Estate Planning Isn’t Just For The Elderly

Happy, smiling couple in their sixties.

A Recipe For Asset Protection: Long Term Care Insurance And Medicaid

By Stella King, Esq.

The U.S. Administration on Aging estimates that 70% of Americans over the age of 65 will require long-term care services, such as home care, assisted living, or skilled nursing. The major question is always how to pay for this care, the cost of which can be astronomical.

While one could exhaust their assets until they qualify for Medicaid, a better alternative is to transfer assets to an Irrevocable Medicaid Asset Protection Trust (MAPT) when one is healthy enough to ensure the passage of the infamous “five-year lookback period.” Another option is to purchase Long Term Care Insurance (LTCI), which is expensive if not purchased when one is younger. A traditional LTCI policy will pay for all or a portion of the cost of an aide at home, a stay at an assisted living residence (or memory care facility for those with Alzheimer’s/Dementia), or the daily rate at a skilled nursing facility (SNF).

Each policy is different, but one’s age, gender, health, marital status, and coverage selected typically factor into the premium cost. Many LTCI policies have maximum daily and lifetime benefits, as well as elimination (waiting) periods between when one starts paying for care and when the policy begins covering. LTCI is like auto insurance—you keep paying for it until you need it (if you ever do).

In some cases, LTCI must be exhausted for one to be eligible for Medicaid, and in others, it need only be activated (in use). This depends upon the type of policy (indemnity / reimbursement) and the type of Medicaid (home care or nursing home). For instance, LTCI may pay a maximum daily rate for home care, which translates to only a certain number of hours, and Medicaid can be used to pay for additional hours. Alternatively, a nursing home Medicaid recipient’s LTCI may cover a portion of the SNF’s daily rate, with Medicaid covering the rest. The foregoing reduces the chance that Medicaid will later seek to recoup the amount expended on the cost of the Medicaid recipient’s care from the Medicaid recipient’s spouse or probate estate. Additionally, if one transferred assets to a MAPT and created the five-year lookback period, their LTCI may be utilized to pay for nursing home care during that period of disqualification. LTCI may also finance items Medicaid won’t cover (e.g., home modifications, private rooms), and Medicaid may be used where LTCI falls short (e.g., pre-existing conditions, mental disorders, family caregivers).

It is true that one must be extremely careful in choosing a LTCI policy, however, it is a misconception that LTCI and Medicaid are mutually exclusive. With strategic planning and the assistance of an elder law attorney, the combination of Medicaid planning and LTCI can result in the ultimate safety net for your assets.

Enea, Scanlan & Sirignano, LLP