In the "old" days, more often than not people used to die rather suddenly, either by keeling over from a heart attack or succumbing relatively quickly to a viral or bacterial infection or occupational injury. Today, with all of the advances that have been made in both so-called "modern" medicine and in understanding of holistic medicine, people are living much longer. Whereas we used to die before dementia set in, now we are dying well after that point. That means that many of us can expect to live out the last few years of our lives requiring some degree of assistance with the activities of daily living. Often members of our extended families are able to help for a while, but eventually the requirements exceed the capacity of one or even two family members and outside help is needed, up to and including placement in a skilled nursing facility aka nursing home.
Long-Term Care Costs
Nursing home and other long-term care costs can be very expensive and are not typically covered by Medicare or other traditional health insurance policies except for very short durations. As of this writing (2019), the national median cost for such care is more than $87,000 per year. Because Medicare and traditional health insurance do not cover most long-term care costs, they are generally paid for in one of three ways: (1) directly from your income and assets (self-insured); (2) long-term care insurance; or (3) Medicaid, and other public or private assistance programs. In some states Medicaid goes by a different name. In Arizona it is called Arizona Health Care Cost Containment System (AHCCCS). In California it is called MediCal. In Colorado it is called Health First Colorado. In Oregon it is called Oregon Health Plan (OHP). In Tennessee it is called Tenncare.
Assuming you meet the medical eligibility requirements (i.e., you prove that you really need physical help with a certain number of activities of daily living), to qualify for Medicaid coverage you must generally have assets of $2,000 or less. That's not much! Granted, some assets are not counted, such as the primary residence, one car, a prepaid funeral plan and a few other things, but those same items are often at risk of being taken by the state after you die to reimburse the state for the amounts it spent on your care, so the exemptions are only temporary. The rules on Medicaid recovery are very complicated and vary among the states.
One way to qualify for Medicaid coverage is to pay your nursing home or other long-term care costs from your income and assets until you have spent down to under $2,000 in assets. But this technique leaves little to nothing for your spouse, children or other intended beneficiaries.
For some people, dying broke is not the least bit worrying, either because they have more money than they can spend in a lifetime even if they end up in a nursing home, or because their actual strategy is to die broke. Some clients tell us that the bumper sticker on their RV says, "I am spending my grandchildren's inheritance." Others explain it by saying their plan is to die and have the last check they wrote bounce the next day. If your long-term plan is to "spend it all", then you can stop reading now. This article is not for you.
If, however, you are motivated to leave some kind of legacy for your children or grandchildren or both, then please do keep reading.
Medicaid Pre-Planning is a process of using legal techniques to transfer assets to your spouse or children or other beneficiaries, or to otherwise cause the assets to be exempt from consideration in qualifying for Medicaid. These techniques (1) preserve these assets for your heirs, (2) while allowing you to maintain a certain degree of control while you are still living, and (3) allow you to qualify for Medicaid coverage much sooner than if your assets were just spent down. The reason for wanting to qualify sooner rather than just spend your money on care until you run out is the private pay rate is usually substantially higher than the Medicaid-reimbursement rate, so it is a way of potentially minimizing Medicaid recovery after you pass.
But you don't want to wait until the last minute to do this. We can protect far more assets by planning at least five years in advance of the need for nursing home care, and pre-planning is a lot less expensive than last-minute scrambling (also called "crisis" planning). We get a lot of calls that go something like this: "We just placed mom in a nursing home and they are telling us she does not qualify for Medicaid. What can we do?" In most cases, there ARE things that we can do to get a person qualified at the last minute, but it is very time intensive (and, therefore, expensive), and the dollar value of assets that can be protected is considerably less than had the family planned ahead.
We can assess whether or not you would be likely to qualify for Medicaid in the event you had to spend time in a nursing home or otherwise need long-term care services (such as a care provider to assist you in your home) and, if you did qualify, to what extent the state would be able to recover against your assets when you die. If you are not likely to qualify, we can help you sort through whether long-term care insurance would be the best solution for you, or whether restructuring your assets using legal techniques would be the best solution, or perhaps a combination of both.