Long-term care planning may seem like a far-off future need to individuals creating their first-ever estate plans. For the most part, people only require long-term care when they are in their golden years and their health begins to decline.
Parents creating their first estate plan after the birth of a child may not worry about their future care needs but rather the current needs of their children. Even those thinking about retirement sometimes let their optimism about their health overshadow best practices for their future protection.
All too often, people forget about the need to address future medical care needs until health issues actually endanger their well-being and finances. Anyone putting together an estate plan might benefit from addressing long-term care needs, but those close to or past the age of retirement may particularly need to contemplate the possibility of their decline as they continue aging.
Long-term care is prohibitively expensive
Even those who have consistently saved for retirement may not have nearly enough set aside to cover the cost of living in a nursing home or having a nurse visit them in their own home on a daily basis. Such services can cost thousands of dollars per month. Medicare typically does not cover long-term care costs.
People instead need to pay with their own resources or apply for Medicaid benefits. Unfortunately, Medicaid can be difficult to obtain without advanced planning. Not only do applicants need to meet very strict standards for their current income and total assets, but they also need to avoid large transfers right before they apply for benefits.
Medicaid professionals usually look back at a full five years of someone’s financial transactions. Those who make gifts to their family members during that lookback period or who move assets into a trust could be at risk of a Medicaid penalty. The state can hold them personally accountable for a certain number of months of care costs based on the transfers they completed during the lookback period.
Those who carefully plan long in advance can potentially minimize the possibility of the state assessing a penalty. They can also protect their assets from estate recovery efforts after they die. Medicaid usually pursues reimbursement for long-term care coverage from someone’s estate after a recipient dies. The state could even lay claim to someone’s primary residence and assets that they earmarked for their children.
The only way to protect vulnerable assets from liquidation during probate proceedings is to plan before death, either by sharing ownership of those assets with another person or by transferring them to a trust. Proper long-term care planning both increases someone’s chances of getting the support they need as they age and protects the legacy that they planned to leave after their death.
Addressing potential long-term care needs before someone requires support can be beneficial for them and the people they love. Seeking legal guidance is a good way to get started.