Medicaid is a healthcare program for low income individuals and families that is primarily funded by the federal government; however, it is administered by the individual states. Although you may make it through your entire working years without ever needing to qualify for Medicaid benefits, there is a good chance that will change when you reach your retirement years as a result of the need to pay for the high cost of long-term care. Qualifying for Medicaid, however, can be problematic if you failed to plan ahead by including a Medicaid planning component in your overall estate plan. Specifically, you may need to create a Medicaid trust in order to protect your hard-earned assets from the Medicaid “spend-down” rules.
Why Would You Need to Qualify for Medicaid?
If you have been fortunate enough to be covered by employer sponsored or private health insurance throughout your adult life, you may not have given must thought to whether or not you would qualify for Medicaid – why would you after all? The answer to that question can be found in the likelihood that you (or your spouse) will one day find yourself in need of long-term care (LTC). As you age, the odds that you will need LTC increase dramatically. When you enter your retirement years at age 65 you stand a 50 percent chance of finding yourself in need of LTC at some point down the road. The odds of needing LTC continue to increase, reaching a 75 percent chance when you hit age 85. It is the cost of LTC that could cause you to turn to Medicaid for help.
The Cost of Long-Term Care
The cost of long-term care is what may eventually cause you to look toward Medicaid for assistance. As of 2016, the average cost of a month in LTC in the State of New York is a $12,000 and the average length of stay is 30 months. That puts the cost of the average stay in a New York LTC facility at a staggering $360,000. If you are still a decade or more away from retirement, however, you need to look ahead to the projected costs of LTC. Experts estimate that by the year 2036, the average monthly cost for LTC in the State of New York will increase to over $20,000 per month. “But I have insurance!” The problem is that your insurance will probably not cover your LTC expenses. First, your current insurance coverage will most likely end when you retire, or reach age 65. Second, even if your insurance coverage doesn’t end, it probably does not cover LTC expenses unless you purchased a separate long-term care rider at an additional cost. Finally, if you are planning to count on Medicare, think again. Medicare only covers LTC expenses under very narrow circumstances and even then only for a very short period of time. Unless you can afford to cover your LTC expenses out of pocket, that leaves Medicaid as your only viable option for assistance. Not surprisingly, over half of all seniors eventually end up relying on Medicaid to help with their long-term care expenses.
Medicaid Planning and the Medicaid Trust
The good news is that by incorporating a Medicaid planning component into your estate plan now you can protect those assets and set yourself up to qualify for Medicaid if you need it down the road. As part of your Medicaid planning component you might establish a Medicaid trust to hold those assets. A Medicaid trust is an irrevocable living trust. Because the trust is irrevocable, the trust is viewed as a separate legal entity and any assets transferred into the trust become trust property. Since those assets are no longer legally owned by you they cannot be counted when determining your eligibility for Medicaid. As such, you cannot be required to “spend-down” those assets because they are not counted. You can, however, continue to receive benefits from those assets according to the trust terms.
For more information, please download our FREE estate planning worksheet. If you have questions or concerns relating to a Medicaid trust, contact the experienced estate planning attorneys at the Law Offices of Kobrick & Moccia by calling 800-295-1917 to schedule your appointment.