For Medicaid to Pay For Your LTC You Must Cash In Your Life Insurance & Go Broke

I was at a health fair yesterday, and was amazed at the level of optimism displayed.  One woman came by my table using a walker and said she had no need for LTC insurance as she was still healthy.  Another said she did not need care, yet, but would call me when she did.

It’s great to be an optimist.  It’s also good to plan ahead, but not everyone does.  In fact, those that do may be in the minority.  Thus I have strategies to help them when it’s too late for insurance. 

Several people approached me with stories of relatives who were entering a LTC facility soon.  They asked what I could do for them.  In many cases their assets are minimal so there is not a lot to work with.  To qualify for Medicaid they will spend all assets down to $2000 and cash in life insurance if the amount payable at death is over $1500.  When they die the state will recover from their $2000 of assets leaving virtually nothing to pay for their funeral (the $1500 of life insurance – if they have that – will not get them down below the frost line in Wisconsin). 

Thus, in many cases the only thing I can do to help is to set up an irrevocable burial trust.  Medicaid allows this up to $15,000 and it is not considered a divestment for Medicaid eligibility.  If they have this much or more in savings, they can rest assured that their children will not be left with their funeral bill.  If they do not do this, it is very likely their children will be paying for the funeral.  The ADRC (Aging and Disability Resource Center) people at this health fair said this bill commonly falls to the children when people did not plan ahead. 

If the person needing care has more funds than this, they can also set up irrevocable burial trusts for their children and the spouses of their children.  This is also not subject to the look-back and is not considered a divestment.  Thus with 3 children, all married, one can move $90,000 to family and still qualify for Medicaid. 

There is also a way to convert a sum of money into an income for life.  This is called an annuity and is a stream of income you cannot outlive.  Obviously the older you are, and the less life expectancy you have left, the larger the monthly income it can produce from the sum you have available. 

One annuity company will take health into consideration.  This means that if your health is worse than the “average” person of your chronological age, you can receive a significantly larger monthly income than a healthy person would from the same sum.  This becomes a LTC solution for those who did not plan ahead.

If you have a sum that will be spent down paying for LTC, leaving nothing behind for family, and could instead take just a portion and produce the needed income to pay for your care, wouldn’t that be a wonderful thing?  You can pay for your care, not have to spend down to Medicaid impoverishment, and leave funds for family too.

If you know someone facing a LTC situation, suggest they call Romeo Raabe, at (920) 884-3030 or (800) 219-9203 for help.

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