We protect your assets and keep them in the hands of your loved ones, but many don’t realize that nursing home and long term care costs may be staking a claim in assets you think will be given to your family. It’s almost inevitable that most of our population will, at some point, need long term care or will need to reside in a nursing home. The CDC projects that the number of people using these services will increase from 15 million in the year 2000 to 27 million in the year 2050. With each of these people there is a lot of money at stake.

While it isn’t the easiest topic to discuss, there are ways to plan your financial goals ahead of time to include plans for long term care. Doing so will help to avoid your assets being drained to pay for your care, even after you are gone.

Medicaid is a government-run program that covers nursing home costs for those with low-income. When your income is low enough to qualify for this assistance, many of your assets may already be drained. State Medicaid programs seek to recover some benefits that they pay for, which means they will take money or other assets (such as a house) that may be remaining in the individual’s estate after the individual’s passing.

How To Protect Your Assets

Establish An Irrevocable Trust

An irrevocable trust allows you to name a trustee to your assets to avoid giving them away to qualify for Medicaid. You can designate that the assets in the trust would pass to your spouse or other loved ones upon your death. The assets can be used during your lifetime but you cannot control the trust’s principal.

A reason to establish an irrevocable trust would be to deem it a “Medicaid Trust” and assets in such trust wouldn’t be used to determine Medicaid eligibility. On the contrary, a revocable trust would not offer this protection as the assets are still technically yours. Medicaid eligibility does have a 5-year look-back stipulation, however, so your transactions from the previous 5 years are taken into account.

Gift Your Money

Keeping in mind applicable taxes, aspects of your estate may be gifted and are exempt from determining Medicaid eligibility. Retirement accounts, income property, and personal items are a few of the exemptions.

Life Estate

An individual’s home is typically a big portion of the wealth in their estate. Putting your family home in a life estate may shield any implications of your home being seized to repay Medicaid benefits. You may stipulate that you keep the right to reside in your home until your death and at which point the property is automatically transferred to whom you name in your deed. This would still fall under the 5-year stipulation in which eligibility may be determined, so if the home is sold, the earnings from the sale could be taken to repay Medicaid benefits.

Planning Ahead

Of course, none of us know where life will take us, but planning your family’s financial future is something you can take charge of now. Plan how you may pay for these services if you need them and protect your assets ahead of time so they remain where they should be- with your loved ones.

We are the experts in estate planning. Contact us with questions on how to get started or update your plan.

Disclaimer: This article is intended to serve as a general summary of the issues outlined therein. While this article may include general guidance, it is not intended as, nor is a substitute for, qualified legal advice. Your review or receipt of this article by Lexern Law Offices, Ltd. (the “LLG”) or any of its attorneys does not create an attorney-client relationship between you and the LLG. The opinions expressed in this article are those of the authors of the article and does not reflect the opinion of the LLG.