Protect your assets : Kelly's Blog

Protect your assets

by Kelly Karczmar on 12/22/14

Approximately 50% of Americans will spend time in an assisted living facility or nursing home. This is a very difficult experience emotionally, but can also be very damaging financially. The average cost of nursing home care in the greater Chicago area is $77,745 per year. This cost is projected to increase to $82,809 per year in 2017. In most cases these costs must be covered by the resident’s savings and other financial assets. Contrary to popular belief, Medicare does not provide long-term care coverage, and help from Medicaid becomes available only when the resident’s resources are almost completely exhausted. The assets of the spouse of the resident are also considered available to cover these expenses, and Medicaid will not be approved until the spousal assets are similarly depleted.  

Because of the large budget deficits faced by the federal and Illinois governments, new laws have been enacted to dramatically reduce Medicaid benefits for long-term care. For most of us, this means that if we enter an assisted living facility or nursing home at some point and have not planned ahead, much of our savings and other assets (and those of our spouse) will be sacrificed. Many people are not aware of the substantial loss of Medicaid benefits over the past nine years. The end result of these changes is that – while your grandmother’s long-term care may have been covered by Medicaid – yours probably will not be covered.

The law provides ways to safeguard your assets when you have health problems so that they remain available to you and your spouse. However, many mechanisms for estate preservation are only available if you plan well in advance, taking steps before any problems occur. This requires careful and judicious planning. Here are some mechanisms that may be useful, depending on your family and financial situation:

  1. Create an Irrevocable Trust;
  2. Create an Irrevocable Funeral Prepaid Burial Contract;
  3. Create a Special Needs Trust;
  4. Upgrade your home or automobile;
  5. Purchase personal property within certain value limits;
  6. Transfer assets (within applicable limits) so that each spouse retains as much in cash and other assets as possible without sacrificing eligibility for Medicaid benefits;
  7. Time the Medicaid application to take advantage of the substantially lower rates paid by Medicaid to long-term care facilities.

All of these strategies require discussion with your attorney. Strategies will vary tremendously depending on your personal circumstances and those of your spouse and loved ones. If you plan early, you can save thousands (or even hundreds of thousands) of dollars later. This can protect you from unnecessary stress and allow you to concentrate on maximizing your health and happiness, as well as the well-being of your loved ones, should you require long-term care later in life.

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