Most people would be a bit confused, because Medicaid is a health insurance program for people with limited resources. Everyone knows that Medicare is the source of health insurance that the vast majority of senior citizens rely on.
This is a logical line of thinking, but the reason why Medicaid is important is because Medicare does not pay for a stay in a nursing home. Medicaid does cover the custodial care that nursing homes provide, and this is why it should be on your radar when you are looking ahead toward the future.
Let’s look at some important Medicaid facts and figures so you can come away with a basic understanding of this important subject.
There is a $2000 asset limit, but that does not tell the whole story. Some of the things that you own are not countable, and the most significant one is your home, but there is an equity limit. For 2021, the limit in Illinois is $603,000.
A motor vehicle that is used as a primary source of transportation is not counted, and furniture and other household items are not countable assets. Heirloom jewelry, wedding rings, engagement rings, and personal effects are not taken into consideration.
You can have a prepaid burial plot and up to $1500 set aside for final expenses. Unlimited term life insurance is allowed, but there is a $1500 limit on the value of a whole life insurance policy.
Allowances for the Healthy Spouse
In many instances, a married person will require nursing home care while their spouse is still capable of independent living. Under these circumstances, provisions are made for the healthy spouse.
There is no home equity limit when an independent spouse is remaining in the home, and they are entitled to two different allowances.
One of them is the Community Spouse Resource Allowance. This is half of the shared assets that are considered to be countable up to a certain limit. The limit in Illinois in 2021 is $109,560.
When a person is using Medicaid to pay for nursing home care, they are allotted a $30 monthly personal needs allowance. The rest of their income has to go toward the cost of the care that is being received.
This requirement is eased if the healthy spouse is relying on all or some of the income to maintain a reasonable standard of living. They can receive a Monthly Maintenance Needs Allowance, and the maximum amount they can qualify for is $2739.
Five-Year Look Back Period
You can divest yourself of personal possession of assets to qualify for Medicaid. If you fund an irrevocable Medicaid trust, you would not be able to touch the principal, but you could receive income from the trust’s earnings until and unless you apply for Medicaid.
Timing is the key to the proper execution of the strategy, because the funding must take place at least five years before you submit your application for Medicaid coverage.
Medicaid Estate Recovery
As we have stated, you can qualify for Medicaid if you are still in possession of the home. However, Medicaid is required to seek reimbursement from the estates of beneficiaries that were enrolled in the program.
After your death, the equity in your home could potentially be used to repay Medicaid for payments made for your care. You can take steps to avoid that repayment as part of your overall estate plan.
Schedule a Consultation Today!
We are here to help if you are ready to put a nursing home asset protection plan in place. You can send us a message to request a consultation appointment, and we can be reached by phone at 630-568-8611.
- It’s Important to Have a Coordinated Estate Plan - September 23, 2021
- Longevity Statistics Put Long-Term Care into Perspective - September 21, 2021
- Roth IRAs Can Be a Great Planning Strategy: Basics - September 16, 2021