The U.S. Department of Health and Human Services says someone turning age 65 today has almost a 70% chance of needing some type of long-term care services in their remaining years. Twenty percent will need care for longer than five years. Thirty-seven percent will receive care in a residential facility, such as a nursing home or assisted living community.
Despite the expected need for long-term residential care, a 2021 Associated Press-NORC Center for Public Affairs Research poll found that 69% of respondents had done little or no planning for their long-term care needs. Only 16% were confident they will have the financial resources to pay for long-term care.
The 2020 Genworth Cost of Care Survey found that the median cost of nursing home facilities in North Carolina ranged from $7,300 per month for a semi-private room to $8,060 for a private room. The monthly median cost for an assisted living community in North Carolina was $3,800.
By the year 2030, long-term care costs are predicted to rise to:
- $10,832 per month for a private room and $9,811 for a semi-private room at a nursing home
- $5,107 per month at an assisted living facility.
If you have done what is necessary to save money for your elder years, will you see all you have built and saved vanish once you or your spouse needs nursing home care?
There are ways to plan for needed care and protect your savings with the help of an estate planning attorney for long-term care. The Medicaid estate planning attorneys at Brady Cobin Law Group in Raleigh, NC, have more than 35 years of experience helping individuals qualify for Medicaid while protecting their assets. Contact us today with your questions about how to prepare for Medicaid eligibility.
Medicare vs. Medicaid and Nursing Home Care
The AP-NORC survey says that “Although Medicare only covers limited ongoing living assistance services, the program is cited as a key component of the long-term care financing plan for many Americans. Half of those age 40 and older expect to rely on Medicare to pay for their long-term care needs.”
In fact, Medicare provides little long-term care assistance and none for nursing home residents. Medicaid is the health care program that most residents of nursing homes and assisted living facilities rely on to pay for their care.
Medicare is a federal health insurance program that people pay into while they are working through automatic wage deductions. At age 65, anyone who is entitled to receive Social Security retirement benefits also receives Medicare. Medicare Part A pays for hospitalization, home health services, hospice, and limited skilled nursing facility care if it is medically necessary and follows a stay of at least three days in a hospital.
Medicare does not cover custodial care, which is assistance with activities of daily living, such as bathing, dressing, eating, getting out of a bed or chair, using the bathroom, and health-related care that most people do themselves.
Medicaid is a health insurance program funded by federal and state governments. The program provides benefits to certain individuals and families with low incomes and, in some cases, limited resources. The federal government sets the rules, regulations, and policies that each state must operate within. But each state establishes its own Medicaid eligibility standards, the scope of services, and payment rates.
North Carolina offers Medicaid long-term care programs for care in nursing facilities, adult care homes (assisted living facilities), and hospice. The eligibility requirements and benefits vary.
Most nursing homes accept Medicaid payments. Because of Medicaid’s income requirements, many people believe that nursing home residents must pay out of pocket or with long-term care insurance until they spend down their assets to qualify for Medicaid.
So, why do you need an estate planning attorney for Medicaid planning? Because there are more advantageous asset protection techniques to qualify for Medicaid’s long-term care benefits than spending down all you’ve worked a lifetime to save.
A Medicaid estate planning attorney with Brady Cobin Law Group can provide guidance about how to protect your wealth as you prepare for potential medical care needs and long-term care in your elder years.
Medicaid Asset Protection Trusts and Other Estate Planning Tools
When an individual applies for long-term care benefits from Medicaid, the Centers for Medicare and Medicaid Services calculates the applicant’s income and assets to determine eligibility. In light of many applicants’ need to shed assets to qualify, Medicare employs a five-year “look back” period to prevent applicants from giving away, or transferring assets to meet Medicaid’s asset limit. A violation results in a penalty period of ineligibility.
It is best to make preparations for Medicaid eligibility at least five years ahead of your expected need. Because none of us can predict when we might fall ill, acting as soon as possible is prudent.
One of the most popular ways to protect assets and remain eligible for Medicaid is to fund a Medicaid asset protection trust, or MAPT.
A MAPT is an irrevocable trust funded for your benefit that is at least five years old when you apply for Medicaid. Assets placed within a MAPT do not count against your eligibility for Medicaid, under Medicaid rules.
The creator of the trust spells out how the trust’s assets are to be used and appoints a trustee to manage the trust. If you create an irrevocable trust, neither you nor your spouse can serve as trustee and you give up rights to control the trust, such as how its assets are invested. But you may write the trust’s bylaws to require that its assets are used for your benefit.
Therefore, you could name a grown child or someone else as trustee of a MAPT that is established to pay you a regular stipend. The trust would also name a beneficiary or beneficiaries to benefit from the trust after you pass away. The trust’s assets would remain out of the reach of Medicaid if the government seeks to reclaim money from your estate after you die.
Other potential asset protection vehicles to be discussed in estate planning for long-term-care include:
- Irrevocable Funeral Trusts were established to pay for the Medicaid applicant’s funeral in advance and reduce countable assets by up to $15,000 ($30,000 for married couples).
- Annuities, which turn countable assets into non-countable income when only one spouse applies for nursing home Medicaid.
- Spousal asset transfer, allows the non-applicant spouse to retain countable assets while the spouse seeking benefits meets the income eligibility limit. In 2022 in North Carolina, the non-applicant spouse can retain 50% of the couple’s joint assets up to $137,400.
Contact an Estate Planning Attorney About NC Medicaid Options
Medicaid is an entitlement that for many people is the primary source of payments for long-term nursing home or assisted living care. You shouldn’t have to lose everything you’ve worked for to qualify for Medicaid assistance. The Brady Cobin Law Group is here to help with well-constructed legal strategies for protecting your assets if you need to obtain long-term Medicare benefits. Contact us today.