Even if you’re healthy now, there’s a strong chance that you’re going to need long-term care at some point in the future. In fact, some studies have shown that as many as 70% of those age 65 and older will need some sort of long-term care in their lifetime.
This care can be extraordinarily expensive, too, quickly eating away at the wealth that you’ve worked hard to accumulate. And if you don’t work to protect your assets, then your long-term care can prevent you from leaving assets to your loved ones, thereby disrupting the initial vision of your estate plan.
Fortunately, you don’t have to let that happen. You can engage in thorough estate planning that allows you to protect your assets for your loved ones’ use while still securing the support you need to pay for your long-term care. But how do you do that? Let’s take a closer look to get you started.
Estate planning to protect your long-term care needs
You have a lot of estate planning options. But if you want to shield your assets while protecting your ability to secure funding for long-term care, then you need to exercise care. One way to do that is to reduce your assets to the point that you qualify for Medicaid. Here are some ways to do that:
- Spend down assets: Medicaid has a five-year lookback period. This means when you apply for Medicaid coverage, the government is going to look at your assets and financial transactions to see if you just quickly and recently got rid of assets to meet eligibility requirements. If they find that you did so during the five years proceeding your application, then you’ll likely be denied coverage. If you can spend down your assets prior to the five-year lookback period, though, then you’re more likely to be in the clear for coverage purposes.
- Use a Medicaid asset protection trust: This trust allows you to remove assets from Medicaid eligibility considerations while still protecting them. For example, if you place your residence in the trust, then ownership will transfer over to the trust, but you’ll still be able to reside in the home. Some assets aren’t transferrable to this type of trust, though, so you may have to liquidate some of them to properly fund the trust. Just keep in mind that this type of trust is irrevocable, meaning that you can’t remove assets from the trust once they’re placed inside of it.
- Use long-term care insurance: A long-term care insurance policy might be able to help you cover some of the expenses that you experience from a nursing home or other long-term care stay, but there are a lot of nuances to these types of policies. So, be sure to have a full understanding of what your policy can and can’t do for you.
- Utilize an annuity: Through an annuity, you receive regular payments based on a premium that you’ve paid. Because you reduced your assets by paying the premium, you might then qualify for Medicaid given that the periodic payments received through the annuity will be spaced out enough so as to not impact your eligibility.
Figure out the best way to protect your potential need for long-term care
There’s a lot that goes into the estate planning and long-term care planning process. And you have to competently navigate all aspects of your plan if you want to protect your access to needed healthcare and shield your assets for your loved ones’ benefit. If you need help figuring out the best way to do that in your unique set of circumstances, then now is the time to get to work learning more about the process and the tools available to you.