Financial and estate pre-planning serves the obvious purpose of passing on your financial legacy to your loved ones and facilitating the easy transfer of assets upon death. While this is an admirable objective, pre-planning serves a higher purpose than simply designating the recipient of your assets. Pre-planning is essential to protecting your hard-earned wealth from the inevitable costs of aging and long-term care. In 2010, the United States spent a total of $207.9 billion on long-term care. Long-term care includes nursing home facilities, assisted living facilities, home care, and any incidental medical costs. As the U.S. population ages, there is a rising demand for long-term care and a growing question of who will provide it and how people will pay for it. In a 2017 survey on the expectations of who would provide long-term care, statistics showed that 47% of U.S. adults believed they would receive care from their spouse in their old age. An additional 26% of U.S. adults believed they would receive care from their children. These expectations, while not uncommon, rarely come to fruition. Often, an aging individual is unable to adequately meet the care needs of his or her dependent spouse. Likewise, children who often have jobs and families of their own, do not have the time, resources, or skills necessary to provide aging parents with long-term care. In light of this reality, many aging individuals end up in facilities with little or no pre-planning, and likewise are paying out of pocket for their care.
The big question is: how do we protect our assets and plan for the future? The answer is two-fold. First, you may qualify for a Long-Term-Care Insurance (LTCI) policy, which is a policy that pays for long-term care if needed and often offers flexibility on the types of care it will cover. The catch is that most policies have an extensive underwriting process with strict automatic disqualifications and are only reserved for healthy individuals under a certain age (often the cap is 80 years old). Therefore, in order to incorporate LTCI into your pre-planning strategy, it is important to have the conversation with your estate planning attorney early regarding your pre-planning options.
One of the best ways to protect your assets from long-term-care costs is to create an asset protection trust with your estate planning attorney. The trust serves a dual purpose. First, as stated above, it helps facilitate asset transfers and determines asset beneficiaries upon death. Second, once your assets have been transferred into the trust, they begin a 5-year-look-back period for Medicaid qualification purposes. The goal of an asset protection trust is to transfer countable assets to the trust five years in advance of needing care and applying for Medicaid benefits should long-term care be needed. After an asset has been in the trust for five years, it no longer counts as an asset you need to spend down for Medicaid qualification, thus you can apply for Medicaid to pay for your care costs. While the length of time an asset has been in the trust is prorated in the event you need care before you have made it the five years (a portion will be asset protected for Medicaid), optimal pre-planning often incorporates both an asset protection trust and LTCI policy. In the event you have not made it to five years, the LTCI policy would help cover the interim care costs to eventually apply and qualify for Medicaid.
Pre-planning is crucial if you wish to optimally protect your assets from the risk of needing long-term care. It helps you protect your financial legacy while affording you the care you may need in the future. The experienced team at Hildebrand Law Firm can assist you with your pre-planning needs and provide you with the best options for asset protection and Medicaid qualification.
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