Anticipating the very real possibility of the need for long-term care is something I urge my clients to consider when creating or updating their estate plans. For many clients, this means including a Medicaid planning component in their estate plan. One reason for this is to avoid the Medicaid spend down provision. To help you understand why Medicaid planning is important, let me explain the Medicaid spend down requirement.
Why Might I Need Medicaid as a Senior?
When you reach retirement age, around age 65, you will already stand more than a 50 percent chance of needing some type of LTC services before the end of your life. Every year, those odds increase, and your spouse shares the same odds if you are married. If either of you ends up in LTC, the cost of that care will be steep. The nationwide average for a year in LTC for 2022 was over $100,000. For that same year, the average yearly cost of LTC in North Carolina was just under $100,000. Given that the average time spent using LTC services is three years, it becomes easy to see how you could deplete your entire retirement nest egg if required to pay out of pocket for LTC.
What Is the Medicaid “Spend Down” Requirement?
If you have never relied on Medicaid, you probably know very little about the eligibility guidelines for the program. To qualify for Medicaid benefits, you will need to meet Medicaid’s eligibility requirements for seniors, meaning you must meet the income and asset tests. The income limit is tied to the Federal Poverty Level and will change depending on which Medicaid category you apply under your geographic location, and household size. The income limit is not where most seniors encounter a problem though. It is the extremely low asset limit that typically poses a problem for seniors. In most states, an individual applicant cannot own “countable resources” valued at over $2,000. A married couple faces an asset limit of just $3,000. Medicaid does exempt certain assets; however, many seniors have accumulated a retirement nest egg full of non-exempt assets that easily exceed the countable resources limit. If your assets exceed the limit, your application will be denied and you will have to “spend-down” your assets before applying again, meaning you will be expected to use those assets to cover your LTC expenses until the assets are gone.
How Can I Protect Assets from Medicaid Spend-Down?
Transferring assets to avoid the spend-down requirement is not an option because Medicaid also uses a five-year “look-back” rule that prevents such asset transfers. The rule allows Medicaid to review your finances for the 60-month period prior to applying. Any asset transfers made for less than fair market value could result in the imposition of a waiting period before Medicaid will kick in. The good news is that by incorporating Medicaid planning into your overall estate plan early on you can protect your assets from the spend-down requirement. One common Medicaid planning tool that can help protect your assets is an irrevocable Medicaid trust. Assets transferred into such a trust remain out of the reach of the Medicaid “countable resources” eligibility requirements. Consult with an experienced Medicaid planning attorney to find out how you can use Medicaid planning tools and strategies to protect your assets.
Contact Durham Medicaid Planning Attorneys
If you have additional questions or concerns about how Medicaid planning can help ensure that you qualify for Medicaid when you need it, please contact the Durham Medicaid planning attorneys at Clarity Legal Group by calling us at 919-484-0012 or contact us online.