Tools for Planning Finances for Long Term Care


Many of us put off addressing concerns about planning for long term care for our parents and making plans for our own later year.  Because of the costs which range easily from $3000 to $12000 per month as well as today’s extended life expectancy, many have to resort eventually, if not initially to government programs to assist in paying for extended care.  The upside is that the help is there.  The downside is that you have to deplete all of your assets to qualify for the greater share of extended care benefits.    A few things may help
Medicaid Trusts:

There are a couple of planning tools which you can utilize to help maintain some of the family’s assets when taking advantage of government long term care programs.     One of the most common is referred to as a “Medicaid trust”.     This is an irrevocable trust that is created to hold assets of the person receiving benefits.  They generally provide that the person retains the right to receive income from the assets during their life.
There are several drawbacks to this type of trust.  First, it is irrevocable, meaning that once it is created the person has no ability to revoke the trust or get back his or her assets.  Second,  the person cannot have access to the principal, nor can it be used for their or their spouse’s benefit.   Only the income is available to them.   The trust is administered by a trustee that is selected when the trust is set up.     This type of trust may also be set up within a will as a testamentary trust if there is a need for one spouse to provide for long term care of the other spouse.  Third,  the use of an irrevocable trust by definition includes the transfer of assets into the trust which creates this drawback.   These government programs have a five year “look back” period meaning that they will consider any transfers or gifts made by the person during five years prior the claim for benefits as being part of the persons assets which have to be expended before benefits become available.
The idea in planning is to set these trusts up when there is an expectation that there will be at least five years before the benefits are needed,   often not an easy decision.


Caregiver Child Exemption:

There is another tool which can be used to reduce the size of the persons estate who will be seeking these types of benefits and which is an exception to the Medicaid 5-year look back rule.   The Caregiver Child Exemption allows the home to be transferred to an adult child who cares for their parents at home as opposed to moving them to a nursing home.  In order to qualify for this exemption, the caregiver child must have lived in the home and provided a level of care for their aging parent for a period of two years immediately prior to the parent’s admittance to nursing care.
Because of the time constraints and the look back period, these tools may not always be available but they can be extremely beneficial to those who can use them.

by  Perry Douglas West, Esq.