The odds are good that you have heard of “Medicaid planning” before. In fact, you have likely heard from several different sources how important it is to include Medicaid planning in your estate plan. The advice is sound, but you are unlikely to follow it unless you understand why Medicaid planning is so important. A better understanding of why you may need Medicaid in the future, and why you need to plan for that eventuality, should help you make the wise decision to include a Medicaid planning component to your comprehensive estate plan.
Medicaid is a healthcare program that is primarily funded by the federal government but administered by the states. The program provides healthcare coverage to low income families and individuals as well as the disabled and elderly. Like many people, you may make it to retirement age without ever needing to qualify for Medicaid benefits; however, the likelihood that you may need those benefits at some point during your “”Golden Years” are high – and qualifying can be tricky, hence the need for Medicaid planning.
During your working years, your odds of experiencing a period of incapacity that requires long-term care are one in five. Those odds increase dramatically when you reach retirement. At age 65 you stand a 50 percent chance of eventually needing long-term care and by age 85 that figures increase to 75 percent. The cost of that care, should you or a spouse need it, can be staggering.
Nationwide, the average cost per year for a semi-private room in long-term care tops $80,000. A private room will run you, on average, almost $92,000 nationwide. Fortunately, most Illinois residents fare a bit better, with an average cost of just under $65,000 for a semi-private room and about $75,000 for a private room. Of course, if you live in the Chicago metropolitan area expect to pay more than the nationwide average. With an average length of stay of 2.5 years it becomes clear that long-term care costs can add up fast – and don’t expect any help from your private insurance policy nor from Medicare. Most private healthcare polices exclude long-term care costs unless you specifically paid for a long-term care rider. Medicare, likewise, doesn’t cover long-term care expenses except following a hospital stay and then only for a maximum of 100 days.
Fortunately, Medicaid does cover long-term care expenses for those who qualify for benefits. To qualify for benefits, however, you must have income and assets below the program limits. As a retiree on a fixed income you may fall below the income limit. However, the value of your “countable resources” may easily exceed the asset limit, causing you to be denied for benefits until you exhaust the majority of those assets. After a lifetime of working and saving, the thought of losing everything to long-term care costs is likely a depressing thought. Worse still, Medicaid uses a five-year “look-back” period when evaluating an application. In essence, this means you cannot simply transfer assets to intended beneficiaries prior to applying in an effort to remove them from your estate. Any asset transfers within the five-year look-back period are typically ignored and the value of the assets transferred imputed back into your estate. This is why Medicaid planning is so important.
Medicaid planning anticipates your future need for long-term care and, consequently, your need to qualify for Medicaid benefits. Using perfectly legal estate planning tools, techniques, and strategies, your Medicaid plan should protect your assets while still ensuring that you will qualify for benefits should you need them in the future. Ideally, you could start incorporating Medicaid planning into your estate plan long before you reach retirement; however, it is possible to benefit from Medicaid planning at any time in your life. While planning at the last minute is far from ideal, you may even be able to implement some last minute Medicaid planning strategies that protect some assets if you, or a spouse, suddenly need long-term care and you failed to plan ahead. The key is to consult with an experienced Illinois estate planning attorney to find out what options you have.
For more information, please join us for one of our upcoming seminars or contact the experienced Illinois Medicaid planning attorneys at Nash Bean Ford & Brown, LLP by calling 309-944-2188 to schedule your appointment today.
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