There are some elder law and estate planning misconceptions that arise out of a misreading of incomplete information. This can definitely enter the picture when it comes to the Medicaid parameters, and we will provide some clarity about home ownership in this post.
Why Is Medicaid Relevant?
Most people become eligible for Medicare when they are 65 years of age, so you may wonder why a senior citizen should care about Medicaid.
The reason why it is important is because Medicaid will pay for a stay in a nursing home. There is also a Medicaid waiver that will cover in-home care that is provided by a licensed health aide.
Medicare will not cover custodial care, and as a result, most seniors in nursing homes are Medicaid beneficiaries.
Medicaid Eligibility Requirements
Since Medicaid is a program that is designed to provide a health insurance safety net for people with sparse resources, there is a $2000 asset limit. This is a paltry number all things considered, but some assets do not count.
The home is not a countable asset, but there is a $603,000 equity limit in Illinois in 2021. Personal belongings and household items are not counted, and you can have one motor vehicle. Heirloom jewelry, wedding rings, and engagement rings are not countable assets.
Medicaid allows up to $5000 of whole life insurance and the same amount saved for final expenses. Unlimited term life is exempt, and the program will not count prepaid burial plots.
Medicaid Estate Recovery
Now that we have provided the necessary background information, we can dig into the point of this post. Medicaid is required to seek reimbursement from the estates of beneficiaries after they pass away.
Since the only asset of significant value that you can retain is your home, this would be the target in most instances. If you are in direct possession of a home at the time of your death, Medicaid could place a lien on the property.
Five-Year Look Back Period
You could fund an irrevocable, income only Medicaid trust with countable assets in an effort to prepare yourself for future eligibility. Your home could be signed over to the trust, and it would be protected during the Medicaid recovery phase.
Plus, you would be able to receive distributions of income that is generated by income-producing assets in the trust, but you would surrender access to the principal.
The tricky part is the fact that you cannot fund the trust today and become eligible for Medicaid next week. There is a five-year look back period, so the trust must be funded at least five years before you submit your application for Medicaid coverage.
If you violate the rule, your eligibility is delayed for a period of time that is based on the amount of long-term care that the divestiture would have covered.
Caregiver Child Exemption
There is an exception to this rule in the form of the caregiver Child exemption. To explain through the use of an example, let’s say that your son moves into your home to provide the care that you need. If he did not do this, you would be forced to move into a nursing home.
Under these circumstances, if he provides care for at least two years, you could use the caregiver child exemption to give the home to your son. The five-year look back period would not apply, and the home would be protected during the Medicaid estate recovery phase.
Schedule a Consultation Today!
As you can see, long-term care costs can potentially consume a significant portion of your legacy if you are unprepared.
We can help you devise a nursing home asset protection plan that will allow you to live in comfort during your golden years secure in the knowledge that your legacy is protected.
You can schedule a consultation appointment at our Naperville, Illinois elder care planning office if you call us at 630-568-8611. There is also a contact form on this site you can use to send us a message, and if you reach out electronically, you will receive a prompt response.