People all eventually age, and a majority of Americans will end up developing an illness or impairment that limits their ability to complete everyday tasks. Many people will end up needing help to complete such tasks as walking, dressing, bathing, toileting, and eating and will need long-term care services. The U.S. Department of Health and Human Services According to a report in Forbes, the median annual cost of a semi-private nursing home room was $85,775 in 2017. Elder Care Direction can help older adults to plan for the expenses associated with nursing home care so that they can qualify for Medicaid while avoiding Medicaid estate recovery.
What is Medicaid estate recovery?
People who do not have the money to pay for nursing home care may qualify for Medicaid to pay for it. However, when they die, the government may try to recover what it spent through Medicaid estate recovery. Through this program, the government may force your home to be sold so that it can recoup some of its money. Planning can help you to make certain that your home will go to your family instead of to the state.
Establishing a trust to protect your home
Some people attempt to avoid Medicaid estate recovery by giving their homes to their children outright, but this can have its own problems. If you give your home to your children, you will not qualify for Medicaid for an extensive period of time and will have to pay for your nursing home care during the penalty period. Medicaid has a look back period of five years. If you need nursing home care, the state may be able to undo any gifts that you have made and seize your home from your children to pay for your care. Deeding your home to a trust may be a better choice. Since the trust will own the property instead of your children, this may allow your home to be protected from Medicaid estate recovery.
Trusts can help you to protect your assets from being seized and sold to pay for your long-term care costs. The trust can be set up to allow you to live in the home for the remainder of your life while also enjoying the associated tax deductions. You can also use a trust to protect other investments that you might have.
Who can serve as the trustee?
When you set up an asset-protection trust, you can name whomever you would like to serve as the trustee. This may be one of your children or a professional. When you set up your trust, you can include provisions that allow you to fire the trustee whenever you want and to name a new person.
How a home protection trust works
A home protection trust is different than the common revocable living trust. Revocable living trusts do not protect your assets from Medicaid estate recovery. Home protection trusts are irrevocable trusts that are designed to prevent losses if you have to get Medicaid to help you to pay for long-term care.
Importance of advance planning
Medicaid’s five-year look back rule still applies to gifts to trusts. This means that it is important for you to create your trust and to fund it at least five years before you will need to apply for Medicaid. You should not wait. Planning well in advance can help you to avoid the problems that might otherwise happen. Elder Care Direction can help you to plan so that you can qualify for Medicaid while not losing your home and other assets to the government. There are also other options that you might be able to use, including establishing life estate deeds, transfers for children who are caregivers and transfers between spouses. However, it is important for you to get help from a professional so that what you do will comply with the laws in the state in which you live.
How you plan will depend on your situation and the laws of your own state. Elder Care Direction has a team of professionals who help older adults to plan according to their unique needs. We can help you to determine which strategy might work best for you. To learn more, call us today or fill out our online contact form.