Who Will Pay Your Long Term Care Expenses (Part 1 of 3)?

It is estimated that someone turning 65 years old today has a 70% chance of needing long term care services in their remaining years. And 20% of people turning 65 will need long term care for more than five years.

Most people believe that long term care is expensive. Estimates of monthly nursing home cost are around $5,500. And in twenty years, it is estimated that monthly nursing home costs will be in excess of $10,000.

There are three payors of long term care expenses: (1) the government; (2) insurance companies; and (3) the person needing care.

This first part of a three part series focuses on when the government covers that expense. Some people mistakenly believe that Medicare covers long term care expenses. Medicare draws a line between medical care and custodial care. Medicare does not cover custodial care - things like bathing, eating, going to the bathroom, dressing, and moving around.

When the government covers one's custodial care expenses, such as, nursing home expenses, they do it through the state's Medicaid program. But you have to be deemed "poor" under Medicaid's rules to qualify for this assistance.

There are many rules and regulations regarding Medicaid qualification, but the most basic of rules state that beside your home and a vehicle, if you own more than $2,000 of other "Countable Resources," you will not be eligible for Medicaid - you must spend and deplete resources first. Typical countable resources include money in the bank, investments, retirement accounts, and real estate that is not your home property. There is also an income test that must be passed.

Some people attempt to arrange their assets in a way to qualify for Medicaid when they go into a nursing home. Some people transfer assets out of their name. But if anything of value was transferred out of one's name within the previous five years prior to a Medicaid application, the applicant will not qualify for Medicaid and they must be a private pay patient for some period of time.

Some people inquire about transferring their assets into their heirs names while they are healthy, but Seniors get queasy about this because they lose control of their money and their estate when they transfer everything they own to others. In addition, adverse capital gains tax effects often occur when you transfer appreciated assets to others while you are alive.

So others get legal help to transfer assets to particular types of trust so that they can keep some element of control over the assets after they are transferred to the "Family Trust." In addition, the "step-up in basis" may be retained which will help the children when they subsequently sell trust assets after the death of the parent(s).

So who typically engages in this Medicaid Planning? Typically it's the middle class who perhaps have seen a parent, relative, or friend lost their life savings to long term care costs. Or perhaps people who feel they have paid enough tax over their lifetime and they want to protect their remaining assets from the government and for their loved ones to inherit.

Nonetheless, the key to protecting your estate, regardless of who may incur those costs in the future, is to plan for this while you are healthy.

This post is for informational purposes only and does not provide legal advice. Please do not act or refrain from acting based on anything you read on this site. Using this site or communicating with Rabalais Estate Planning, LLC, through this site does not form an attorney/client relationship.

Paul Rabalais

Louisiana Estate Planning Attorney

www.RabalaisEstatePlanning.com

Phone: (225) 329-2450