Every 11 seconds, a Baby Boomer turns 60! So maybe they’ll spend a little less time on the Rollercoaster at the amusement park this summer. But the rollercoaster of finance is just beginning. Like everyone else, Boomers have their own financial ups and downs to consider as well as looking out for their children. But they also may have to think about their own Mom and Dads because elderly care cost can sure take you for a ride. The average cost of nursing home care runs around $70,000 per year, and Medicaid pays nursing home bills for individuals who qualify based on certain income and asset guidelines. Those who have saved and planned their whole lives for retirement and leaving an inheritance for their families are often dismayed to find that their assets must be basically used up to pay their nursing home expenses before they are entitled to receive any kind of assistance from Medicaid. Those who have not planned and saved, or have not had the ability to, are eligible for immediate assistance. Because many savers would prefer that their family get their inheritance - instead of the nursing home - they often plan accordingly, and start gifting money to family members before the need for nursing home care arises.
Many individuals, expecting even a modest inheritance, too often watch the money quickly disappear. And recent changes in the law can make it more difficult to qualify for Medicaid. The good news? With a little knowledge, you can act now to protect yourself and your family before it’s too late.
First, Medicaid has always had a “look-back” period, where they literally look back a certain number of years at gifts made to family in particular, knowing that this may have been done so to remove assets, and therefore to qualify for Medicaid assistance earlier. The time frame used to be a “look-back” has now been extended to five years. So if nursing home care is needed within five years of giving a gift, proof may be required to show that at the time of giving the gift, the donor was in excellent health, and was not giving the gift with the express intention of transferring assets to avoid paying nursing home expenses. If the individual is unable to prove this, the asset will be counted towards a waiting period until Medicaid assistance can be received. For example, if a father gives his daughter a $50,000 gift and subsequently needs nursing home care, expected to cost $5000 per month, the waiting period would be ten months before any Medicaid could be received…even if the gift money is long spent and gone. Worse yet, the waiting period clock used to start “ticking” at the time the gift was given - but it now starts ticking at the time Medicaid is applied for. If the father is in immediate need of medical care, this could present some very serious problems.
Next, the equity in your home will come under scrutiny…and if you have more than $500,000 equity in your home, you will be ineligible for nursing home coverage from Medicaid. States have the ability to raise the limit to $750,000 - but it has been questioned why any state would make this decision, since it would result in higher Medicaid costs for the state. Since many Americans strive to pay off their home by retirement age, this could impact many people who are simply unaware of the rules. What can you do, to protect yourself and your loved ones?
Be informed and plan now. For more information, visit www.elderlawanswers.com, or the Kaiser Family Foundation information site at www.kff.org. New strategies may need to be developed for your retirement, including not leaving equity trapped in your home where it could work against you for retirement assistance. Many are reconsidering the wisdom of having a home paid for in full, and are planning to instead leverage the equity via a refinance into a financial plan that works for them, not against them. Because the new laws are so complex, it’s always best to consult a financial professional as to the best plan for your own retirement, or that of your loved ones. Please call me if I might provide a referral to a quality financial advisor, to help walk you through how the new regulations might impact you…and what you should be doing now to prepare.
