When you get serious about planning ahead for the eventualities of aging you may run into some rude awakenings. One of these would be the situation that you may face if you need long-term care someday.
First of all, we would like to establish the fact that this is something that everyone should take seriously. You may think that a small percentage of people will need help with their day-to-day needs eventually. Actually, 70% of people who reach the age of 65 will someday need long-term care.
Medicare is not the answer because Medicare doesn’t pay for long-term care. Paying for it out of your pocket is a possibility, but you may be emptying out your pockets if you have to go this route. It can cost upwards of $200,000 for the average stay in a nursing home, which is a bit over two years. Some 10% of people in nursing homes stay in the facilities for at least five years.
Because of the staggering costs many people wind up applying for Medicaid to pay for long-term care. Medicaid is largely thought of as a program that is only utilized by the poor, but in fact most long-term care is paid for by Medicaid.
Some people who worked all their lives while planning ahead for retirement as effectively as they could may still find it necessary to seek Medicaid coverage as a way to pay for long-term care.
To qualify you must stay within upper financial asset limits. The limit for countable assets is $2,000.
Some of your most valuable assets don’t count when Medicaid is evaluating your eligibility. You can retain ownership of your home up to a certain amount of equity ($536,000 in 2013), and your primary vehicle doesn’t count.
What about the rest? Can you just give away your assets to people who would otherwise be inheriting them while you are still alive to qualify for Medicaid benefits?
This would be part of the process known as “spending down.” It can be done, but you have to plan ahead effectively.
The Medicaid program doesn’t want you to suddenly give away everything that you have on the day that you come to the realization that you need long-term care. There is something called a five-year look back period. If you apply for Medicaid the program evaluators will look back five years to see if you have transferred assets to others in an effort to spend down.
If you have indeed transferred assets within five years of applying for the program a penalty will be imposed. Your eligibility for Medicaid will be delayed. The amount of time will depend on the average cost of long-term care in Oklahoma and the value of the property that you gave away within the five-year time frame.
Parman & Easterday
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