The Costs of Long-Term Care
According to the U.S. Department of Health and Human Services, the majority of Americans will rely on Medicaid for long-term care at some point during their lives. Medicaid is the only government program that assists in paying for long term care for the elderly and disabled. It is a federal and state program that helps with medical costs for some people with limited income and resources, regardless of age. Medicaid also offers benefits not normally covered by Medicare, including nursing home care and personal care services. In Colorado, the home equity exception was set at $ $595,000 for the year 2020.
Medicaid in Colorado
In order to qualify for Medicare an applicant must meet extremely strict income and asset guidelines. In Colorado, Medicaid recipients are generally not allowed to have more than $2,000 in countable assets such as checking, savings, and investments accounts. There are exceptions for certain assets such as a principal residence, vehicle, life insurance, and some personal property, but there are limitations on these exemptions as well.
Americans with higher levels of assets and income will often be forced to ‘spend down’ their savings and other resources before they can meet the Medicaid threshold and qualify for long-term care. Initially they will pay for long-term care with their own savings, only after everything else runs out they can qualify for Medicaid. The average monthly cost of care for an assisted living facility is north of $7,000. Even those with ample savings risk depleting their resources paying these fees without government assistance.
Spending down assets to qualify for Medicaid long-term care means that other than a few exempt assets, almost nothing is left for the next generation. We believe that Americans should not be forced to decide between paying for the care they need during their later years or leaving little or nothing behind for their loved ones.
What are Spousal Impoverishment Protections?
Spousal Impoverishment Protections are rules used to prevent the spouse of a Medicaid applicant from losing all his or her assets due to their spouse’s long term-care needs. A spouse is allowed to keep an exempt amount of funds and income under the Community Spouse Resource Allowance, but the limits for these exemptions are hardly generous and still require many couples to pay for long-term care needs. In Colorado, the allowed assets for non-applicant spouses was set at $128,640 for the year 2020.
Medicaid Planning using Annuities
One of the assets that are exempt under the Medicaid requirements are certain annuities. Not every type of annuity will be exempt, and usually only an immediate irrevocable annuity may qualify. The annuity must also name the state as the beneficiary upon death, which means they will get paid back for any Medicaid benefits paid before the family members recover any funds left. When considering annuities for Medicaid eligibility it is important to be well advised on the latest requirements.
What are Medicaid Asset Protection Trusts?
Medicaid Asset Protection Trusts (MAPT) can be a crucial solution to meet Medicaid’s strict asset limitations. These types of trusts shield a Medicaid applicant’s assets from being taken into consideration for Medicaid eligibility purposes.
An applicant with excess assets who would otherwise not qualify for Medicaid can become Medicaid eligible and receive the care they require, including home care or nursing home stays. Any assets placed in a Medicaid Asset Protection Trust are no longer considered as owned by the individual applicant. However, if a house is placed in trust, the grantor can still retain the right to live there. The grantor can also retain the rights to receive income from any businesses or other income producing assets in the trust.
It is crucial to plan well in advance in order to take full advantage of a Medicaid Asset Protection Trust. In order to receive Medicaid, an applicant must typically wait about five years after placing assets into a trust to enter a nursing home or apply for long-term care. Once the trust is properly aged, any assets placed in trust will be out of reach of Medicaid and other future creditors. Thus, the Medicaid Asset Protection Trusts can help preserve wealth that would have otherwise been spent in medical care to flow instead to children and other loved ones.
Using a Medicaid Asset Protection Trust to protect assets is a perfectly valid legal solution, with effective planning, it can make a significant difference in your long-term financial situation.
Using gift transfers to qualify for Medicaid
With proper planning, it is possible to use outright gifts to family members and other loved ones in order to reduce the number of assets held. While gifting can be a valuable part of Medicaid planning, just like with a Medicaid Asset Protection Trust, any gifts should be completed five years before applying for long-term care. Unlike a trust, an outright gift means having no control over any assets given away. Additionally, any gifts to family members outside of trust are unlikely to be protected from future creditors. Any funds given to children outright could be put at risk in case of a business dispute, lawsuit, or divorce.
Medicaid Asset Protection Trust and Long-Term Care Insurance
Less than ten percent of Americans have a long-term care insurance policy in place. As people live longer, the cost of long-term care insurance continues to become even more expensive. Older Americans can expect to pay thousands of dollars each year for long-term care insurance; regardless of where in the country they live. Most people avoid long-term care insurance due to the high costs and inconsistent coverage restrictions associated with most policies. Many Americans fail to realize the fact that most will require some form of long-term care or assistance during their lifetime.
Long-term care insurance must generally be bought several years before being needed and is often an awfully expensive option. Comparatively speaking, the cost of establishing a Medicaid Asset Protection Trust instead is almost always much less.
Medicare and Medicaid
Medicare is different from Medicaid and primarily provides health insurance for Americans aged 65 and older, but also for some younger people with disability status which has to be determined by the Social Security Administration. Medicare is divided into four different parts. Part A includes hospital visits, nursing, and hospice services. Part B involves doctor visits and professionally administered prescription drugs. Part C is a combination of A&B. Part D covers self-administered prescription drugs. Home care is available through Medicare however, recipients must meet a lot of requirements for home health care. The main requirement is that the patient must be homebound. The Centers for Medicare and Medicaid Services has a long list for the criteria of meeting the homebound requirement, many of which will leave beneficiaries with no access to the home care they may need.
Medicaid Planning is for the Middle Class
Thinking about long-term care can be disconcerting. Understanding the ins and outs of Medicaid, qualification requirements, benefit eligibility, and out of pocket expenses can be confusing and the rules vary from state to state. Those with few assets might be covered by Medicaid regardless of any planning, and the rich can afford to pay out of pocket for long-term care or long-term care insurance without compromising the family’s future. For many in the middle class however, the costs of long-term care can erase decades of savings in just a few months.
Having a long-term care plan in place years in advance could be one of the best financial decisions. Take the first step to ensure you and your family are better protected. Set up a meeting with our experienced team of lawyers to learn more about protecting your assets from the excessive costs of medical care.
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