Though we are all living longer, on average, in the United States, the increased life expectancy often comes at a high cost. Studies tell us that once you reach the age of 65 your chance of needing long-term care is about 50 percent. By age 80, three in four people will eventually need long-term care. Often, this is the result of an age related dementia disease such as Alzheimer’s. Because neither Medicare nor most private health insurance companies cover the often exorbitant costs of long-term care, Medicaid may be the only answer. Medicaid, however, has both asset and income limits that cannot be exceeded. If you have a loved one who is showing early signs of dementia it may not be too late to create a Medicaid plan to ensure that your loved one qualifies for benefits when they are needed down the road.
Unlike the Medicare program, Medicaid is a need based program, meaning that only applicants with low income and few assets qualify for benefits. If you loved one has funds in savings, investments, or owns more than a primary residence chances are that he or she will not qualify for Medicaid benefits. Simply transferring those assets to another family member when the time comes to apply for benefits isn’t an option either because of the five year “look-back” period Medicaid uses. In essence, the “look-back” period allows Medicaid to search back through your financial transactions for five years prior to your application date for any asset transfers. If any are found, they value of the asset transferred will be imputed to you as if the transfer was never made.
While it is best to include Medicaid planning in an overall estate plan from an early age, it is never too late to try and incorporate some Medicaid planning strategies into an estate plan. For example, it may be possible to turn a countable asset into an exempt asset for your loved one. If, for example, your loved one still owes on his or her house but has money in savings it may be possible to use those funds in savings to pay down the mortgage and protect the funds in the process because your primary residence is often exempt when calculating assets.
Talk to you estate planning attorney as soon as you see signs of dementia in a loved one about what you can do to ensure that your loved one will qualify for Medicaid when the time comes.