The average life expectancy in the United States has nearly doubled in the last century. While living longer is certainly viewed as a good thing by most people, an increased life expectancy also means that the likelihood you will spend time in a long-term care facility is also increased. The cost of a stay in a long-term care facility can deplete your life savings rapidly unless those costs are covered by insurance. If, like most people, you do not have insurance that covers long-term care, Medicaid may be your only hope. Medicaid, however, has both income and asset limits that cannot be exceeded by participants. This often leads to the question “ Can’t I just give away my assets to qualify for Medicaid? Unfortunately, giving away your assets just prior to applying for Medicaid will not work.
Medicaid is a federally funded but state administered program that provides health insurance benefits to low income individuals and families. With the average cost of long-term care running over $80,000 per year, as many as half of all seniors end up depending on Medicaid benefits to cover costs associated with long-term care expenses. To qualify, however, your countable resources cannot exceed the program limit which is very low – typically $2,000. If the value of your countable resources exceeds the limit you will have to “spend-down” those resources before Medicaid will start helping In essence, this means you have to spend your life savings first before Medicaid will kick in and start covering costs.
Transferring, or gifting, assets prior to applying for Medicaid will not solve the resources dilemma because Medicaid employs a five year “look-back” period. This allows the Medicaid program to review your bank statements and other financial information for the five year period prior to the date of your application to look for assets transfers. If an assets transfer is identified, the value of the asset transferred is usually imputed back into your estate for purposes of your application for benefits. As you can see, the five year ‘look-back” period makes it more difficult to qualify for benefits if you have any countable resources.
The good news however, is that if you start early enough you can develop a Medicaid plan that can be incorporated into your overall estate plan. Your Illinois estate planning attorney can show you how perfectly legal estate planning strategies can be utilized to protect your assets while still ensuring that you qualify for benefits when you need them.
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