Planning for Medicaid and long-term care protects your legacy

by | Jul 31, 2020 | Estate Planning |

Planning your estate can feel like a morbid process, as you have to think about what will happen to your possessions and your loved ones when you die. Many people rush through the process specifically because of how unpleasant they find it, but rushing doesn’t do anyone any favors.

In addition to creating a last will that discusses what you want to have done with your assets and how you wish to protect your loved ones, you should review your resources for retirement, including your financial and medical support options.

Planning early in your retirement or even prior to retirement for long-term care and the potential need for Medicaid as you age is as important as planning for the distribution of your assets if you want to leave behind a meaningful legacy.

Medicare and private insurance may not cover long-term care

Whether you experience the standard decline associated with aging or have exceptional needs because of medical conditions like Alzheimer’s or other progressive conditions, you may eventually find yourself in need of skilled nursing help in your own home or even a stay in a residential facility like a nursing home.

Your Medicare insurance or private, employer-sponsored health plan likely will not cover the full costs associated with long-term care. You may find yourself in need of Medicaid. Unlike Medicare, Medicaid has strict limitations on both income and assets for those who hope to qualify. They will look back at up to five years of your financial activity, which means you need to start planning at least half a decade before you might need Medicaid benefits.

Unless you want to spend every cent you have saved on your medical care when you need Medicaid coverage, you will have to plan ahead of time if you want to leave assets for your loved ones.

Instead of looking for insurance, many people reduce their assets

While long-term care insurance policies are available, they are typically cost-prohibitive for individuals close to the age of retirement. Instead of trying to find a way to cover a premium that may be hundreds or thousands of dollars, many people find it simpler to reduce the value of their assets so that they can qualify when the time comes.

In some cases, making gifts to loved ones, such as annual financial gifts to children, can be a great way to reduce the value of a person’s assets. For others, using major assets, like the equity in a home, to fund a trust is a better solution. They can still retain control over the assets in the trust while also diminishing their personal holdings.

When the time comes for you to plan your estate, you will likely benefit from reviewing your potential long-term care needs and engaging in Medicaid planning at the same time.