The process of estate planning is intertwined with retirement planning. If you want to do certain things for your loved ones, you have to consider your estate planning objectives when you are creating a retirement budget.
When you envision the expenses that you will have as a retiree, you are probably going to envision the active years full of travel, leisure activities, and quality time with your loved ones. This is certainly part of the equation, but you should also take the twilight years into account.
It is statistically likely that you will need long-term care eventually if you live a normal life span. Nursing homes and assisted living communities are extremely expensive. We practice law on Long Island, and according to a Genworth Financial study, the median annual cost for a private room in a nursing home in our area is over $162,000 at the present time.
If you are thinking that you are not worried about long-term care costs because you will be qualified for Medicare coverage when you reach the age of 65, we have some bad news for you. The Medicare program will pay for convalescent care after an injury or illness, but it will not pay for the custodial care that you would receive in a nursing home or assisted living community.
As you can see when you can digest these statistics, long-term care costs could consume all or most of what you intended to leave to your loved ones. Fortunately, there is a solution that many people embrace in the form of Medicaid. This federal/state government health insurance program does pay for custodial care.
Since Medicaid is only available to people with a significant level of financial need, there is a limit on countable assets. For an individual, this limit is just $2000.
What are non-countable assets? The assets that do not count are your home (up up to $828,000 in equity), one vehicle that is used for transportation, wedding and engagement rings and heirloom jewelry, household effects, and personal belongings.
When it comes to the assets that are countable, you could convey them into a Medicaid trust. This would be an irrevocable trust that you cannot revoke or dissolve.
After your passing the assets would go to the people that you name as beneficiaries, but they would not be counted if you were to apply for Medicaid to pay for long-term care.
You can also continue to receive income from the trust’s earnings before you apply for Medicaid coverage.
Advance planning is key, because the trust must be funded at least five years before your application for Medicaid is submitted if you want to obtain timely eligibility.
Medicaid Planning Report
If you would like to obtain more detailed information about long-term care and Medicaid planning, visit this page to download our free special report: Smithtown NY Medicaid Planning.