With advances in medical care, many retirees find themselves in the fortunate but complicated situation of attempting to stretch their savings for many more years than they originally planned.
Many also worry that money set aside for family members will be depleted if they need to move to a nursing home or receive at-home care. You can help ensure that you and your family members are well taken care of in the future by spending time now forming a plan that addresses if and how you will use Medicaid and if you would prefer to use long-term care (LTC) insurance.
Medicaid is a welfare program that helps people pay for their medical care. Only people with assets and income below a certain level qualify, and the benefits only cover certain types of care and medical expenses.
ï¿½Medicaid compliance requires a person to relinquish either income and assets or control over that income and assets,ï¿½ states Lawyer and Certified Financial Planner Daniel A. Timins in an April 2016 article in Kiplinger. ï¿½However, the majority of my prospective Medicaid planning clients are in their sixties or seventies, in good health, appear cognitively solid and have ample assets.ï¿½
These people want to get a head start on organizing their assets before they face the potential of losing control over them. This practice, known as Medicaid planning, has been controversial in the past, with some people viewing it as method of hiding wealth. As long as no laws are broken, however, Medicaid planning is simply a smart way to take advantage of all of the financial tools available to the elderly. It is similar to the way savvy savers make deposits into more than one retirement account each year and then make withdrawals in a certain order in retirement, maximizing contributions and minimizing taxation.
ï¿½Congress implicitly accepts this result through rules that protect spouses of nursing home residents and permit others to qualify after spending down and transferring some of their savings,ï¿½ states ElderLawAnswers.com. ï¿½To plan ahead and accelerate qualification for Medicaid is no more unethical than planning to avoid taxes.ï¿½
Furthermore, early planners may find they donï¿½t want to rely on the care provided by Medicaid and would rather open savings accounts to help pay for a nursing home privately or purchase a long-term care insurance plan that will help them live in the manner they wish later in life. By planning ahead, it is possible to choose between a variety of options, rather than having one chosen for you by default in your elder years.
Medicaid is primarily a state-run program with different levels and types of coverage in each state. In many states, the primary function is to cover stays in nursing homes, so people who wish to remain in their own home may find it too limiting. Homeowners should also be aware that Medicaid can be costly for heirs.
ï¿½If you receive care and your spouse remains in your home, some states may force your heirs to reimburse the costs of your care from the sale of your home when the community spouse - the one who stayed in the home - dies,ï¿½ states Janet Arrowood for Investopedia.com.
Furthermore, not all nursing homes accept Medicaid patients, so your choices may be limited. In this manner, LTC insurance can provide greater flexibility. It also allows you to purchase the exactly policy you want, without having to qualify for certain income or asset limits. On the other hand, there are many benefits associated with Medicaid, such as the fact that it covers costs without a waiting period, while many LTC insurance plans have an elimination period.
ï¿½Medicaid does pay for your stay in a facility for as long as you need the care,ï¿½ states Arrowood. ï¿½LTC insurance, on the other hand, does so only if you elect the lifetime option and chose a benefit level high enough to cover a lifetime of costs.ï¿½
Both options offer distinct advantages, so talking with your financial planner before committing to either is wise. Your financial institution can help you select the best LTC insurance policy or plan how to become Medicaid compliant by transferring your wealth to your beneficiaries.
Two common ways of doing so are with an outright gift or an irrevocable trust. With either method, the transferred assets wonï¿½t be considered for your Medicaid eligibility after five years.
Start creating a plan for your elder years now by examining the Medicaid coverage details for your state at https://www.medicaid.gov/medicaid-chip-program-information/by-state/by-state.html and be sure to consult your financial institution to go over your best options.