Medicaid Trust: How It Helps Seniors Needing Nursing Home Care

Medicaid trust

It’s the topic most of us prefer not to dwell on – the inevitable progression of age and the potential need for nursing home care. However, acknowledging the reality early and preparing for it with a Medicaid trust can make the process a lot less stressful.

Here’s a hard fact: according to the U.S. Department of Health and Human Services, about 70% of people turning 65 will require some type of long-term care during their lifetime. Now here’s the harder fact: Medicare, the health insurance program for seniors, doesn’t cover long-term nursing home care.

Before you panic, take a deep breath because there is a solution in the form of a Medicaid trust.

Why Doesn’t Medicare Cover Nursing Home Care?

You might be scratching your head, wondering why Medicare, the program specifically designed to aid seniors with health costs, doesn’t cover long-term nursing home care. Isn’t that one of the significant health needs for seniors?

The answer lies in the difference between medical necessity and custodial care. Medicare will cover medically necessary care; that is, treatments prescribed by a doctor to address specific medical conditions. However, nursing home care often falls under the category of custodial care, which includes assistance with everyday tasks like eating, dressing, and bathing.

Despite the essential nature of this type of support, Medicare does not consider it a medical necessity, and therefore it falls outside of their coverage.

The Cost of Nursing Home Care: A Stumbling Block for Many

The unfortunate truth is that nursing home care is expensive. As of 2021, the median annual cost for a semi-private room in a nursing home was about $93,075, and a private room was around $105,850, according to Genworth’s Cost of Care Survey. With such exorbitant costs, affording nursing home care can seem insurmountable for many.

However, while Medicare isn’t an option, Medicaid can provide the answer

The Solution: A Medicaid Trust

For many seniors, a Medicaid trust is an invaluable tool to qualify for Medicaid’s long-term care benefits without losing their hard-earned assets. This would be an irrevocable trust, so when you fund it, those assets would no longer be yours in a legal sense. They become the property of the trust.

As a result, they would not count if you apply for Medicaid. In the meantime, you can accept distributions of the trust’s earnings, but you cannot access the principal. A lot of people rely on the income that is earned from their savings, and if you are one of them, you wouldn’t be spending the money anyway.

This can all work out well, but establishing a Medicaid Trust isn’t a last-minute solution. You need to set up the trust at least five years before applying for Medicaid due to the program’s look-back period. This period is designed to prevent seniors from suddenly offloading assets to qualify for aid.

Home Ownership

We should share some key information about Medicaid eligibility and home ownership. Your home is not considered to be a countable asset if you apply for Medicaid (with a $688,000 equity limit). That can sound like a good thing, but there is a downside.

Medicaid is required to seek reimbursement from the estates of beneficiaries after they pass away. If your home is in your direct personal possession at the time of your passing, it would be within reach of the program during the recovery phase.

However, if you convey the home into the trust, it would be the property of the trust. As a result, it would be protected from Medicaid estate recovery.

We Are Here to Help!

If you need help with a Medicaid trust or are ready to work with a Knoxville, FL elder law attorney to develop a plan for aging, we are ready to spring into action. You can send us a message to request a consultation appointment, and we can be reached by phone at 305-456-3255.

Author Bio

Justin Stivers is the founder and managing attorney of Stivers Law, an estate planning firm specializing in wills, probate, trust administration, and financial risk management services. Justin’s approach goes beyond just creating legal documents. From aligning investments with estate plans to ensuring comprehensive insurance coverage, he safeguards a client’s legacy from unforeseen circumstances. His commitment extends beyond individual transactions, fostering lifelong partnerships to provide ongoing support and guidance.

With an impressive track record, Justin is licensed by the Florida and the Tennessee State Bars. His professional portfolio boasts Series 65 registration as a Registered Investment Advisor, the Wealth Management Specialist™ designation, and a 2-15 License for Health, Life, and Annuities. His dedication to excellence has earned him positions like Board Member of the Estate Planning Council of Greater Miami, Business Eagle Member of the Florida Justice Association, and active membership in esteemed organizations like the American Academy of Estate Planning Attorneys.

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