Qualify for Medicaid without reducing your net worth

People in Minnesota may assume that one day, perhaps at some point after an eightieth birthday, for example, they will need long-term care. They may be counting on retirement funds to pay for the care they need. However, even those with an impressive investment portfolio may not be able to afford the kind of care that they imagine they will have. 

According to Forbes magazine, one study on the costs of long-term care found that the median cost of a year in a private room in a nursing home is over $90,000. Even a shared room is over $80,000. Hiring an in-home health aide or moving to assisted living has a price tag in the mid-$40,000 range. 

Most people probably do not want their children to shop around and find the cheapest nursing home to move them into. But how will they afford care?

NextAvenue.org explains that Medicaid will pay much of the expense of long-term care when a person’s income is below a certain threshold. However, that does not mean people need to cut back on the retirement assets. Instead, they can use a Medicaid trust.

This estate planning tool allows people to transfer nonexempt assets such as retirement accounts, real estate and other investments to the ownership of the trust. Because the trust owns the assets and pays the beneficiaries a specified income each month, an amount below the Medicaid threshold can be designated.

Waiting until the last minute could cause problems, though. Someone who is planning to apply for Medicaid within the next five years may be disqualified because the income limit must be met consistently for the 60 months before the application is submitted. Even one month where the income is higher could make someone ineligible. Consequently, the earlier people begin their estate plan, the less likely they are to run into trouble when the time comes to hire a caregiver or move into a long-term care facility.

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