As you enter the later stages of life, it’s important to think about how you might prepare for the possibility of assisted living and long-term care services. It’s the reality for over one million Americans, and the CDC expects nearly 27 million people will rely on some form of long-term care by 2050.
This type of care can become expensive – a private room in a nursing facility could cost upwards of $90,000, and many people make the mistake of waiting until it’s too late to start figuring out their financial future and how they will pay for this.
Medicaid exists to help people pay for these expenses, but it isn’t a no-strings-attached proposition. In fact, in many cases by the time Medicaid kicks in, your assets could already be heavily depleted.
In order to give clients peace of mind, as well as protect the future of their assets and family security, it’s vital to consider some form of medicaid asset protection in Southlake and Fort Worth.
What is Medicaid Asset Protection in Texas?
Two of the biggest mistakes we see clients make are assuming they won’t ever need nursing home care, and assuming that if they do, the government will pay for it. The truth is, most people WILL require nursing home care at some point, and government contribution is entirely dependent on your total net worth.
In layman’s terms, the more you have, the more the government is going to be looking to take to recoup their costs of taking care of you.
Medicaid asset protection is a collection of various different strategies and tactics that help clients protect their assets and financial interests from becoming the primary source of funding for their long-term nursing home care.
What is Medicaid?
Medicaid is a government-run program that covers health care costs, including nursing home costs, for low-income individuals, or individuals that otherwise need assistance due to limited resources.
There’s more than meets the eye when it comes to Medicaid though. Medicaid is considered a last resort of payment in the eyes of the government, and eligibility is determined by your income level. That level needs to be fairly low to qualify, and as a result, most clients don’t even meet the eligibility requirements until much of their existing assets and wealth has been gone through.
Why Do I Need Medicaid Asset Protection?
Since the cost of long-term care is high, many clients will eventually meet the strict income requirements to qualify for Medicaid assistance. The problem arises after a client passes away because upon their death the government will be looking to collect whatever they previously paid out in the form of your remaining assets.
Clients sometimes make the mistake of simply giving many of their assets away in the hopes that it reduces their total wealth, allowing them to qualify. In this case, a client will find itself on the receiving end of a Medicaid “look-back” period.
A look-back period allows the government to scrutinize any sort of asset transfer in a period of five years leading up to the Medicaid application, and use those assets to help recover anything that might have been paid out. This is one reason our clients ask about simply doing a lady bird deed in the state of Texas. While that has its (simplified) place, a more comprehensive plan is often recommended. Fortunately, through proper estate planning a client might be able to drastically minimize the impact of Medicaid costs on their remaining assets.
How to Protect Assets from Medicaid Recovery
Medicaid asset protection takes the form of various different strategies that a client can take advantage of, in conjunction with working together with an estate planning attorney, to help guard their assets against Medicaid penalties. These include:
Gifts – Certain assets are considered exempt, which allows you to give them to loved ones for little to no compensation without incurring a penalty. Examples of these types of assets include personal belongings, household goods, and income-generating property.
Estate Planning – Working with an experienced estate planning attorney will help you get a head start on what might be needed to pay for your long-term care when the time comes. An estate planning attorney is well-versed on the rules and regulations pertaining to Medicaid, as well as knowing which benefits you might qualify for before even applying
Does a Family Trust Protect Assets From Medicaid?
Yes and no. An irrevocable trust will help you avoid giving away or spending down the value of your assets in order to qualify for Medicaid. Because the assets you place in the irrevocable trust technically aren’t yours anymore, you’ll need to name a primary beneficiary as well as establish a reliable power of attorney for future needs that arise. Working with a will and trust attorney will allow you to properly structure the trust so it can be avoided in asset recovery. However, the trust is still subject to the five-year look-back period.
A revocable trust does NOT offer any sort of Medicaid asset protection. This is because the government still considers the assets in this type of trust to be yours since you control it.
Are IRA Assets Protected From Medicaid?
In the case of IRAs as it pertains to Texas, the circumstances are unique. You should consult professional legal advice before making any decisions.
As always, the only way to make sure you are taking the correct steps in your medicaid asset protection is by working together with a trusted legal expert. Reach out to us today to see how we can best keep your wealth in the family while also solving for your long-term health care needs.