Long-Term Care and Medicaid Planning

Long-term care planning principally requires preparing for the possibility that a person will need nursing home care for an extended period of time. One aspect of long-term care planning has been Medicaid planning which seeks to preserve an elderly person’s wealth for heirs by qualifying the person for public benefits.

(PRWEB) July 8, 2006 -- Long-term care planning principally requires preparing for the possibility that a person will need nursing home care for an extended period of time. One aspect of long-term care planning has been Medicaid planning which seeks to preserve an elderly person’s wealth for heirs by qualifying the person for public benefits. Typically, an elderly person achieves eligibility for Medical Assistance by transferring assets to family members and by spending down resources until reaching the level the law defines as destitution.

In the past, the law required a look back period of 36 months for transfers for less than fair market value and 60 months for transfers to certain trusts. This look back period required a period of ineligibility for Medical Assistance to the extent of the property transferred. Thus, if the elderly person transferred $60,000 and if the average cost of the nursing home in that state is $5,000 per month, the person was ineligible for Medical Assistance for 12 months.

Due to the changes brought about by the Deficit Reduction Act of 2005, the look back period has been increased to 60 months for all such transfers. This change is part of the continuing effort by Congress to eliminate Medicaid planning opportunities for the elderly. Generally, lawmakers perceive that Medicaid planning involves an abusive shifting of long-term care costs to taxpayers. In addition to the extension of the look back period, Congress eliminated some particular techniques used in the past by persons engaged in Medicaid planning. For example, in the past, an elderly person in need of nursing home care could preserve income for a spouse by purchasing an annuity. Under the new law, the income from an annuity can now be taken into consideration as a resource that will disqualify a person for Medical Assistance.    

One change in the law has provided an additional reason for considering the purchase of long-term care insurance. The Deficit Reduction Act now allows states to disregard the insurance benefits that an individual will receive under a long-term care insurance policy. In other words, there will not be a period of ineligibility due to the long-term care policy. A long-term care policy, therefore, may facilitate some Medicaid planning, because a person could obtain a policy that pays benefits for the five years of the look back period and can transfer other assets to heirs. If the individual needs nursing home care longer than the five years, Medicaid will then be available.

Long-term care insurance is becoming increasingly popular due to the rising costs of nursing care. The average cost of nursing home care is $62,000 per year. A person will stay on average about 2 1/2 years in a nursing home, and about 10% of nursing home residents stay more than 4 years. If an individual has income and assets adequate to pay the approximately $150,000 for 2 1/2 years of nursing home care, then insurance may be unnecessary. If an individual is unable to set aside this much for long-term care, then long-term care insurance should be considered. In addition, long-term care insurance can increase an individual’s choices for nursing homes, because nursing homes can refuse to admit persons who will depend on Medicaid for payment of care.

To register for the November 2006 CFP® Certification Examination, please go to the CFP Board’s website at www.CFP.net.

If you would like to purchase study materials to help you prepare for the exam, please go to Keir Educational Resource’s website at www.keirsuccess.com or call Keir toll free at 800-795-5347.

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