The numbers are clear: there’s a good chance that you’re going to need long-term care at some point in the future. In fact, some studies have shown that as many as 70% of individuals will need long-term care sometime in their life. Another 20% of those individuals will need long-term care for 5 years or more.
Given that long-term care may cost as much as $7,000 or more per month, you’re looking at exorbitant expenses that can quickly eat away at your assets and leave you and your family facing financial hardship. If you’d like to avoid that outcome, now is the time to figure out how to best plan for your potential long-term care needs.
How long-term care fits into estate planning
A lot of people think that estate planning is just about figuring out how your assets will be distributed when you pass away. But it actually entails much more than that, including planning for long-term care.
One way to get long-term care costs covered is to qualify for Medicaid. However, if you have significant assets, that may require you to spend down an enormous portion of your estate, which puts your remaining assets, including your home, at risk of being recovered by the state once you pass away.
So what options are available?
Fortunately, there are several. Let’s look at some of them here:
- Property transfers: You might be able to transfer some of your real property to your spouse, your child, or a sibling without facing a Medicaid penalty. This can be a powerful way to ensure that your home stays in the family and isn’t used to offset the costs expended by Medicaid. Keep in mind, though, that there may be certain requirements that you have to meet for one of these exempt transfers, such as the period of time that your child lives in the residence prior to the transfer.
- Create an irrevocable trust: Another option may be to use an irrevocable trust. You can’t change an irrevocable trust, which basically makes it a permanent decision. However, assets that are placed into one of these trusts are exempt from creditors and are not counted for Medicaid eligibility purposes. This means that you’re free to decide how those assets will be divided upon your passing while helping you qualify for Medicaid and thus, the long-term care that you may need.
It’s important to note, though, that there’s a lookback period when it comes to Medicaid eligibility, especially when you use an irrevocable trust. That period is generally 5 years from the time of the trust’s creation when you’re seeking nursing home care, but the period is generally shorter when you’re looking at obtaining in-home care.
- Long-term care insurance: Long-term care insurance may also be right for you. Just make sure that you fully understand your policy before purchasing it, as many claims made under these policies are ultimately denied. This may require additional legal action to ensure that you receive the benefits to which you’re entitled.
Be prepared for all the curveballs that life might throw at you
If you want to protect yourself and your estate as fully as possible, you need a holistic estate plan that takes every possible curveball into consideration. This requires you to have a lot of foresight and an understanding of the law. Figuring out how to navigate the intricacies of the legal process can be daunting, though, which is why law firms like ours are here to help.
If you’d like to learn more about how an advocate can assist you in these matters, we encourage you to continue to read our website to learn more about what we have to offer our clients.