How to Plan for Long-term Care and Asset Protection
The Department of Health and Human Services has predicted that a person turning 65 today faces a close to 70% chance of needing some form of long-term care service in the remaining years of their life.
That leads to a number of decisions centered not just on the health care and physical needs of a loved one, but also on financial and legal issues.
Many people think they can avoid needing long-term care or simply don’t want to face the idea and deal with the details. Long-term care can be expensive — the average cost of a semi-private room in a Texas nursing home is $5,019 a month — and often people don’t understand their rights and options.
Long-term care insurance, a person’s individual finances and Medicaid are the primary sources of money for long-term care.
Forethought in the form of a savings plan or paying insurance premiums over time are ways for a person to prepare for such a major life change. But many don’t go to the trouble or don’t want to spend the money on such advance planning, and frequently Medicaid becomes the go-to payment method for long-term care.
But Medicaid is means tested, requiring applicants to have low incomes and limited assets.
For married or single applicants to nursing home care in Texas, the Medicaid income limit is $2,382 a month per individual (meaning $4,764 per couple) with assets no more than $2,000 for single applicants and $3,000 for married applicants. The numbers are the same to qualify for waivers for home- and community-based services.
For married applicants with only one spouse applying, the asset limit is $2,000 for the applicant and $130,380 for the non-applicant.
Medicaid basically wants people to spend their own money on long-term care first. Medicaid eligibility requirements make it hard for seniors who want to hang onto their money or will it to someone to meet the qualification standards.
Unlike many states, Texas does not allow a person to “spend down” excess income on medical expenses in order to qualify for Medicaid. But Texans can employ a few income and financial asset planning strategies to protect their money and assets.
Texas is one of the states that allows people to set up a Qualified Income Trust (QIT), also referred to as a Miller Trust. It allows a Medicaid applicant to deposit income over the Medicaid limit into a QIT and the amount is not counted toward eligibility. A trustee is named and the money is used for specific purposes like accrued Medicaid expenses.
If someone meets the income requirements for Medicaid eligibility but not the asset requirement, they can meet the asset limit by spending down excess assets on those that are not countable, like home modifications (wheelchair ramps or stair lifts, for example), prepaying funeral or burial expenses or paying off debt.
Then there are a range of Medicaid asset planning strategies families can employ when working with a Medicaid planning professional.
These include funeral trusts, spousal asset transfers, annuities, spending down excess assets and medicaid asset protection trusts.
A Lady Bird Deed is a life estate deed in which the Medicaid recipient keeps their home for the remainder of their life, after which it is transferred to a beneficiary. Since home ownership technically changes, it is not considered part of a recipient’s estate.
A Medicaid Divorce is a legal termination of marriage when only one spouse is applying for long-term care Medicaid and protects the assets of the non-applicant spouse.
“Half a Loaf” strategies are a complicated way around the look back rules by creating a revenue stream through a process of giving a family half of one’s assets and purchasing a Medicaid-compliant annuity.
No family should undertake any type of long-term care Medicaid strategy without consulting with a professional Medicaid planner. A number of sites like medicaidplanningassistance.org can help you locate professionals nearby to help navigate these critical decisions involving your loved one’s long-term care.
Estate Planning Should Not Wait Until Later
Estate planning is not just an important step to take in securing one’s final wishes are met, it is also a kindness performed for the surviving loved ones.
By making a series of essential decisions now, you can secure some comfort and peace of mind for those who will enact your plans after you’re gone.
If you’ve already settled things like naming beneficiaries for insurance, say, or funeral arrangements or even whether or not to continue life support, you spare your survivors the heartache of making difficult decisions and the uncertainty of sorting through legal questions.
There are a handful of basic steps one can take in estate planning.
Power of attorney
Having someone authorized to navigate legal questions and administer wills and handle other legal matters can help a family avoid unnecessary expenses and proceedings after a loss.
Living wills
These address end-of-life issues like the life support question and funeral details, sparing the survivors doubt and uncertainty about the decisions. “A living will really does walk you through those important questions, those medical questions. How aggressive do you want the end of life care to be?” said Jaime Cobb, vice president of dementia & caregiver education at James L. West Center for Dementia Care.
Wills vs. trusts
You may need to think about guardianships for children or naming beneficiaries of an inheritance. A trust will be administered without court supervision by a trustee you designate. A will must be probated and administered by an executor, which could have legal costs attached.
Review
Once you’ve done your estate planning, return to it every time there is a major change in your life. A divorce or death might mean you need to change the beneficiary of an insurance policy or 401(k) or bank account balance, for example.
