Wouldn’t it be great to have a crystal ball that could indicate what the future has in store? Of course, none of us has that luxury. Maybe that’s a good thing in some circumstances, but knowing what the future holds for our health and finances would be useful.
One of the biggest unknowns about aging is whether or not long-term care services will be needed. There are no guarantees. However, according to a recent study, more than 40 percent of people who reach age 65 will need nursing home care. And, in the event care is needed, it’s not cheap; the average cost of care in a long-term care facility in New Jersey can exceed $65,000 per year, for an average stay of 2 1/2 years.
Paying for Long-Term Care
When it comes to paying for that care, most of us haven’t set aside that kind of money to be used for health care. The idea of the assets we’ve accumulated over a lifetime of hard work being spent for health care in our senior years is sobering.
Insurance
Purchasing long-term care insurance while still relatively young and healthy is one option. With long-term care coverage, an insurance policy would kick in to provide payment according to the terms of the policy, so a senior wouldn’t need to spend their life savings on nursing home care. Unfortunately, pre-existing conditions can disqualify an applicant from being able to purchase insurance coverage, putting them back at square one.
Medicaid
New Jersey seniors who qualify for Medicaid can rely on that coverage to pay for long-term care expenses. Unfortunately, the problem is that qualifying for Medicaid isn’t easy. Applicants must meet the program’s strict income and asset limits; essentially, a senior’s own assets must be used to pay for care until those assets dip below the Medicaid limits – currently $2,000 ($3,000 for a couple.) Certain assets are exempt, and there are certain other exceptions, but in general, it is safe to say that seniors planning to rely on Medicaid for long-term care expenses must have very few available assets in their names.
The Importance of Planning Ahead
Waiting to explore Medicaid planning until care is actually needed is probably too late. Because Medicaid is designed as a safety net for impoverished seniors, people who give away their assets shortly before applying for care will not be eligible.
When someone applies for Medicaid to cover their long-term care expenses, the state will review the assets that person owned and transactions made over the previous five years (60 months) to identify whether anything was given away or sold for less than fair value.
For seniors and their family members who plan ahead, there may be options available to protect a nest egg and ensure legacy gifts and inheritances can be provided, even if long-term care services are later needed. One of those options is to establish an irrevocable trust and transfer assets into that trust. With this option, someone else has complete control over managing the assets; the original owner cannot exert any control over them. When this is done properly, and when it’s done at least five years before the transferor needs to apply for Medicaid, the assets should be protected and the senior can qualify for Medicaid faster than they otherwise would have.
These types of decisions are always specific to each individual’s financial picture and goals. There are no one-size-fits-all solutions, but an elder law attorney can help identify, discuss and implement various options. In the absence of a crystal ball, the key is starting this planning as early as possible.
LTLA’s Elder Law Attorney Can Help
At the Long Term Living Association (LTLA), we can’t predict the future either, but we can help you plan for what might happen. To learn more about how our Certified Elder Law Attorney can help, and to get started with Medicaid planning for yourself or for an aging family member, call us at 1-800-868-1193 today.
Our Elder Law and Estate Planning Specialist
Eric Goldberg
