If you are aware of the need to include Medicaid planning in your overall estate plan, you are ahead of most people. Unfortunately, many people remain unaware that there is a very good chance they will need to qualify for Medicaid during their retirement years and that planning for that need is crucial. Knowing you need to incorporate Medicaid planning into your estate plan, however, doesn’t tell you when you need to begin doing so. You may be left, therefore, wondering when you should start Medicaid planning tn.o ensure that you will qualify for benefits if you need them without putting your assets at risk. Although there is no hard and fast rule for when to start Medicaid planning, knowing more about Medicaid eligibility may help you decide when to start your plan.
Why Is Medicaid Planning So Important?
Medicaid planning is important for anyone who cannot afford to pay for long-term care out of pocket – which includes most people. As you age, the odds of needing long-term care (LTC) increase dramatically. By the time you enter your retirement years, you are looking at a 50 percent chance of eventually needing LTC. If you have a spouse or partner, you are both facing the same odds. If you are still here when you turn 85, your odds of needing LTC prior to your death will have increased to 75 percent. LTC is expensive. Nationwide, the average cost of a room in LTC was $80,000 a year in 2016. In the State of North Dakota, LTC cost more than the national average with an average monthly cost of almost $11,000, or $130,000 a year. With the average time in LTC running about 2.5 years, your LTC bill could easily top $300,000!
What really makes LTC problematic is that neither your private health insurance coverage nor Medicare are likely to pay for it. Unless you paid for a separate LTC policy, your basic health insurance policy will not usually pay LTC expenses. Moreover, after you retire, your health insurance will likely terminate anyway. Medicare will only cover LTC expenses if they are related to an inpatient hospital stay and, even then, only for up to 100 days. Hence the need to qualify for Medicaid because Medicaid will cover LTC expenses.
Why Is Medicaid Planning Essential?
The need for Medicaid should now be clear; however, that doesn’t explain the need for Medicaid planning. Medicaid planning is essential because qualifying for Medicaid can be problematic. Medicaid is intended to provide healthcare coverage to low income individuals, families, the disabled and the aged. As such, Medicaid imposes both an income and an asset limit on applicants. If the value of your assets, or countable resources, exceeds the program limit you will not qualify immediately. With a limit of as low as $2,000, it can be easy to exceed the limit. If that happens, Medicaid will impose a waiting period during which time you will be expected to “spend-down” your assets until their value is below the program limit. The “spend-down” requirement basically requires you to sell your hard-earned assets and use the profits to cover your LTC expenses.
The goal of Medicaid planning is to ensure that you qualify for Medicaid when you need it without losing your assets. Because Medicaid also uses a five-year look-back period that effectively prohibits you from transferring assets out of your estate for the five-year period prior to applying for Medicaid, it is important that you incorporate Medicaid planning into your estate plan at least five years prior to the need for benefits. Of course, no one knows when they will need to qualify for Medicaid benefits, making it difficult to know exactly when it becomes essential to include Medicaid planning in your estate plan. Because the odds of needing LTC increase with age, however, a good rule of thumb is to start incorporating Medicaid planning into your estate plan while you are in your 40s and no later than your 50s. Doing so will protect your assets and set you up to qualify for benefits when you need them.
If you have additional question or concerns regarding Medicaid planning, contact the experienced North Dakota and Minnesota Medicaid planning attorneys at German Law Group by calling 701-738-0060 to schedule an appointment.