.
- Improperly setting up trusts: There are several trusts that can remove assets from Medicaid eligibility calculations. However, if you choose the wrong trust or structure your trust incorrectly, then those assets could count, thereby leading to a finding of ineligibility.
- Mishandling the family home: Although the value of your residence typically isn’t counted for Medicaid eligibility purposes, there can be issues that come up if the home is titled in both your name and your spouse’s name. This is because once you pass away and your spouse becomes sole owner of the residence, a lien may be placed on the home to secure repayment of Medicaid funds expended for your care. Fortunately, you can avoid this by transferring possession of your home to someone else.
Develop an effective plan for your long-term care needs
Figuring out how to cover your potential long-term care needs is a critical part of estate planning. So, don’t procrastinate in figuring out this piece of your plan. Instead, think through your estate planning options and educate yourself as much as possible so that you can make the fully informed decisions that are best for you, your estate and your intended beneficiaries. By being proactive and thoughtful here, you’ll hopefully come up with a legal strategy that gives you peace of mind and ensures that you’ll be protected as you age.