When you’ve worked a lifetime to accumulate wealth, you don’t want to lose it all due to a disability, prolonged illness or cognitive impairment such as Alzheimer’s disease. Since approximately 69% of the population aged 65 and older will develop disabilities before they die, and 35% will eventually enter a nursing home, reports the Family Caregiver Alliance, it is imperative to plan ahead.
The organization goes on to report that in 2010, about one in eight people age 85 or older (13%) resided in institutions, and by 2012, 1.4 million people lived in nursing homes nationally. Alarmingly, one in four people age 45 and up are not at all financially prepared if they suddenly required long-term care for an indefinite period of time.
One method of protecting your financial security is to shift as much of the cost as possible onto a third party such as Medicare, Medicaid and private insurance. But be aware that Medicare does not cover the costs of long-term stays in nursing homes.
Long-Term Care Insurance
Another method is to purchase long-term care insurance. This is available to healthy individuals for potential coverage in the event that long-term care is required. However, this insurance can be costly, and therefore is not widely utilized.
A third option is Medicaid, the most likely to provide financial assistance. Qualifying for Medicaid is complicated, and may require an experienced attorney to help navigate its rules. For example, you may not be eligible if you carry assets above the allowance levels. Some of these assets can be used for debt reduction prior to applying for Medicaid. Medicaid also does not include assets like your home, car or personal assets in its qualification process. This allowable spending to purchase such items can reduce your cash assets and enable eligibility for Medicaid benefits. For example, instead of turning your money over to nursing home care, spend it on home improvements, a new car, or funeral arrangement prepayment, or use it to pay off outstanding debts.
Convert Assets into Income
Assets can also be converted into income, such as annuities, but specific requirements are needed in order to qualify for Medicaid planning. This again is where you need to speak to an estate or elder law attorney.
Some seniors pass along assets to their children or heirs early to preserve wealth and “spend down” their assets before applying. In order to prevent fraud in this area, Medicaid has implemented a five-year look-back transfer penalty law. To avoid a penalty, advance planning is a must. In fact, the farther ahead you plan, the more options you will have.
Create a Trust
The creation of an irrevocable trust can also help to preserve assets while allowing eligibility for Medicaid coverage. Select one person to act as your primary agent.
Set up Your Will
Leaving your money to a spouse can backfire when that spouse is in a nursing home or has developed a cognitive impairment like Alzheimer’s disease. The inheritance of assets may render them ineligible for government assistance such as Medicaid.
Consult with an Estate Law Attorney
What you don’t want to do is make a costly mistake. It is worth your while to speak with an estate law attorney to explore your options and select those that make sense for your particular situation. Again, planning early is the key—even if you are healthy now and don’t expect to need nursing home or long-term care in your future.
Contact The Law Office of Patricia E. Tichenor
Attorneys Patricia Tichenor and Camellia Safi provide estate planning legal services. They can help you navigate the complicated maze of nursing home and long-term care options available to you that will help you plan a secure future and protect your hard-earned assets. Contact us today at The Law Office of Patricia E. Tichenor.