If you have worked hard, spent your money wisely, and saved methodically in order to ensure that you would be comfortable during your retirement years, you certainly do not want anything to put that nest egg at risk. Unfortunately, that is precisely what happens to millions of older Americans who underestimate the need for, and cost of, long-term care. To ensure that this does not happen to you, be sure to discuss adding a Medicaid planning component into your estate plan with your New York estate planning attorney.
The Cost of Long-Term Care
As you age, the likelihood that you or your spouse will need long-term care increases exponentially. At age 65 there is a 50-50 chance of one (or both) of you needing long-term care before your death. At age 85 that increases to a 75 percent likelihood that you will need long-term care. Nationwide the average cost of a year stay in a long-term care facility is about $80,000 for a semi-private room. In the State of New York, you can expect to pay more than the national average with a semi-private room averaging just over $131,000 per year and a private room running, on average, almost $137,000 per year, and probably more. With an average length of stay of 2.5 years it is easy to see how long-term care costs can add up and threaten the assets you spent a lifetime accumulating.
Why Medicaid May Be the Only Solution
The high cost of long-term care isn’t the real problem. The real problem is that long-term care is not covered by traditional payment options such as traditional health insurance policies or Medicare. Most employer sponsored health insurance plans terminate when you reach retirement age. If, however, you continue to have coverage, or you purchase an independent policy, the odds are great that long-term care will not be covered by the policy unless you also elected to purchase a separate rider at an additional cost. Moreover, while you may plan to rely on Medicare for your health care needs during your Golden Years, do not count on Medicare helping you pay for long-term care costs because it won’t except under very limited circumstances and then for only a short period of time. This is why almost half of all seniors depend on Medicaid, because Medicaid will help cover long-term care expenses.
How Are My Assets at Risk?
Knowing that Medicaid will help cover your long-term care costs is great news, if you can qualify for benefits. To qualify for Medicaid benefits you must have income and assets that do not exceed the program limits. If your assets exceed the program limit you will be expected to rely on your available assets before Medicaid will start covering your long-term care costs without proper planning. Transferring assets in anticipation of applying for Medicaid will not work either because Medicaid employs a five year “look-back” period that effectively discounts assets transferred made by you during the five-year period prior to your application. If you failed to plan ahead, you will be stuck in a situation where you are forced to liquidate your assets in order to cover your long-term care costs and gets your estate value down below the program asset limit. Understandably, no one wants to watch the accumulation of a lifetime of working, scrimping and saving disappear within a matter of months.
How Does Medicaid Planning Protect My Assets?
First, and foremost, Medicaid planning protects your assets by acknowledging that they are at risk. As you now understand, realizing the risk at the last minute leaves you with few options; however, by incorporating a Medicaid planning component in your estate plan early on you can protect your assets and set yourself up to qualify for Medicaid later on in life. While each Medicaid plan is unique, one common method used to protect assets is a Medicaid trust. By transferring your major assets into a Medicaid trust their legal ownership is switched out of your estate and into the trust, thereby removing them from the calculations used by Medicaid to determine eligibility.
If you have additional questions or concerns regarding Medicaid planning, please join us for an upcoming free seminar or contact the experienced New York estate planning attorneys at The Law Offices of Kobrick & Moccia by calling 800-295-1917 to schedule your appointment.