When you are planning ahead for your retirement years, you make projections based on your anticipated living expenses. People take this process very seriously, but many folks completely overlook a very significant expense that can have a devastating impact.
Anticipated Lifespan
There is a tool on the Social Security Administration website that you can use to find out your life expectancy based on your age. If you plug in the numbers for someone that is turning 67 on this day, you will find that the anticipated lifespan for a man is 85 years, and it is 87 years for a women.
Depending on the year of your birth, you will qualify for your full Social Security benefit when you are between 66 and 67 years of age.
Most people certainly expect to live long enough to collect Social Security. If you are one of them, you should think about the implications of the life expectancy statistics.
Alzheimer’s Disease
The Alzheimer’s Association is a great source of information about this terrible disease, and they keep a finger on the pulse of all relevant studies. At the time of this writing, they are stating that 32 percent of people that are 85 years of age and older have contracted the disease.
A significant percentage of people in nursing homes need the care because of the impact of Alzheimer’s. Of course, this is not the only cause of cognitive impairment, and people require nursing home care for other reasons.
Long-Term Care Costs
You can expect to pay somewhere in the vicinity of $175,000 for a year in a private room in a nursing home in the Smithtown area. An in-home health aide will cost you about $60,000 annually, and a one-bedroom unit in an assisted living community comes with a price tag of over $90,000 a year.
Medicare Gap
It would be natural to assume that Medicare will pay for custodial care if you ever need it. After all, the program is intended to cover the health care needs of seniors, and many elders will require this type of assistance.
A lot of people would say that it does not make sense and it’s not fair, but in fact, Medicare does not cover long-term care.
What Do You Do?
The solution for most people is Medicaid eligibility. This jointly administered federal/state government health insurance program will pay for long-term custodial care if you can gain eligibility.
Since this is a need-based program, there is a $15,750 asset limit in New York in 2020, but your home is not considered to be a countable asset. However, there is an equity limit, and there are other non-countable assets, but we will explain the details in another post.
You can divest yourself of assets so you can qualify for Medicaid to pay for long-term care, and you can do this very effectively if you fund an irrevocable Medicaid trust.
The principal would not count if and when you apply for Medicaid coverage. However, you would be able to receive distributions of earnings that are generated by income producing assets in the trust.
Timing is the key to the successful execution of this strategy, because there is a five-year look back period. You have to fund the trust at least five years before you apply for Medicaid.
If you violate this rule, you have to wait out a period of eligibility. To explain the penalty through the use of a simple example, if you gave away enough to pay for one year of nursing home care, your eligibility would be delayed by a year.
Schedule a Consultation Today!
We are here to help if you would like to discuss a nursing home asset protection strategy with a licensed attorney. You can send us a message to request a consultation appointment, and we can be reached by phone at 631-265-0599.
- What You Need to Know about Medicaid’s “Look-Back” Rule - February 1, 2023
- What You Need to Know about Elder Financial Exploitation - January 25, 2023
- What Is an Asset Protection Trust? - January 18, 2023
An Overview of IRA Inheritance Planning
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