When you have been self-sufficient throughout your life, it’s hard to imagine a time when you will no longer be able to handle your activities of daily living on your own. However, if you digest a few statistics, a compelling picture starts to come into focus.
The Social Security Administration has a life expectancy calculator on their website. If you plug in the numbers for a woman that is turning 67 today, the life expectancy is 87 years, and it is 85 years for a man.
Life can be very different when you are an octogenarian. According to the Alzheimer’s Association, over 30 percent of the oldest old have contracted the disease. This is not the only cause of cognitive impairment, and other health challenges can limit your independence.
The United States Department of Health and Human Services tells us that 52 percent of seniors will need some type of paid long-term care eventually. Since Medicare is a health insurance program for elders, you would assume that it would cover custodial care since so many seniors will need it.
Unfortunately, Medicare will not cover a stay in a nursing home, and it does not pay for in-home care that is provided by a professional health aide.
The State of Long-Term Care Costs
It would be difficult for most people to pay for long-term care out of their own pockets because the costs are quite high, and they have been rising. Genworth Financial sells financial products for seniors, so they keep a finger on the pulse of the ongoing state of long-term care costs.
They have found that the median annual charge for an in-home health aide in the Troy, Michigan area in 2020 was $59,488. For a semi-private room in a nursing home, the median cost was $105,850, and the figure was $127,750 for a private room.
The average length of stay is 12 months, and 13 percent of seniors that require paid care receive the assistance for more than five years.
All this may sound a bit disconcerting, but there is a widely embraced solution the form of the Medicaid program. It will cover long-term care if you can gain eligibility, but it is only available to people with limited financial resources.
There is a $2000 limit on assets, but your home is exempt if you are a homeowner with an equity limit of $603,000 in 2021. Wedding rings, engagement rings, and heirloom jewelry are not counted, and one motor vehicle is permitted.
A healthy spouse that is going to live independently while their spouse is entering a nursing home is entitled to a Community Spouse Resource Allowance. This is half of the countable assets, but there is a limit that stands at $130,380 this year.
There is also a minimum allowance of $26,076. A healthy spouse can keep this much even if it is more than half of the countable assets.
Income that is brought in by the institutionalized spouse must be contributed toward the cost of the care, but this requirement is waived if a healthy spouse needs the money.
They can receive the income in the form of a Monthly Maintenance Needs Allowance, and the maximum allowance this year is $3259.50. The minimum allowance is $2155.
Five-Year Look Back Period and Medicaid Estate Recovery
There is a Medicaid estate recovery mandate, so the program is required to seek reimbursement from your estate after you pass away. If you are in direct possession of your home at that time, they can place a lien on the property.
To prevent this, you can convey your home and other assets into an irrevocable, income only Medicaid trust. The principal would no longer be accessible to you, but you could accept distributions of the trust’s earnings until you apply for Medicaid.
This can be a very effective strategy, but advance planning is key, because you have to fund the trust at least five years before you apply for Medicaid coverage.
Schedule a Consultation Today!
We are here to help if you are ready to work with a Troy, MI estate planning lawyer to put a plan in place. You can send us a message to set up a consultation appointment, and we can be reached by phone at 248-251-1001.