Medicare will help with your medical expenses when you reach the age of eligibility if you qualify, but the program will not pay for long-term care.
This is a problem for most people, because long-term care is quite expensive. The average stay could cost over $200,000 in many areas of the country.
Medicaid is the fallback plan for many people. This program pays for the majority of the long-term care that seniors receive.
There are asset and income limits that you must stay within to qualify for Medicaid. People who retire with some resources typically engage in a Medicaid spend down to qualify for the program.
A Medicaid spend down is a divestiture of assets. You could decide to give your children their inheritances in advance before you apply for Medicaid coverage.
You could give direct gifts to your children, but you could alternately spend down by conveying assets into a Medicaid trust.
Irrevocable vs. Revocable
You may have heard of revocable living trusts. These trusts are popular among people who want to avoid probate. Part of the appeal lies in the fact that you don’t lose control of assets that you convey into this type of trust.
This is great on the one hand, but on the other hand, assets that you convey into a revocable living trust would be counted by the Medicaid program. These trusts are not useful for Medicaid planning purposes.
A Medicaid trust would be an irrevocable trust. You cannot revoke or rescind this type of trust. Because you surrender incidents of ownership, the assets would not be counted by Medicaid evaluators. As a result, the creation of an irrevocable Medicaid trust could be part of the plan if you are spending down in an effort to qualify for Medicaid coverage.
However, you do have to consider the five-year look-back period if you decide that you would like to fund a Medicaid trust. The program examines your financial dealings going back 60 months. If you have given away assets within five years of submitting your application, you will be deemed ineligible for a particular period of time.
Free Medicaid Planning Consultation
Medicaid planning can help you preserve your savings for the benefit of your loved ones. If you would like to talk things over with a licensed attorney, we would be glad to help. Our firm offers free consultations, and you can send us a message through this link to set up an appointment: Davenport IA Medicaid Planning.
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