The most significant elder law issue is the matter of long-term care and the Medicare gap. Nearly three-fourths of senior citizens will need help with their activities of daily living at some point. Over half of them will need professional assistance, and custodial care costs are very high.
Medicare does not cover this type of care, and this creates a challenging situation. Long-term care insurance is available, but when you take a long look at it, the value is questionable.
Rising Premiums
Long-term care insurance premiums are based on your age, your health, and your gender. It is less expensive when you are younger, but you are probably not going to think about the subject when you are in your 30s. Even if you did, it is very likely that you would be paying for a very long time before you have any chance of getting anything in return.
The American Association of Long-Term Care Insurance tells us that the average combined cost for a married couple that is 65 years of age is $3750 a year. That number will rise by between 4 percent and 6 percent annually while the couple is still in their 60s, and it will increase from there.
From the outset, you are acting with the knowledge that you will get absolutely nothing for your money if you never incur covered long-term care expenses. This dynamic is magnified by the elimination period that is included in every long-term care insurance policy.
If you finally file a claim that is covered under the terms, you will be forced to pay out-of-pocket until the elimination period expires. Depending on the policy details, it will be 30 days, 60 days, or 90 days.
Medicaid Planning
There is another type of insurance that you can rely on to pay for long-term care if you take the right steps in advance. Medicaid will cover custodial care, and you can gain eligibility if you have resources if you implement a nursing home asset protection plan.
Since it is a need-based program, you have to transfer assets out of your name, and there is a five-year look back period. You are ineligible for five years after you divest yourself of assets, and this is why you have to look ahead.
Giving your children inheritances in advance is obviously an option, but you may need the income that you are receiving from your invested assets. If you are in this situation, a Medicaid trust will provide the ideal solution.
You convey the income producing assets in the trust long before you would logically expect to require paid living assistance. After you fund the trust, you would no longer have access to the principal, but you would accept the earnings as usual.
During the funding process, you should consider the Medicaid estate recovery mandate. You can qualify if you own your own home, but the program will seek reimbursement from your estate after your death. If your home is part of your estate, it would not be protected under most circumstances.
As a response, you can transfer your home into the trust as well. You would still live in the home without interruption, so nothing would change. If you ultimately apply for Medicaid at least 60 months after you fund the trust, the strategy will succeed, and you will qualify for Medicaid.
Need Help Now?
If you have already decided that you should work with a North Aurora or Naperville, Illinois estate planning lawyer to put a plan in place, our doors are open. You can send us a message to request a consultation appointment, and we can be reached by phone at 630-568-8611.
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