LONG-TERM CARE PLANNING

The majority of people living in the United States will spend some time in a long-term care facility. People are living longer, the cost of care is skyrocketing, and available government funds are decreasing. No one enjoys considering the possibility of spending time in a nursing home. But planning is crucial. 

Nursing Home Costs

The cost of a nursing home stay varies depending on city, level of care, and the length of the stay. Generally, Georgia nursing homes cost about $6,300 a month, per person. A married couple in the nursing home can easily expect to pay at least $12,000 each month.

Unless you have a long term care insurance policy, you must pay for these costs yourself. When you have less than $2,000, you can qualify for Medicaid to pay for the nursing home. Alternatively, you can plan ahead. Work with an experienced attorney when developing a long-term care plan.

MEDICAID PLANNING

You can protect your assets while simultaneously qualifying for Medicaid coverage to pay for long-term care expenses. Every Medicaid applicant's situation is unique. Also, Medicaid eligibility rules change every few years, making it increasingly difficult to protect your assets and qualify for Medicaid. Work with an experienced Georgia estate planning attorney when developing a long-term care plan.

Common techniques to protect assets while qualifying for Medicaid include:

OWNING EXEMPT ASSETS

A Georgia Medicaid applicant can have no more than $2,000 of “countable resources” if they are single, or $3,000 if married. Countable resources, also known as “non-exempt assets,” are assets counted when qualifying for Medicaid. By simply transferring countable assets into non-countable assets, you can qualify for Medicaid.

Countable assets include (but are not limited to) cash, bank accounts, certificates of deposits, IRAs, 401(k)’s, stocks, bonds, lump sum annuities, cash value in life insurance policies, homes valued at less than $560,000 each, real estate other than your primary residence, business interests, and assets that can be converted to cash.

GIFTS

The IRS allows you to give up to $14,000 per person per year absolutely free of gift tax. If both spouses join in the gift, you can give up to $28,000 per person a year, gift tax‐free. 

You should keep two things in mind when gifting to qualify for Medicaid. First, Medicaid rules apply a transfer penalty for any gifts or transfers made within five years. Any transfer during this period will disqualify the applicant for Medicaid until the penalty period expires. This means the applicant must pay privately for his or her care. The penalty period is determined by dividing the transfer's value by the Medicaid penalty divisor ($6,175 as of March 2017). 

Second, remember that things don't always go as planned. Some give money to their children with the expectation that the children will hold it for the parent's benefit. Outright gifts are vulnerable to the children's poor financial decisions, divorce proceedings, lawsuits, or creditor claims. The children might also pass away before the parents. Then the parents are stuck trying to retrieve the money from the child's heirs.

IRREVOCABLE LIVING TRUST

Alternatively, you can transfer your assets into an Irrevocable Living Trust. Doing so exempts those assets from Medicaid Estate Recovery, and it allows you to maintain more control over those assets than if you simply gifted them to your children. This method also avoids certain taxes, such as the capital gains tax.

Irrevocable Living Trusts are a popular Medicaid Planning tool. You can protect your assets by transferring your countable resources out of your name into this type of Trust at least five years before you go into a nursing home. Unfortunately, many people do not think about qualifying for Medicaid until their loved one is on the nursing home’s doorstep.

To learn more about the Irrevocable Living Trust or any of these Medicaid techniques, contact an estate planning attorney from our office today.