Planning for Long-Term Care
One of the most significant concerns expressed by many of our clients is the unknown cost of healthcare during retirement. In addition to the price of basic healthcare, it’s the variable cost of long-term care, should the need arise, that can be difficult to plan for.
The inability to quantify the extent and expense of long-term care essentially creates a moving target in the planning process.
The cost of health care has risen dramatically in recent years due to increased longevity (meaning extended continuing care), the high price tag associated with technology in healthcare, and the bureaucratic process of reimbursement and claim handling.
Because healthcare costs can be a potential threat to a retiree’s estate – Long-term care planning is an essential part of our estate planning and financial planning conversations.
When the need for extended long-term care services arises, we must look towards the options of self-funding, drawing from an existing long-term care policy, and as a last resort, Medicaid.
Long-term care insurance is designed to help pay for an individual’s long-term care expenses. Depending on the plan you choose, it may pay for a portion or all of your care.
Additionally, a long-term care policy could potentially be leveraged in conjunction with Medicaid benefits, as long as all Medicaid requirements are satisfied.
Recently, I met with a client and an experienced Elder Law attorney who assists with Medicaid planning strategies, as well as, the Medicaid application process.
Medicaid is the most extensive public payer of long-term care services. Considering it is a joint federal and state public assistance program, the rules and benefits often vary by state.
Typically, eligibility is based on two types of requirements – general and financial. Once qualified, there are additional functional requirements to meet in order to be eligible for long-term care services.
Due to stringent financial requirements for eligibility, the Medicaid application process requires a five-year look-back on financials.
Most gifts or transfers of assets made within five years of applying for long-term care are presumed to be an attempt just to qualify. Actions such as this will trigger a period of ineligibility on the theory that those assets could have been used to pay for the individuals care.
It is important to note that not all transfers trigger a period of ineligibility. Due to changes in Medicaid laws, there are various exceptions to the rule, and certain assets that can transfer without penalty.
There is an entire legal specialty that focuses on providing older Americans with help and support as it relates to Medicaid planning.
While we may not be able to control the unforeseen, we can implement strategies to lessen the economic impact of the unknown. Through collaborative planning, we can work together to create a plan long before the potential need arises.