For many seniors, few things are more intimidating than the thought of a required stay in a nursing home. In addition to the high degree of emotional stress that going into a nursing home entails, there’s also the scary thought of the financial repercussions. A Milwaukee Journal Sentinel article from last spring reported that the average cost of a nursing home stay in Wisconsin was more than $42,000 per year, with that number skyrocketing to almost $97,000 for a private room.
One way for some people to avoid the enormous costs of a nursing home is Medicaid, but it too comes with its own set of complications, mostly related to the steps needed in order to qualify for benefits. It is essential, though, as you consider your estate plan in light of a possible need for Medicaid benefits, to have a clear understanding of how Medicaid eligibility will — or won’t — impact you.
Eligibility for Medicaid means, among other things, having a monthly income and total assets that are small enough to meet Medicaid’s financial eligibility standards. Some people can become eligible for Medicaid by divesting themselves of income or assets, also known as “spending down.” Spending down your assets typically does not mean selling your house, though. As long as you intend to return home, or your spouse or a family member dependent on you still lives in the house, you generally do not need to sell immediately, and can proceed with distributing your house upon death as part of your estate plan, whether through your will, living trust or transfer-on-death deed.
You also do not have sell all of your assets. Many assets do not count against you in terms of Medicaid qualification analysis, including some things that may be part of your estate plan. For example, you can prepay your funeral and final expenses. Also, you can create an irrevocable burial trust and fund it with up to $3,000 in assets without that money counting against you when you submit your financial information for Medicaid.
One other potential technique for Medicaid qualification is a gifting strategy. You may choose simply to give some of your assets to loved ones immediately, which may help you eventually qualify for Medicaid, once you clear a penalty period of time established in the Medicaid rules. If you seek to use such a plan, you should bear in mind the potential tax implications of your strategy and consider structuring your gifts into trusts, rather than making the gifts outright. This way, you can protect your loved one from the risks of bankruptcy divorce or other creditors.
With people living longer and longer lives, the likelihood of needing nursing home care at some point is at an all-time high. For many people, this means that the need for Medicaid assistance is also higher than ever. For thoughtful and carefully customized advice on how to craft or modify your estate plan should you need to apply for Medicaid, consult Madison estate planning attorney Daniel J. Krause of Krause Donovan Estate Law Partners, LLC. He can help create a plan, or alter your existing one, to meet your changing needs. Contact Attorney Daniel J. Krause today.
Reach us through our website or call our office at (608) 268-5751 to schedule your confidential, no obligation initial consultation.
No More Outright Distributions; Give Your Heirs Protected Assets, Wisconsin Probate & Estate Planning Blog, Nov. 14, 2013
It’s Not Too Late: Estate Planning and End-Stage Terminal Illness, Wisconsin Probate & Estate Planning Blog, Oct. 30, 2013
A Success Story in Estate Planning: Estate Plan Offers Major Benefits, Even Before Death, Wisconsin Probate & Estate Planning Blog, Sept. 23, 2013