Elder law attorneys help clients who are concerned about senior issues, and long-term care costs are at the top of the list. Most of the senior citizens in our country will need living assistance eventually, and it is very expensive.
We practice in the state of Pennsylvania, and in our state, the median annual cost for a private room in a nursing home is over $107,000. A semi-private room comes with an annual charge in excess of $99,000 according to a Genworth Financial survey.
If you spend a few years in a nursing home toward the end of your life, you can see that the costs could be considerable.
You may assume that Medicare is the solution, but in fact, Medicare does not pay for long-term care. Help with your activities of daily living is considered to be custodial care. Medicare will pay for up to 100 days of convalescent care, but it doesn’t cover custodial care at all.
What’s the Solution?
If you need long-term care, how can you pay for it without losing everything that you intended to leave behind to your loved ones? For most people, the answer is Medicaid.
You are probably aware of the fact that Medicaid is a health insurance program that is run by the state along with the federal government. This program is in place to help people who are financially needy. Because it is need-based, there are asset and income limits.
A logical thought is probably going to come to your mind: If you need long-term care, you can give your children their inheritances in advance. You will then have little left in your own name, and you can qualify for Medicaid.
Five-Year Look-Back Period
This make sense on the surface, but the powers that be don’t want you to be able to take this route. As a result, they have implemented a five-year look-back period.
If you apply for Medicaid to pay for long-term care, program evaluators will take a look at your financial transactions. They will go back five years, and if they find that you have given away assets within this five year period, your Medicaid application will be denied.
A penalty would be imposed. The duration of the penalty would be determined based on the amount of the divestitures.
For example, to use a round number, let’s say that the average cost for a room in a nursing home is $100,000 a year. Under this hypothetical scenario, you gave away $300,000 during this five-year interim.
Since $300,000 would pay for three years of nursing home care, your eligibility would be delayed by three years.
Medicaid Planning Report
We have answered a single question in this post, but there is a lot to know if you are interested in future Medicaid coverage. If you would like to learn more, download our special report.
The report is free to our readers, and you can get your copy through this page: Bucks County PA Medicaid Planning.
Latest posts by Marianne Flood, Estate Planning Attorney (see all)
- What Is a Qualified Personal Residence Trust? - July 24, 2015
- Will Medicaid Take My Home? - July 22, 2015
- 2015 Estate Tax Exclusion Adjustment Released By IRS - July 18, 2015