Most people are familiar with the general concept of Medicaid, but figuring out how much coverage you can get and at what cost can be confusing. Medicaid covers care in state-certified nursing homes when an individual cannot afford any other method of payment. You must be in need of nursing home care to qualify.
Though you may not believe that you will someday need nursing home care, currently there are 1.4 million people, mostly seniors, served in 16,000 nursing homes across the country. 1 in 3 people over 65 will eventually need nursing home care, the average cost of which is $82,000. 15% of Alabama is currently over the age of 65, and 15,252 of these individuals are nursing home residents with Medicaid, making up 67% of nursing home residents total. In the year 2050, there will be 83.7 million people in the U.S. who are 65 or older, which is twice as many as in 2012.
It's important to consider the possibility that you or a loved one may end up in a nursing home, and to know how to structure your assets so it’s possible to get coverage. Medicaid sets a maximum assets threshold which is very low in most states. In Alabama, you may not have more than $2,000 in countable assets to qualify for Medicaid. There are some exclusions from this threshold, like automobiles and real property, etc. If you exceed the threshold, your excess assets will be put toward paying for nursing home care before Medicaid coverage will kick in.
You should not have to be forced to use your extra assets to pay for nursing home care. If you can’t afford long-term care insurance, the next best option is to create a Medicaid Asset Protection Trust (MAPT) to protect your assets from being eaten up by nursing home care costs. If you use a MAPT, you can transfer assets out of your estate and qualify for Medicaid sooner.
MAPTs must be irrevocable trusts, because assets in revocable trusts are countable toward the maximum threshold. The difference is that irrevocable trusts cannot be changed after they are created, and if set up in a particular way the assets are not immediately available to the Medicaid applicant.
An experienced attorney will know how to set up your trust in order to protect your assets. The trust must not benefit you or your spouse; someone else must be named as trustee. It may sound intimidating that irrevocable trusts cannot be changed, but they are actually quite flexible. If you set up a MAPT, you can still receive pension and social security costs directly and maintain the right to use and occupy your home. The trust can freely sell and trade assets through the trustee, including stocks. You can sell your home, as long as money is paid to trust, and the trust can buy property in its own name and it will be protected.
Irrevocable trusts are the best way to protect your assets from seizure by Medicaid, but not the only way. It’s also possible to set up different kinds of trusts, like testamentary trusts, or create a life-estate deed, etc. Consulting an attorney will help you determine the best way to get Medicaid coverage and keep your hard-earned savings.
It might seem like a good idea to try and discretely transfer your assets before applying for Medicaid so that they cannot be countable resources, but this can be risky. When you apply for Medicaid, the agency assesses whether you or your spouse have made any transfers of assets in the past 5 years. This is called the “look-back” period. If you have made any transfers as “gifts,” you will be penalized by Medicaid, and have to pay for a portion of your nursing home care.
You are ineligible as long as the value of the transferred asset could have paid for nursing home care. In theory, there is no limit to how long you might be declared ineligible, so it’s crucial to be careful when making asset transfers. There are ways to make transfers and not have them red-flagged by Medicaid. You should consult an attorney if you are considering any asset transfers.
At the Reid Law Firm, we are well-versed in the Alabama trust formation and regulation process. Trustees should have their trusts assessed annually. As rates go up and down and new policies are put in place, it is wise to keep a constant eye on how your savings are doing. You want to insure your money is continually handled in the most advantageous fashion, and the staff at Reid Law Firm can help.