Estate planning, when done well, combines a variety of inter-related goals and objectives into one cohesive plan. Ensuring that your estate assets are distributed according to your wishes at the end of your life is likely a primary goal. Protecting those assets over the course of your lifetime, however, should also be one of your estate planning goals if you want to be certain there will be assets left to distribute after you are gone. One of the threats to your assets that you may not have considered is the very real possibility that you (or a spouse) will need long-term care. The Waukegan asset protection planning attorneys at Hedeker Law, Ltd. explain how long-term care threatens your assets and how you can address that threat in your estate plan.
Long-Term Care and Your Assets
Unfortunately, there is no way to know with any degree of certainty whether you or a spouse will need long-term care (LTC) during your “Golden Years.” We can, however, depend on statistics to tell us how likely we are to need long-term care (LTC). When you enter your retirement years, around age 65, you will already stand a 50-50 chance of one day needing LTC. The longer you live, the better your odds are of eventually needing LTC. For example, at age 85, your chances of spending time in an LTC facility will increase to a 75 percent likelihood. Given those odds, it is best to plan for the strong possibility that you, or a spouse, will need LTC at some point during your retirement years.
If you, or your spouse, do end up needing LTC, how will you pay for it? As a senior, you will likely depend on Medicare to cover most of your healthcare expenses; however, Medicare won’t pay for LTC except under very narrow circumstances – and even then, only for a very limited amount of time. If you continue to carry private health insurance after you retire, you will likely find that your policy also excludes LTC expenses, unless you purchased a separate LTC insurance policy. At an average monthly cost of about $6,500 in Illinois, as of 2017, and an average length of stay of close to three years, paying out of pocket means you would be responsible for an LTC bill that exceeds $200,000, on average. For over half of all seniors currently in LTC, Medicaid is the answer. Qualifying for Medicaid, however, can threaten your retirement nest egg if you fail to plan ahead.
How Does Medicaid Threaten My Assets?
Having never needed to qualify for Medicaid before, the eligibility requirements are probably a mystery to you, as they are to many seniors. Medicaid is a needs-based federal healthcare program As such, the program uses both income and asset limits when determining eligibility. The asset limit is very low in most states. Typically, an individual applicant cannot have “countable resources” valued at over $2,000 or their application will be denied. Some assets, such as a home, are exempt from consideration when determining the value of your countable resources; however, after spending a lifetime building up your assets, there is a strong likelihood that your countable assets are worth more than $2,000. If that is the case, when you apply for Medicaid your application will be denied and you will be expected to “spend-down” your resources before applying again. Those excess assets must be removed from your estate if you want to qualify for benefits. Using those assets to pay for your LTC expenses is one way to spend-down your assets; however, that effectively means your retirement nest egg will disappear rapidly. It is this spend-down requirement, therefore, that threatens your assets.
Because of the five-year look-back period imposed by Medicaid, transferring any excess assets to loved ones when you realize the need to qualify for Medicaid is not an option. In essence, that rule allows Medicaid to review your finances for the five-year period prior to applying for benefits. Any transfers made for less than fair market value may be problematic and trigger a waiting period during which time you will not be eligible for Medicaid. The best way to avoid any potential threat to your retirement nest egg is to include asset protection and Medicaid planning tools and strategies in your comprehensive estate plan.
Contact Waukegan Asset Protection Planning Attorneys
Please join us for a FREE upcoming seminar. If you have questions or concerns regarding asset protection or Medicaid planning, contact the experienced Waukegan asset protection planning attorneys at Hedeker Law, Ltd. by calling (847) 913-5415 to schedule an appointment.
Dean R. Hedeker
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