You should know some things about Medicare and Medicaid when you are looking ahead toward your retirement years.
The majority of seniors are going to qualify for Medicare, because most people pay into the program while they are working and paying taxes.
You can gain four retirement credits each year, and in 2014 you gain one credit for every $1200 you earn. Once you have 40 credits, you will qualify for Medicare when you reach the age of 65. These requirements are quite modest, so the majority of people will qualify for Medicare.
Medicaid is also a government health insurance program, but it is a need-based program. Eligibility has nothing to do with the accumulation of retirement credits. If you can demonstrate sufficient financial need, you may be able to qualify for Medicaid.
Medicaid may seem irrelevant at first, but it can be quite important, because Medicare will not pay for long-term custodial care. If you need help with your activities of daily living, you can’t count on Medicare to pick up the tab.
Medicaid does pay for long-term care, and this is why it becomes a factor for many elders.
There are asset and income limits that you must stay within to qualify for Medicaid coverage. As a result, people often give away assets before they apply for Medicaid. You could essentially give your children their inheritances in advance. This process is typically referred to as a Medicaid spend down.
If you want to engage in a Medicaid spend down, you could convey assets into a Medicaid trust. A Medicaid trust would be an irrevocable trust.
The name is somewhat self-explanatory: once you create the trust, you cannot revoke or rescind it. As a result, you are surrendering control. Because of this loss of control, assets that have been conveyed into an irrevocable Medicaid trust would not be counted by Medicaid when your assets are being tallied.
It is possible to create an income-only Medicaid trust. You could continue to draw income from the earnings of the trust, but you could not touch the principal. This would go to the beneficiaries that you name in the trust agreement after your passing.
You could alternately create an irrevocable Medicaid trust and choose not to accept income that is earned by the trust. The earnings and the principal would go to the beneficiaries.
Medicaid Planning Report
We have provided a bit of surface information in this post. To learn more, download our in-depth report on Medicaid planning. The report is being offered free of charge, and you can obtain access through this link: Smithtown NY Medicaid Planning.
More on Medicaid at Forbes.com
Visit Mark Eghrari over at Forbes.com to dig deeper. We have recently posted some articles about Medicaid planning that people are talking about.
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