Most people hope to remain healthy as they age. Some people take extraordinary measures during their earlier years to improve their chances of health and longevity. However, many people find that those hopes aren’t based in reality.

Whether you have a family history of degenerative conditions like Alzheimer’s disease or simply experience rapid physical and mental decline in your later years, you may not have the best health after retirement. While it makes sense to hope for the best case scenario, you should also plan for the worst possible outcome.

There is the potential, regardless of the size of your family or the size of your estate, that you will wind up needing in-home nursing care or residential care at a nursing home later in life. If that occurs, you cannot rely on Medicare to cover those expenses. Instead, you must either pay for those medical costs yourself or qualify for Medicaid.

Advance planning can help individuals qualify for Medicaid when they need it

Medicaid provides medical coverage for individuals without substantial assets or income. It will cover inpatient care at a nursing home or rehabilitation facility. However, to receive those benefits, individuals must meet the income and asset requirements for Medicaid.

Some individuals attempt to qualify for Medicaid by giving assets away to their loved ones. In order to catch those abusing the system, Medicaid will look back at five years of your financial history. Any gifts or transfers that occurred during those five years will result in a penalty of the same amount that you must pay before receiving Medicaid benefits.

Additionally, there is the concern that you no longer have control over those assets, as you gave them away to others. A trust created and funded at least five years before your Medicaid application can provide the ability to qualify without the risk of giving away all of your wealth or possessions.

Trusts become the owners of the assets they hold

A trust is a legal construct that has many of the same rights as an individual. A trust can own possessions, including real estate. When you fund your trust, you transfer items that you owned into the trust’s possession.

As with other gifts, the assets placed in a trust are subject to a five-year look-back term. Creating the trust at least five years before you think you will need Medicaid assistance is the only way to avoid potential penalties.

Trusts offer other benefits, such as the ability of your estate to avoid probate when you die and less liability for estate taxes for those who have sizable estates. Sitting down to talk about your circumstances and your financial means with a New York attorney who has experience with long-term care planning can maximize the benefits you receive as you age.