The Medicaid program is something that may be off your radar if you have been planning ahead for retirement effectively. After all, Medicaid is a program that is only useful for people with virtually no financial resources, right?
It is true that Medicaid is a health care insurance safety net for people who have very limited financial capabilities. However, Medicaid becomes quite relevant to a significant percentage of senior citizens. Here’s why.
Long-Term Care
The United States Department of Health and Human Services tells us that seven out of every 10 senior citizens will someday need help with their activities of daily living. This is a very telling statistic.
Most people are going to qualify for Medicare coverage. However, this program does not pay for long-term care, so the gap presents a problem.
It is not easy to dip into your pockets to pay for long-term care if you need it. We practice law in the state of Texas. The median annual cost for a private room in a nursing home in Texas is $65,700 according to Genworth Financial.
If you have to spend several years in a nursing home toward the end of your life, everything that you intended to leave to your loved ones could be consumed by the costs.
Medicaid Solution
Medicaid will pay for long-term care, and this is why it is relevant to people who were never poor. Because it is a need-based program, you cannot qualify if you have significant assets in your own name.
People who are aiming toward eligibility typically give assets to their loved ones before they apply. However, you have to act in advance, because there is a five-year look-back. You must complete your divestitures at least five years before you apply, or your eligibility will be delayed.
You could give direct gifts to your loved ones if you are planning ahead with Medicaid eligibility in mind. However, you could alternately convey assets into a Medicaid trust.
Assets in the trust would not be counted by the Medicaid program, because a Medicaid trust is an irrevocable trust. That’s the good news. The bad news is that you cannot take back assets that you convey into a Medicaid trust if you never need long-term care.
This does not mean that you should not consider the creation of a Medicaid trust if you think that you may need income, because you could establish an income-only Medicaid trust. With this type of trust you can receive income from the trust’s earnings, but the principal would not be counted against you if and when Medicaid evaluates your eligibility status.
Medicaid Planning Report
To learn more about the Medicaid program as it applies to long-term care costs, download our special report. This report is being offered on a complimentary basis, and you can visit this page to gain access: Houston TX Medicaid Planning.
Stephen A. Mendel, Estate Planning Attorney
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