Long Term Care Planning and Estate Planning
When addressed in tandem, long-term care planning and estate planning protect the estate from being consumed by long-term care costs. Neglecting to incorporate long-term care planning into the estate plan can quickly undo a legacy.
Purchasing a long-term care insurance policy should be a starting point in planning for long-term care. Policies purchased in mid-life may seem unnecessary. However, when they are needed later in life, the coverage is welcome. The older you are, the more difficult it is to buy a long-term care policy. Fewer insurance companies sell these policies than in the past, and if you have a chronic condition, they may refuse to issue a policy. The premiums increase as time goes on. However, it is a worthwhile investment.
Understanding Long-Term Care and Estate Planning
Long-term care refers to the services required to help with daily activities such as bathing, dressing, toileting and eating. Medicare covers a limited amount of short-term care, and when it is exhausted, the individual must apply for Medicaid. Long-term care is sometimes performed at home. However, for most people, long-term care takes place in a skilled nursing facility, where costs can easily reach $100,000 a year—or more.
Long-term care planning and estate planning intersect when the family wishes to protect the estate from the cost of long-term care.
The Role of Medicaid Planning in Estate and Long-Term Care Planning
Long-term care planning aims to determine how to finance long-term care without leaving a spouse impoverished or depleting a lifetime of earnings. Medicaid eligibility is means-tested, meaning the agency closely reviews the person’s assets to determine if they are eligible to have Medicaid pay for their care.
A Medicaid plan is created before it’s needed. Medicaid has a five-year lookback period. Any transactions like transferring ownership of a house or vacation home, lending money to a family member, or creating and funding a trust will make the applicant ineligible for Medicaid benefits. They will have to spend down assets until they qualify.
No one knows if they will need to qualify for Medicaid. However, most people need some form of long-term care at some point. Betting on being the exception is not a Medicaid plan.
What Happens If There’s No Long-Term Care Plan?
An introduction to long-term care in the middle of a health crisis is the worst time to learn about Medicaid. The crisis often begins when an elderly parent falls and is taken by ambulance to a nearby hospital. Once their medical condition is addressed, the family learns their elderly parent can’t live alone anymore and the hospital needs to transfer the patient to a licensed nursing home. The family must shift into high gear, learning about available facilities, navigating the costs and figuring out how to pay the bills.
An Easier Transition to Long-Term Care Through Planning.
By planning in advance, you can minimize the emotional and financial impact on the family. Asset protection protects middle-class seniors by securing life savings and property from the cost of long-term care. It also allows the family to procure the best available care by having a plan.
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