The Medicaid program ultimately winds up being important for a significant percentage of senior citizens. This can seem like an odd statement if you know that you will be qualified for Medicare when you reach the age of 65, but Medicaid could still be relevant.
Most elder Americans will someday need help with their activities of daily living. In fact, according to the government website longtermcare.gov, the figure is a rather attention-getting 70 percent. Nursing homes and assisted living communities are very expensive everywhere, but here in the greater New York City area where we practice law, the costs are particularly high. It can cost you well over $100,000 to spend a year in a Long Island nursing home.
If you need help with your day-to-day needs as a senior citizen, that type of care would be called custodial care. The Medicare program does not pay for custodial care. It will pay for convalescent care after an illness or injury, but it will not pay for long-term living assistance.
Medicaid does pay for long-term care. In fact, many people would consider it to be the de facto form of long-term care insurance in the United States, because most people in nursing homes are enrolled in the program.
Trusts and Asset Limits
The limit on countable assets for an individual Medicaid applicant is just $2000, but some things do not count, including your home, your vehicle, and your personal effects.
Assets that are in a living trust would be countable for Medicaid purposes, because you retain incidents of ownership when you establish a living trust. These trusts are revocable, so you have the power to take back direct personal possession of the assets at any time.
However, this does not mean that a trust could not be useful for Medicaid planning purposes. In addition to revocable trusts that you can revoke or dissolve, there are also irrevocable trusts. If you want to get assets out of your own name to qualify for Medicaid, you could choose to convey them into an irrevocable Medicaid trust.
You would be surrendering control of the assets that comprise the principal, but you could continue to receive income from the trust’s earnings. If you never need long-term care, you will still have the income stream. On the other hand, if you do apply for Medicaid, there are income limits, so the program may absorb this income.
Download Our Special Report
Long-term care costs can potentially consume all or most of what you intended to leave to your loved ones. If you would like to explore nursing home asset protection strategies in detail, download our special report. This in-depth report is free, and you can click the following link to access your copy: Nursing Home Asset Protection.