Don’t Let Long-Term Care Drain Your Estate

Growing old is not cheap. As of the date of publication, the average cost of a private room in a skilled nursing facility in Missouri is roughly $7,400 per month. And that’s just for skilled nursing care; many seniors may opt for assisted living or in-home care before reaching the point of needing nursing care. Given these astronomical costs, early planning for long-term care is essential to protect seniors’ assets and quality of life. Our Springfield long-term care attorneys assist our clients with protecting both. 

Options for Paying for Long-Term Care 

Seniors have a variety of options available to them when it comes to paying for long-term care, each with its own benefits and drawbacks. Some of the most common options include: 

Paying Out of Pocket 

Paying for long-term care out of pocket is the simplest and most straightforward option, requiring the least amount of legal and financial strategizing. Of course, it’s also the most expensive and poses the greatest risk of draining your estate. As such, it’s not an ideal option for most seniors. 

Long-Term Care Insurance

Long-term care insurance is an increasingly common method of paying for long-term care and offers a very effective bulwark against depletion of your estate. Many insurers offer versatile policies that allow insureds to customize their coverage to meet their specific needs, providing peace of mind that they will be covered in the event of a claim. However, long-term insurance premiums can be costly, potentially even increasing over time, and not all policies cover all needs. 

Medicare 

A common misconception in the long-term care planning space is that Medicare covers the full costs of such care. Unfortunately, that is not the case. While Medicare covers short-term stays in skilled nursing facilities, it does not cover stays lasting longer than 100 days, making it a poor option to finance long-term care. 

Medicaid 

Medicaid (known as “MO HealthNet” in Missouri) covers long-term care for qualifying recipients, including nursing home care, in-home health aides, adult day care, and assisted living services. That’s the good news. The bad news is that Medicaid is only available to seniors with incomes below a certain level. If your income is above that level, you may qualify for Medicaid only if you “send down” any income in excess of the program limit. However, seniors have certain strategies available to protect their assets while maintaining eligibility for Medicaid (more on that below). 

Many seniors opt to use a combination of the above methods, as well as a few not covered in this discussion. However, when you work with our Springfield long-term care attorneys, we will help you craft a long-term care strategy using a variety of methods that maximize benefits while minimizing burdens. 

Long-Term Care Asset Protection Strategies 

For many seniors, the most effective way to pay for long-term care is by using Medicaid paired with one or more wealth protection strategies, such as: 

Medicaid Asset Protection Trusts

As we mentioned above, Medicaid is income-restricted. To determine eligibility, Medicaid considers both an applicant’s income (i.e., wages from a job, income earned from investments, Social Security benefits, etc.) and their assets (i.e., investments, real estate, vehicles, personal effects, etc.). One of the most popular ways to minimize countable assets is to transfer them into an irrevocable trust, specifically a Medicaid Asset Protection Trust (MAPT). When a grantor transfers assets into an irrevocable trust, they are no longer considered the grantor’s property, but the property of the trust. Therefore, such assets generally are no longer countable for Medicaid eligibility purposes. 

However, the five-year look-back period is a major caveat to MAPTs. Under this rule, Medicaid examines an applicant’s financial history for the five years preceding their application and penalizes them for any assets transferred or gifted during that period. As such, individuals who wish to take full advantage of MAPTs should start the planning process well in advance of needing long-term care. For more information about the benefits of MAPTs and irrevocable trusts generally, please contact a Springfield long-term care attorney. 

Life Estates 

A life estate is a type of joint property ownership in which one person is granted the right to the possession of real property until their death, after which the property transfers in full to another designated person. Not only does this arrangement allow the property to avoid probate, but it also exempts it from Missouri’s Medicaid estate recovery program under which MO HealthNet is required to attempt to recoup the cost of Medicaid services from a deceased person’s estate. Keep in mind, however, that the five-year look-back period also applies to life estates. 

Long-Term Care Partnership Policies 

Missouri’s long-term care partnership program enables individuals to purchase qualified long-term care insurance policies that provide additional asset protection. Generally, the way it works is that every dollar the policy pays in benefits allows the insured to keep a matching dollar of their own assets and still qualify for Medicaid. For example, assume that a policy pays out $150,000. At a later date, the insured needs more care and applies for Medicaid. Medicaid would then disregard $150,000 of assets beyond the normal Medicaid asset limit. 

Strategic Gifting 

One of the simplest ways to maintain Medicaid eligibility while preserving assets for your heirs is through strategic gifting. The goal of this strategy is to lower countable resources without sacrificing a family’s ability to pass wealth to the next generation. Again, however, the five-year look-back period also applies to gifts (although some transfers are exempt). Individuals wishing to use this strategy should thus plan ahead to avoid penalties. 

Protect Your Estate With Help From a Springfield Long-Term Care Attorney 

Early planning can help preserve both quality of care and family wealth. However, long-term care planning can be complex, and an effective long-term care strategy must be tailored to the individual’s unique circumstances. For more information about planning for long-term care while preserving your assets, please contact a Springfield long-term care attorney at the LifeGen Law Group by calling 417-823-9898 or using our online contact form.