Protecting assets from depletion by long-term care costs

by | Jun 11, 2015 | Estate Planning |

The baby boomer generation is not getting any younger and more and more individuals in this age category are entering into retirement. However, a lot of them are doing so without any kind of long term care plan finalized. This is because some people think it is too late to plan for long-term care. However, not having a long-term care plan in place could result in the unnecessary expenditure of hundreds of thousands of dollars for medical care in the event of incapacitation.

The thing is, it is never too late to prepare for long term care. Various legal strategies can be employed to help individuals save their personal assets from being depleted by nursing home facility bills. Even if these tools are implemented immediately before checking into a nursing facility, they can help individuals save money.

Nursing home bills can range from $11,000 to as much as $14,000 per month. Depending where one lives, the costs could be more or less than that. Without using personal assets, the only way to pay these bills is through long-term care insurance or through Medicaid. However, only 5 percent of individuals have long-term care insurance. Also, there are certain limitations to Medicaid. For example, in many cases, Medicaid cannot be used until virtually all of one’s personal assets have been depleted. Furthermore, there is a “five-year look-back period,” which means that if an individual gives away a lot of assets within a five-year period, a special time frame of ineligibility for Medicaid will result.

That said, some personal assets are exempt from nursing home bills. For example, assets in individual retirement accounts are exempt from consideration in calculating an individual’s eligibility for Medicaid. Also, money placed in a Medicaid Asset Protection Trust will be exempted so long as it is five years after the date of putting it in the trust. MAPTs are classified as revocable trusts and this is an important distinction because revocable trusts will not protect an individual’s assets from nursing home bills.

Source: Times-Herald Record, “Bonnie Kraham: Elder law estate planning misconceptions,” Bonnie Kraham, June 03, 2015