Inadequate long-term care planning is often linked to common myths about paying for care. Quite a few people believe that Medicare or private insurance will pay if they eventually need to move into a nursing home. Many Americans are shocked to learn that that is not the case.
Medicare does offer basic medical coverage to older adults, but it does not cover the expense of long-term care. Although Medicare will not cover nursing home expenses or the cost of in-home skilled nursing help, Medicaid may cover these necessary medical costs.
Medicaid, unlike Medicare, has asset and income caps that limit the pool of people able to receive coverage. Planning earlier in life to secure access to Medicaid as you age is a wise decision. Many times, Medicaid planning will involve the creation of a trust.
How can a trust help with Medicaid eligibility?
When you apply for Medicaid benefits, the government will look at your current income, as well as the value of the assets that you own. In fact, they can look back as far as five years to determine what assets you have transferred or given to others.
For that reason, anyone who may eventually need Medicaid benefits should begin planning as early as possible to ensure eligibility. In some cases, people make gifts of their assets to family members. Doing this over several years allows them to minimize any tax obligations for those gifts and ensure that your family members are not overwhelmed by access to so much money.
Not everyone wants to give their assets to their heirs until after they pass on. For these individuals, a trust may be the ideal solution. It can limit tax liability for their estate when they die, provide them with resources while they are still alive and ensure that they can qualify for Medicaid in the future.
By transferring all significant assets into the trust, an individual can retain control over their assets without making themselves ineligible for Medicaid if they need it in the future. They also protect those assets for their family members and heirs.
Setting up a trust doesn't require millions of dollars in assets
Creating a trust isn't just something the incredibly wealthy do. It works well for people of all incomes, provided that they have some savings or established equity in their home that they can use to fund the trust. There are many different kinds of trusts that can work for different situations.
Talking with an experienced estate planning attorney can help you determine what form of trust would work best in your situation. Once you decide on a form of trust, you can create it, find it and stop worrying about whether your assets will impact your ability to receive care as you age.