When people think of estate planning, they typically think in terms making a will or setting up a trust. They’re not wrong – these are common and important aspects of estate planning. But one facet of estate planning that often flies under the radar is that of Medicaid planning. Let’s take a look at what it is and why it matters.
The problem of long-term care
Long-term care is expensive and there’s no way around that fact. When you or a loved is getting to a point where long-term care is necessary, money can become a significant stumbling block. For those who are 65 or older, you might think Medicare will pick up the bill, but it does not. While Medicare is an incredibly useful program, and many seniors rely on it, its usefulness is limited when it comes to long-term care – whether that care is at home, in a nursing home or at an assisted living facility.
Medicaid can be the answer, but it takes planning
Unlike Medicare, Medicaid does pay for long-term care. However, Medicaid also has income and asset limits in order to qualify for its benefits. This makes it much more difficult to obtain than Medicare. Most people can lower their income enough to get under the Medicaid income limits, but assets are much more difficult.
Medicaid has a 5-year ‘lookback period’, where your assets are examined over that entire time period, rather than just at the moment concurrent with your Medicaid application. This means that you cannot simply divest yourself of assets immediately before applying – they will still be counted as part of the lookback period. This is where Medicaid planning comes in, as part of your overall estate planning strategy. By starting early enough, with the goal of qualifying for Medicaid, you can implement strategies designed to ensure that you meet the income and asset limits when the time comes.