Most seniors will need some type of paid living assistance, and 35 percent of elders will reside in nursing homes according to the U.S. Department of Health and Human Services. Since Medicare is a health insurance program for elders, you would assume that it would cover this type of care. There are those that would question the fairness of this arrangement, but in fact, Medicare will not pay for the custodial care that nursing homes provide.
Long-Term Care Costs
It is not easy for a retiree to cover their own nursing home costs. The state of Oklahoma has determined that the statewide average daily charge for nursing home care this year is $179.57. This works out to about $65,500 a year, and 12 months is the average length of stay. Over half of people that receive paid care require assistance for more than a year, and a married couple may be forced to deal with two different sets of nursing home bills.
There Is a Solution
This is a challenging situation, but there is a widely embraced solution. The Medicaid program will cover long-term care costs, and most seniors in nursing homes are Medicaid beneficiaries. Even though you cannot qualify with more than $2,000 of “countable” or eligible assets in your name, many of these people were never financially needy.
It is possible to take steps to qualify for Medicaid without losing a lot in the process. The first thing to understand about Medicaid planning is the fact that your home is not a countable asset. However, there is a $603,000 equity limit. Exempt assets you can retain include wedding rings, engagement rings, heirloom jewelry, and one automobile. Your personal belongings and household items are also exempt assets you may keep. The Medicaid program wants you to be able to address your internment or cremation costs, so you can have a prepaid burial plot and unlimited term life insurance. An applicant can also be approved with $1,500 of whole life insurance and the same amount set aside for final expenses. For couples, there are allowances for a healthy spouse that can still live independently, and one of them is the Community Spouse Resource Allowance. This is one-half of the countable assets up to a certain limit. In 2021, the maximum amount of assets the healthy spouse can treat as exempt is $130,380. A healthy spouse can keep no less than $26,076, even if this is more than half of the total assets that are countable. The institutionalized spouse’s income must be contributed toward the cost of the care, but an exception is made if a healthy spouse needs the income. They can receive a Monthly Maintenance Needs Allowance that can be as high as $3,260.
A Closer Look at Home Ownership
You can qualify as a homeowner, but this is not a position that you want to be in if you can help it. There is a Medicaid estate recovery mandate, so depending on how your assets are owned, the program will seek reimbursement from your estate after you pass away if you are a beneficiary. They could place a lien on the home during this phase if it is in your direct personal possession unless your spouse, a minor child, or a blind or disabled adult child is living in the home. Another exception is the child caregiver exemption. If one of your children has been living with you in the home providing a level of care that has allowed you to stay out of a nursing home, you can transfer ownership to the child. The home would subsequently be protected after your passing.
Irrevocable Medicaid Trust
You can establish and fund an irrevocable trust to transfer assets (including your home) out of your name to qualify for Medicaid. While you are living in the community, you can receive distributions of the trust’s earnings, but you would not be able to touch the principal. If you fund the trust at least five years before you apply for Medicaid, the assets in the trust would not count. Because of this five-year look-back period, advance planning is the key to maximize the potential of this strategy.
We Are Here to Help!
Our doors are open if you would like to work with an Oklahoma City elder care planning attorney to put a plan in place. You can call us at 405-843-6100 set up an appointment, and you can use our contact form if you would rather send us a message.