Many of our older clients are unfamiliar with the eligibility requirements and participant benefits of the Medicaid program because they enjoyed employer-sponsored or privately purchased long-term care insurance during their working years. Those who have not will either have the family resources to self-pay for long-term care or may suddenly be faced with the need to qualify for Medicaid to help cover the high cost of long-term care. If they did not plan for that possibility, their hard-earned assets could be at risk. Unfortunately, transferring those assets in anticipation of applying for Medicaid could trigger Medicaid to impose a waiting period.
Will You Need Long-Term Care?
There is a strong possibility that you, or a spouse, will need long-term care (LTC) at some point during your retirement years and the odds increase with each passing year. By the time you turn sixty-five years of age you will stand a fifty percent chance of eventually needing LTC at some point before the end of your life. Every year that passes, those odds go up. If you are fortunate enough to still be here at age 85, your odds of needing LTC will have increased to a 75 percent chance. Don’t forget, if you are married, your spouse is exposed to the same risks.
How Much Will LTC Cost?
This is important because LTC can be extremely expensive. If you (or a spouse) do end up needing LTC and you failed to plan for that possibility, the cost of that care will potentially put your retirement nest egg at risk. Nationwide, the average cost of LTC in 2020 was almost $9000 per month. In the State of North Carolina, the average cost is lower than the national average at around $8,000 per month and in the Raleigh, Durham, Cary, Chapel Hill area can go as high as #14,000 per month. With an average length of stay in a nursing home, the math can be enough to knock you back. Even at $8,000 per month, the three year average LTC bill will approach $300,000. Moreover, the cost of LTC will continue to rise in the years to come, making it even more expensive if you (or your spouse) need LTC.
Understanding the Medicaid Waiting Period
Unlike Medicare and most private insurance policies that will not cover LTC expenses, Medicaid does cover LTC expenses for program participants. You must first qualify for benefits though. Because Medicaid is intended to help low-income individuals and families, the program uses both income and asset limits when determining eligibility. The asset limit in most states is just $2,000 for an individual. If you have countable resources (some assets are exempt) valued at more than the limit, your application will be denied. Transferring valuable assets out of your estate in anticipation of applying for benefits won’t work either because Medicaid uses a “five-year look-back” rule. The rule allows Medicaid to check your finances for the previous five years to see if you transferred any assets out of your estate for less than fair market value. If you did, a waiting period may be imposed during which you will be expected to self-pay all of your LTC expenses.
How Long Is the Waiting Period?
The waiting period will be calculated by taking the excess value of the assets transferred (100% if the asset was simply given away) and dividing that by an amount specified by the State of North Carolina (for 2022, $7110.00). For example, if you transferred have non-exempt resources valued at $100,000 you would divide $100,000 by $7,110 which equals 14.1, meaning your waiting period would be fourteen (plus a small fraction) months. The most important observation I can share as to how to avoid this kind of penalty is to always see a qualified attorney to help you navigate the system before you make any transfer and in any event, before you apply for Medicaid.
Contact Chapel Hill Estate Planning Attorneys
For more information, please contact us to be placed on our invitation list for our upcoming FREE asset preservation planning seminar. If you have questions or concerns relating to the Medicaid waiting period, please contact the Chapel Hill, Raleigh, Cary and Durham area attorneys at Clarity Legal Group by calling us at 919-484-0012 or contact us online.
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