If you have worked and paid taxes for at least 10 years, or if your spouse has done this, you will qualify for Medicare when you reach the age of 65. This program will provide a health care insurance underpinning, but there are out-of-pocket expenses, and there is one huge gap.
Medicare will pay for convalescent care after an injury or illness when recovery is anticipated. However, it will not pay for custodial care. This is the type of care that you would receive in a nursing home or some other type of assisted living facility.
In North Carolina and Kentucky, you can expect to pay about $75,000 for a year in a nursing home at minimum. That is a lot of money in and of itself, and you can double it for a married couple that will eventually need nursing home care.
Of course, some people are in nursing homes for more than a year, and in other cases, they enter nursing homes after residing in pricey assisted living communities. To compound these disturbing facts, nursing home costs have been rising year-by-year so you can expect to pay considerably more if you need custodial care 20 years from now.
The Medicaid Solution
Medicaid is a jointly administered federal/state government health insurance program that will pay for a stay in a nursing home if you can gain eligibility. You are probably aware that this is a need-based program so you cannot qualify if you have a reasonable store of assets in your own name. The limit on countable assets is just $2000 if our service areas.
Fortunately, there are some things that do not count when Medicaid is determining your eligibility status. If you have a prepaid burial plot, it is not considered to be a countable asset, and you can have as much as $1500 set aside for final expenses. Unlimited term life insurance is allowed, and you can have up to $1500 worth of whole life insurance in Kentucky — the rule is a little more complicated in North Carolina — and still qualify for Medicaid to pay for long-term care.
A Medicaid applicant can maintain ownership of one vehicle that is used as a primary source of transportation. You can maintain ownership of your furniture and the things that you have around the house, along with your personal possessions. Wedding rings, engagement rings, and heirloom jewelry are not considered to be countable assets.
Estate Recovery and Your Home
Now that we have set the stage, we can hone in on the core purpose of this post. Your home is another asset that is not considered to be countable for Medicaid eligibility purposes, but there is a limit on equity.
During the current calendar year, the home equity limit is $585,000 in our two states. However, if you are married and your spouse is remaining in the home, there is no equity limit at all.
If you qualify for Medicaid to pay for nursing home care, the program is required by law to seek reimbursement from the assets that may remain in your estate after your death. Your home could be attached if you owned it at the time of your death and your spouse was not residing in it.
For assets other than the house, to qualify for Medicaid in the first place, you would have to divest yourself of the assets. In addition to spending assets down, some individuals may give assets to a loved one or convey them into a trust. People will do the same with a house to protect it from estate recovery. A caveat would be that you normally must relinquish ownership at least five years before you apply for Medicaid.
Should you fail to do this, your eligibility could be delayed, and you would have to pay out-of-pocket for a prescribed period of time. The length of the penalty would be based on the amount that you gave away as it compares to the cost for nursing home care.
For example, if the state determines that the average cost for a year in a nursing home is $80,000, and you give away $160,000, your eligibility would be delayed for two years.
One way to get around this five-year look back period for the house is through the Caregiver Child Exemption. If you meet certain conditions, you can give your home to a child that has been your primary caregiver in the home for at least two years, and this five-year rule would not be applicable. There are other planning options available to preserve assets even within the five-year period, but the options depend on the individual situation — your elder law attorney can walk you through the options for preserving assets in your situation.
Attend a Free Seminar!
We are holding a number of seminars in the near future, and you can learn a lot if you attend one of these sessions. There is no charge, but we do ask that you register in advance so that we can save your seat. To get all the details, visit our seminar page.
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