Like most people, you have likely heard of Medicaid, though you may never have needed the benefits afforded by the Medicaid program during your working lifetime. What you may not realize, therefore, if the likelihood that you will need to qualify for Medicaid benefits during your retirement years. Qualifying for Medicaid though can be tricky and can put your hard earned assets at risk if you failed to plan ahead. With that in mind, do you need to include Medicaid planning in your estate plan? The answer for the average person is a resounding “YES.”
To understand why you need to include Medicaid planning in your comprehensive estate plan you first need to understand a little more about long-term care. As we all age, our odds of eventually needing long-term care increase dramatically. During your working years the odds of suffering a period of incapacity that could require a stay in a long-term care facility is one in five. By the time you reach retirement age (65), those odds increase to about one in two. If you are fortunate enough to make it to age 85, you stand about a 75 percent chance of needing long-term care before you die. Moreover, if you do need long-term care during your “Golden Years” the average length of stay is 2.5 years – and the cost of that stay may surprise you.
Nationwide, the average cost of a year stay in a nursing home or other long-term care facility is approaching $100,000. In the State of North Carolina, long-term care runs a little less than the national average; however, the average cost of a year in a long-term care facility in North Carolina will still run you just over $75,000 for a semi-private room and about $82,000 for a private room. That means that if you spend 2.5 years in long-term care (the national average) it will run you $187,500 on average in North Carolina.
“But I have great health insurance coverage and I will qualify for Medicare!”
Unfortunately, neither of those is unlikely to help you with long-term care expenses. First, most employer sponsored or private health insurance policies terminate when you reach retirement age. Even if your policy continues after you retire it is unlikely to cover long-term care expenses unless you purchased a separate (and usually costly) long-term care rider. Second, Medicare only covers long-term care expenses under very limited circumstances, and then only for up to 100 days. This leaves the average person trying to cover long-term care expenses out of pocket. Unless you can afford to potentially spend hundreds of thousands of dollars on long-term care you need to plan ahead to ensure that you qualify for Medicaid when the time comes because Medicaid does cover long-term care expenses.
Although Medicaid does cover long-term care costs, qualifying for benefits requires you to have income and assets below the program limits. The income limit may not be an issue; however, the “countable resources” limit often is considering that the limit is frequently as low as $2,000. If the value of your assets exceeds the program limit you will effectively have to use up the majority of those assets before Medicaid will start covering your bills. Transferring those assets when you suddenly need to qualify for Medicaid is not an option either because Medicaid uses a five year “look-back period. The look-back period allows Medicaid to look through your finances for the five year period prior to your application and essentially ignore any assets transfers made during that time. Understandably, the thought of losing assets you worked hard over a lifetime to acquire probably doesn’t sit well with you. This is where Medicaid Planning can help.
Medicaid planning looks ahead to the future and assumes you will need to qualify for benefits. Strategies are then incorporated into your estate plan to ensure that you will qualify for benefits but without losing valuable estate assets in the process.
To learn more, please join us for one of our upcoming seminars. If you have additional questions or concerns regarding Medicaid planning, or would like to get started with your plan, contact the experienced North Carolina estate planning attorneys at Clarity Legal Group® by calling (919) 484-0012 to schedule an appointment.