When you are preparing for the expenses that you may face toward the end of your life, you should include potential long-term care costs. Medicare does not pay for living assistance, and most people will need help with their activities of daily living before everything is said and done.
Since long-term care is prohibitively expensive for most people, you need to look for a solution. For many, the answer is Medicaid.
Most people are aware of the fact that Medicaid is a state/federal government program that exists to provide a health care insurance safety net for low income people. This program will pay for long-term care.
Many seniors who were never needy give assets to their loved one so that they can obtain Medicaid coverage. This is called a Medicaid spend down.
To get assets out of your own name, you could give direct gifts to your heirs, but you could alternately convey assets into a Medicaid trust.
Revocable vs. Irrevocable Trusts
There are revocable trusts, and there are trusts that cannot be revoked or rescinded. If you were to create a revocable trust, you would be able to dissolve the trust and walk away with the resources. Because you would retain this level of control, assets that were conveyed into a revocable trust would be counted when Medicaid was determining your eligibility.
As a result, a revocable trust would not be useful for Medicaid planning purposes.
A Medicaid trust would be an irrevocable trust. You are surrendering incidents of ownership when you convey assets into an irrevocable Medicaid trust. Since you would no longer control the resources, the assets would not be counted by the Medicaid program when your eligibility status was being determined.
You cannot revoke this type of trust, so you could not change your mind and take back the assets, even if you never need long-term care.
However, many people use income-only Medicaid trusts. When you create and fund this type of trust, you are surrendering control of the principal. You cannot take back the resources, but you can receive ongoing income from the earnings of the trust.
The bad news is that the income would go toward the cost of your long-term care if you were to qualify for Medicaid at some point in time.
Medicaid Planning Report
Medicaid pays for most of the long-term care that is received by seniors in the United States. If you can qualify at the right time, you can keep a significant store of resources in your family.
We have prepared an in-depth report that will provide you with a comprehensive understanding of the Medicaid program as it applies to seniors who need long-term care.
This report is being offered free of charge at the present time, and you can visit this page to access your copy: Bucks County PA Medicaid Planning.
Marianne Flood, Estate Planning Attorney
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