For many people, having a spouse require Long Term Care (LTC) in a facility is so expensive that it is unsustainable unless you purchased LTC insurance. Not everyone did or could, so what can you do?
Medicaid is usually the answer as it will pay for LTC once you are completely impoverished. For a single person, this means spending everything you have down to less than $2000 and cashing in your life insurance. You are allowed to retain $45/month from whatever income sources you might have and Medicaid makes up the shortfall to pay for the care.
Married people have it somewhat better because the at-home spouse can retain use of a home, a vehicle, some savings and income. However, estate recovery will return all remaining assets to Medicaid when the at-home spouse dies. This usually means no inheritance is left for children.
Medicaid does give us one tool that will allow some money to be left for family, whether you plan in advance, plan when entering care, or even once you have already spent down to Medicaid impoverishment. Let’s start with a single person…..
While life insurance generally must be cashed in if the death benefit is over $1500 (yes, one thousand five hundred dollars), Medicaid allows you to set aside money for funeral if it is in an irrevocable burial trust. In most states $15,000 can be moved into such a trust which allows your family to pay for funeral expenses without having to use their own credit cards.
It is also acceptable to establish such trusts for your children and your children’s spouses. A statement of goods and services must be obtained, but planners who work with LTC financing can help you obtain these. There is generally no cost or fees to establish these trusts. Obviously, this must be done before all available funds have been spent on care.
Now let’s address the married couple where one is in a LTC facility on Medicaid and the at-home spouse is living in the home (which will most likely be recovered against by Medicaid after death). Remember, the at-home spouse cannot gift assets away without causing Medicaid eligibility problems for self or the institutionalized spouse.
The at-home spouse cannot give this money away, but can establish irrevocable burial trusts for the two of them, their children, and their children’s spouses which is acceptable to Medicaid and is not a divestment which would cause eligibility problems.
If you are that at-home spouse you have two choices – leave the home equity to be recovered by Medicaid after death, or proactively accessing the home equity through a reverse mortgage and using those dollars to fund irrevocable burial trusts for children and their spouses.
For more information as well as a video explaining this in detail, visit www.TheLongTermCareGuy.com. The video is at the bottom of our home page. Or call us and schedule a meeting to learn what options you have to protect some funds for family.