If you are currently enjoying your retirement years, or are nearing retirement age, one issue you need to give serious thought to is the likelihood that you (or a spouse) will need long-term care (LTC) at some point in the future. Although none of us like to dwell on the possibility that we might end up in a nursing home, or other LTC facility, statistics tell us it could happen. If you fail to plan for the financial impact LTC will have on you and your family, you could pay an even high price than the already high cost of LTC. Specifically, failing to include Medicaid planning within your overall estate plan could be a costly mistake. Waiting until the last minute to consider the costs involved in LTC is not an option either because of the Medicaid five-year look-back rule. In case you are unfamiliar with the look-back rule, Lincolnshire elder law attorneys explain the ins and outs of the rule.
I’ve Never Needed to Qualify for Medicaid. Why Would I Need to Now?
This is a very common question asked by seniors and those nearing retirement age. Like many people, you may have been fortunate enough to have qualified for employer sponsored health insurance, or purchased your own health insurance, up to this point in your life. In addition, you are probably counting on Medicare to cover your healthcare expenses during your retirement years. Whey then, would you need to qualify for Medicaid benefits? The answer can be found in the likelihood that you will need long-term care and the prohibitive cost of that care.
At the time you retire, around age 65, you will stand a 50 percent chance of eventually needing LTC. Keep in mind that if you are married, your spouse shares those same odds. With each passing year, your odds of needing LTC increase. At age 85, for example, your odds of needing LTC will have increased to about a 75 percent chance. Given those odds, it only makes sense to plan for the possibility that you will end up in LTC – and incur the costs of that care.
Most people are aware that nursing home expenses can be high; however, they don’t realize how high. In 2016, the nationwide average for a month in LTC was around $6,500. LTC costs in the State of Illinois run just less than the national average at about $6,000 per month, or about $70,000 per year. If you consider that the average length of stay in a LTC facility is 2.5 years, that puts the average LTC bill at $175,000.
What really makes the cost of LTC problematic, however, is that neither Medicare nor your average basic health insurance coverage will cover any LTC expenses. Medicare will only cover up to 100 days following certain hospitalizations. Your health insurance policy, if you have one, probably excludes LTC costs unless you purchased a stand-alone LTC policy for an additional cost. Consequently, most seniors do not have insurance to cover LTC expenses. Unless you can afford to pay the bill out of pocket, you need another option. For over half of all seniors in LTC, Medicaid is the only option because Medicaid will help you with your LTC expenses, if you qualify for benefits.
Medicaid Eligibility and the Look-Back Rule
Medicaid eligibility is based, in large part, on your income and the value of your “countable resources” (assets). The countable resources limit is very low, usually $2,000 for an individual. Although assets such as your primary residence are exempt, many seniors still fail the asset test unless they planned ahead. The five-year “look-back” rule also prevents you from simply transferring excess assets to loved ones in anticipation of applying for Medicaid. The rule allows Medicaid to review your finances for the five-year period leading up to your application. Any assets transfers made for less than fair market value will likely be flagged and the value of the asset added back into your “countable resources” total.
How Can Lincolnshire Elder Law Attorneys Help?
The key to understanding the look-back rule, as well as ensuring your eligibility for Medicaid if you need it down the road, is to consult with an experienced elder law attorney long before you plan to retire about including Medicaid planning in your comprehensive estate plan.
For more information, please download out FREE estate planning worksheet. If you have additional questions or concerns regarding the Medicaid look-back rule, contact the experienced Lincolnshire elder law attorneys at Hedeker Law, Ltd. by calling (847) 913-5415 to schedule an appointment.
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