You may have heard about the importance of including a Medicaid planning component in your comprehensive estate plan; however, you may also be under the (mistaken) belief that you do not need to worry about doing so until you are well into your retirement years. In fact, that is among the most common estate planning mistakes. To help you avoid making a potentially costly mistake, the Fargo Medicaid planning attorneys at German Law Group explain when you should start Medicaid planning.
Looking Ahead to Long-Term Care
Without a crystal ball to tell us the future, there is no way to know which of those among us will eventually need LTC. What we do know, however, is that when they reach retirement age (65), everyone stands about a 50 percent chance of eventually needing LTC. We also know that the odds of needing LTC increase with each passing year. By age 85, you will have about a 75 percent chance of ending up in an LTC facility prior to your death. Keep in mind that if you are married, your spouse has the same odds of needing LTC as you do. Given the odds, it makes sense to plan for the possibility of needing LTC at some point because the cost of that care will likely be prohibitive. Nationwide, the average monthly cost of LTC runs about $6,500, or just over $80,000 per year as of 2017. Unfortunately, if you are a resident of the State of North Dakota you can expect to pay considerably more than the national average for LTC. For 2017, North Dakota residents paid, on average, almost $11,000 a month for LTC. With an average length of stay of three years, you could easily be facing an LTC bill of close to $400,000 were you to need that care today. In 20 years, experts estimate that same month of LTC will cost you about $20,000 in North Dakota, putting the total cost of an average LTC stay at almost $750,000!
How Will You Pay for Long-Term Care?
Like most seniors, you will probably rely on Medicare to cover the majority of your healthcare expenses. Unfortunately, however, Medicare only covers LTC expenses under very limited circumstances, and even then, only for a short period of time. Furthermore, most basic health insurance plans also exclude LTC expenses. Consequently, you will be faced with the prospect of covering your LTC expenses out of pocket. For the average person, an entire retirement nest egg could be lost to LTC costs in a relatively short period of time. The good news is that Medicaid does cover LTC expenses; however, you must qualify for Medicaid benefits to be eligible for assistance with your LTC costs.
You will likely face some obstacles, however, if you failed to plan ahead. Medicaid is a “needs based” program, meaning that an applicant must demonstrate a need for the benefits to qualify. Consequently, Medicaid imposes both an income and an asset, or “countable resources,” limit on applicants. As a senior on a fixed income you may not have a problem with the income limit; however, the countable resources limit might pose a problem if you did not plan ahead because, in most states, the resources limit is only $2,000-$3,000 for an individual applicant. Although some assets are exempt, it is easy to see how the value of your non-exempt assets could exceed the limit. In other words, your retirement nest egg could prevent you from qualifying for much needed Medicaid benefits if you failed to plan ahead. The good news is that by incorporating Medicaid planning into your estate plan now you can protect your hard-earned assets in the future.
When to Start Medicaid Planning
One of the primary reasons you need to incorporate Medicaid planning into your estate plan as early as possible is that Medicaid also uses a five-year “look-back” rule that effectively checks to see if you have made any assets transfers for less than the fair market value during the five-year time frame prior to applying for benefits. The look-back rule penalizes last minute asset transfers. If a transfer is uncovered, you Medicaid will impose a waiting period, the length of which will be determined based on the value of the asset transferred. During the waiting period, you will be forced to rely on your own assets to cover your LTC expenses. In essence, waiting until you need LTC to worry about qualifying for Medicaid will likely lead to the loss of valuable retirement nest egg assets one way or the other. The key to protecting those assets and qualifying for Medicaid benefits in the future is to start Medicaid planning long before you envision the need to qualify for benefits.
Contact Fargo Medicaid Planning Attorneys
Please join us for an upcoming FREE seminar. If you have additional questions or concerns about Medicaid planning, contact the Fargo Medicaid planning attorneys at German Law Group by calling 701-738-0060 to schedule an appointment.