Advanced Planning for Long-Term Care Can Protect Assets from Medicaid

When most people think of long-term care or the "need to stay in a home," they think of it has a worst-case scenario as we approach end of life that entails losing one's independence and personal autonomy. Although that may be true, we seldom calculate how much it will cost, and the truth is, it comes at a tremendous financial price. To avoid spending a lifetime of savings on long-term care proper planning can help protect assets for future generations.

Most People Pay for Nursing Home from Their Savings Until They Run Out of Money

Long-term care can be very expensive, especially around-the-clock nursing home care. Most people end up paying for nursing home care out of their savings until they run out, at which point they can qualify for Medicaid to pick up the cost.

Medicaid rules require that recipients have no more than $2,000 in "countable" assets  and limited income. Any excess assets need to be spent down before you can qualify for Medicaid. In addition, in order to be eligible for Medicaid, you cannot have recently transferred assets. If you transfer assets within five years of applying for Medicaid, you may be subject to a penalty period during which you cannot receive benefits. After you die, Medicaid also has the right to recover from your estate, which in the case of a Medicaid recipient usually means only the house.

Long-Term Care Planning Optimizes Medicaid to Preserve your Estate for Spouse or Children

Careful planning in advance can help protect your estate for your spouse or children. If you make a plan before you need long-term care, you may have the luxury of distributing or protecting your assets in advance. This way, when you do need long-term care, you will quickly qualify for Medicaid benefits.