THE IMPORTANCE OF PLANNING FOR LONG TERM CARE

​The importance of planning for long-term care.
 
By Kiley Stuchlik, Attorney at Law
 
There seems to be a stigma that if we plan for death, it’s more likely to happen. While there is no evidence to support that concern, there is a 100% chance of dying whether we plan for it or not. A smaller, but still quite large probability that looms over us is the likelihood that as we age, we are going to need long-term care. As with planning for death, there is no evidence to support the fear that planning for long-term care will increase the probability that we will need it. Given the likelihood that one will need long-term care, it is important to plan for it and for reasons explained below, it is important to plan for long-term care as early as possible.
A person can have his or her long-term care paid for by the state via Medicaid, a program that acts as an interest-free loan to pay for a resident’s basic, long-term care provided all applicable eligibility requirements are met. The state’s interest-free loan will come due upon the Medicaid recipient’s death or upon the death of the surviving spouse of the Medicaid recipient, in the case of married couples.  
 
In order to receive Medicaid, one must meet all 5 of the following eligibility requirements:

1.  Age- A Medicaid applicant must be 65 years of age or older.
2. Medical Eligibility- The Medicaid applicant must have a medical need for care determined based on an assessment of the Medicaid applicant’s daily living needs, such as bathing, dressing, meals, medication, mobility, personal hygiene, etc.
3. Income Eligibility- A Medicaid applicant cannot have more the $2,333.00 per month of gross income. However, a person earning too much income may still be eligible if they first establish a Miller Trust. A Miller Trust allows an applicant to divert excess income into a special trust account, while still allowing the applicant to qualify for Medicaid. 
4. Resource Eligibility- A Medicaid applicant must meet the resource eligibility test. Certain assets, such as a personal residence and two cars, are not considered part of the “countable” resources. In other words, those assets are exempt. A single Medicaid applicant must have two thousand dollars ($2,000) or less in countable (non-exempt) resources. Different rules apply when a Medicaid applicant is married. For example, if only one spouse applies for Medicaid, the healthy (non-applicant) spouse may keep a range of countable resources, typically between $25,284.00 – $126,420.00, based on the couple’s situation. If both members of a married couple are applying for Medicaid and reside in a skilled nursing facility, they may only keep three thousand dollars ($3,000) in countable resources.
5. Transfer Eligibility-If a Medicaid applicant transfers assets for less than fair market value during the 5-year (sixty-month) period prior to applying for Medicaid, the state will impose a penalty period of ineligibility. As we explained in an earlier blog regarding the legal and tax consequences of gifting a home during one’s lifetime, a Medicaid applicant, by making a lifetime gift of the applicant’s home within the 60-month period immediately preceding the application for Medicaid, will trigger the penalty period and be ineligible for Medicaid for the length of the penalty period.  The penalty period is determined by the fair market value of the gift divided by the average monthly cost of care in the state.

As explained above, there are some strategies, such as establishing a Miller Trust and spending down countable (non-exempt) resources, that one can employ in order to qualify for Medicaid.  Additionally, if one wants to shield certain assets, such as a residence, from being collected upon when the Medicaid loan comes due at death, there are certain lifetime strategies that can be employed, such as transferring the asset to an irrevocable asset protection trust. But, one must be sure that the strategy can be carried out at least 60 months before the need to apply for Medicaid arises. Sometimes that determination is difficult to make and one might risk being ineligible for Medicaid or having to unwind a transfer in order to qualify for Medicaid.  Other times, timing may be more predictable, making the transfer strategy a good option for protecting an asset.
The bottom line is that long-term care is expensive. The average monthly cost of a one-bedroom unit in an assisted living facility in Idaho is currently around $5,000, or $60,000 per year. That reality makes it even more important to think about long-term care and how one will pay for it. If you have questions about employing strategies to qualify for Medicaid or protect assets, we are happy to help.  If it’s a situation that’s outside of our scope of expertise, we’ll make sure to connect you with a trusted expert in the field.