Your comprehensive estate plan probably began with a Last will and temperament aimed at ensuring that your assets are handled as you wish when you are gone. You also need to protect those assets while you are here. A Murfreesboro estate planning attorney at Bennett, Michael & Hornsby explains Medicaid planning can help you protect your assets.
Why Do I need to Worry about Medicaid?
You may have made it to this point in your life without ever needing to rely on Medicaid. As a senior, however, you may find that changes if you (or a spouse) need long-term care (LTC). Moreover, the likelihood that you will need LTC increases as you age. Medicaid may be your best option for covering the high cost of that care. Nationwide, the average yearly cost of LTC was more than $100,000 per year for 2019. Tennessee residents pay a bit less, on average, than the national average at around $87,000 per year. Nevertheless, your assets could be at risk if you have to cover the cost of that care yourself.
Medicare Won’t Help
You will probably rely on Medicare to cover most of your healthcare expenses once you reach retirement age. Unfortunately, however, Medicare only covers LTC expenses under very limited circumstances, and even then, only for a very short period of time. Furthermore, most basic health insurance plans also exclude LTC expenses. Therefore, unless you purchased a standalone long-term care insurance policy prior to the need for coverage, you will be faced with the prospect of covering your LTC expenses out of pocket. Valuable assets could be lost to LTC costs if forced to pay for them out of pocket. Fortunately, Medicaid will help you pay for long-term care.
The potential problem arises because Medicaid is a “needs based” program, meaning that Medicaid uses both an income and a “countable resources” limit when determining eligibility. Although some assets, such as a primary residence and a vehicle, are exempt from consideration, it is still easy for a retiree to have non-exempt assets that exceed the countable resources limit. If that is the case, your application will be denied. At that point, you will have to “spend-down” your excess assets before Medicaid will approve your application.
What Medicaid Planning Tools and Strategies Can Help Me?
Nobody wants to watch their hard-earned assets disappear because of the need to pay for LTC. One way to protect those assets is to transfer them into a Medicaid trust. To benefit from the protection a trust can offer, however, it must be the right type of trust. All trusts also fall into one of two general categories. The first is a testamentary trust which does not activate until a provision in the Settlor’s Last Will and Testament causes it to activate upon the death of the Settlor. A living trust, as the name implies, is a trust that activates while the Settlor is alive and as soon as all formalities of creation are in place. Living trusts can also be divided yet again into two categories – revocable and irrevocable living trusts. If you create a revocable living trust you retain the ability to modify or revoke the trust at any time and for any reason — or even without providing a reason. On the other hand, if you establish an irrevocable living trust you can never modify nor revoke the trust for any reason. If your goal is to protect assets from the Medicaid spend-down requirement, this distinction between revocable and irrevocable living trusts is crucial.
A Medicaid trust is an irrevocable trust wherein the income is payable to you for life but the principal cannot be applied to benefit your or your spouse. Upon your death the principal remaining in the trust is paid to the beneficiaries named by you (usually children and/or grandchildren). This way, the funds in the trust are protected and you can use the income for your living expenses. For Medicaid purposes, the principal in a Medicaid trust is not counted as a resource for eligibility purposes as long as the Trustee cannot pay it to you or your spouse for either of your benefits. If you do end up in a nursing home, however, the trust income will have to be paid to the nursing home in most cases.
Contact a Murfreesboro Medicaid Planning Attorney
If you have additional questions or concerns regarding the need for Medicaid planning, consult with an experienced Murfreesboro Medicaid planning attorney at Bennett, Michael & Hornsby as soon as possible. Contact the team today by calling 615-898-1560 to schedule your free appointment.