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If you are nearing a retirement age, one addition you should consider to your estate plan is medicaid planning.
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MEDICAID PLANNING IN
ILLINOIS
Why It’s Important
CURTIS J. FORD ILLINOIS ATTORNEY
If You are Nearing Retirement Age, One Addition You Should Consider to Your Estate Plan Is Medicaid Planning
Medicaid Planning – Why It’s Important www.nashbeanford.com 2
A comprehensive estate plan
should accomplish much more than
simply providing a roadmap for the
distribution of your estate assets
when you die. The components
you choose to include in your
estate plan will, of course, depend on your unique goals and objectives. If
you are nearing retirement age, one addition you should consider to your
estate plan is Medicaid planning. People frequently make the mistake of
assuming they have no need for Medicaid benefits and, therefore, do not
need to include Medicaid planning in their estate plan. Before you make
the mistake of making that assumption, consider the following information
relating to long-term care and Medicaid eligibility.
YOUR GOLDEN YEARS BY THE NUMBERS
Your chance of becoming disabled to the extent that you need long-term
care goes up with each passing year. As the average life expectancy of an
American continues to rise, so do the odds that you will need long-term
care at some point during your golden years. Consider the following
statistics:
There were 9 million people over the age of 65 who needed long-
term care in 2012.
12 million people over the age of 65 are expected to need long-
term care by in the year 2020.
Medicaid Planning – Why It’s Important www.nashbeanford.com 3
40 percent of people who reach age 65 will go on to need long-
term care at some point in their lives.
75 percent of people who live to age 85 will need long-term care at
some point.
40 percent of the elderly who need long-term care have income at
or below 150 percent of the federal poverty level.
49 percent of nursing home costs were covered by Medicaid in
2002.
Just 7.5 percent of nursing home costs were paid by private
insurance in 2002.
The average length of stay in a nursing home is about 2.5 years.
Median annual cost of assisted living in Illinois for 2013 was
$48,600.
Median annual cost of a semi-private nursing home in Illinois for
2013 was $62,050.
LONG-TERM CARE COSTS
It should be clear from some of
the figures above that everyone
should plan for the costs
associated with long-term care. If
you are married, the odds are
extremely good that one (or
both) of you will need long-term
care at some point. What many
people do not realize until it is too late is that the vast majority of private
Medicaid Planning – Why It’s Important www.nashbeanford.com 4
health insurance policies do not cover costs associated with long-term care.
Moreover, Medicare does not cover those costs either except in very limited
circumstances and then only for a short period of time. Long-term care
insurance is available but is typically cost-prohibitive for the average
person. The good news is that the Medicaid program does cover long-term
care costs if you are eligible for benefits. The key to ensuring that your
long-term care costs are covered, therefore, may be in found in the
Medicaid planning you include in your estate plan.
QUALIFYING FOR MEDICAID
People frequently confuse Medicare and Medicaid. Medicare is a federal
entitlement program. An entitlement program, as the term implies, is a
program that you are automatically entitled to for some reason. In the case
of Medicare, you are entitled to benefits because either you or your spouse
(or both) paid into the program during your working years. Medicaid, on
the other hand, is a “means” program, meaning that you must be eligible
for benefits based on a number of factors. Although Medicaid is primarily
funded by the federal government it is administered at the state level.
Therefore, both the eligibility criteria and the benefits offered can vary
somewhat by state. In all states, however, your income and resources
must fall below a designated limit to be eligible for benefits. For many
seniors, the income limit does not present a problem but the resources
limit can be a bar to eligibility.
Medicaid Planning – Why It’s Important www.nashbeanford.com 5
Illinois uses a community
standard income level,
meaning that your income
needs to be at, or below,
150 percent of the federal
poverty level for your
area. Certain types of
income are exempt such as SSI benefits and the first $25 of money from
any source each month. If your income exceeds that limit you will have to
“spend-down” before being eligible for benefits. Essentially this means you
will need to incur a specific amount in medical bills first and then Medicaid
will start covering your costs.
The resources, or asset, limit is where most seniors have a problem. The
asset limit for an applicant who is applying based on age or disability is
only $2,000. As with the income limit, certain assets are exempt such as
the family home if the spouse continues to reside in the home, up to a
certain value in an automobile and household furnishings. If your assets
exceed the limit you will have to “spend-down” to be eligible for Medicaid
benefits.
Imagine that you worked hard all your life, saved consistently and invested
wisely to provide a nest egg for your golden years only to find out that
your nest egg will make you ineligible for benefits needed to pay for the
costs of long-term care. Worse still your only option is to pay out of pocket
until you have exhausted your savings at which point Medicaid will begin
paying. Unfortunately, scenarios such as this one play out all over the
Medicaid Planning – Why It’s Important www.nashbeanford.com 6
country every day because people didn’t consider the need to qualify for
Medicaid ahead of time and, therefore, did not include Medicaid planning in
their estate plan.
MEDICAID PLANNING
Now that the likely need for Medicaid benefits is clear, and the potential
problem qualifying for those benefits is equally clear, it’s time to discuss
the solution. First, the
Medicaid “look-back” period
needs to be understood.
Many people, when faced
with the Medicaid asset limit,
start transferring assets out
of their name to loved ones
to lower the value of their
countable resources.
Unfortunately, this won’t work. Medicaid has a five year “look-back” period
that essentially “looks back” five years for any transfers of assets you have
made. Usually, if a transfer occurred during the look-back period the value
of the asset that was transferred is imputed to as if you had never made
the transfer. This is why Medicaid planning is so important. The earlier you
begin the better your chances of qualifying for Medicaid benefits when the
time comes. There are numerous legal strategies that can be used to
transfer and protect assets in anticipation of applying for Medicaid in the
future. While starting years ahead of time is ideal, there are some options
Medicaid Planning – Why It’s Important www.nashbeanford.com 7
than may be available should you suddenly need Medicaid benefits and you
did not plan ahead. For example, you may be able to turn non-exempt
assets into exempt assets. Imagine that you still owe $50,000 on your
family home. Also imagine that you have $50,000 in a savings account.
The $50,000 in your savings account is not exempt and would have to be
spent-down before Medicaid benefits are available; however, you may be
able to use the $50,000 to pay off your mortgage and turn the funds into
an exempt asset, thereby eliminating the spend-down requirement.
While Medicaid planning is legal there are many “strategies” advertised
that sound too good to be true because they are too good to be true. If
you wish to include Medicaid planning in your overall estate plan, or
suddenly find that you need Medicaid benefits but your assets exceed the
limit, consult with an experienced and reputable Illinois estate planning
attorney to determine what your legal options are.
REFERENCES
Genworth, Illinois Cost of Care Survey
Illinois Department of Healthcare and Family Services, Long Term Care
Illinois Department of Healthcare and Family Services, Long Term Services
and Information for Couples
Illinois Legal Aid, Disabilities Guidebook: Medicaid
Medicaid Planning – Why It’s Important www.nashbeanford.com 8
About the Author
Robert N. Nash
Robert N. Nash is a partner in the law firm of Nash Nash Bean & Ford, LLP. The law firm has
offices in Geneseo and Moline, Illinois and conference facilities available throughout
Northwestern Illinois. Mr. Nash chose the estate and business planning arena because he
believes it provides a positive force in his clients’ lives. He practices preventative, rather
than remedial law. Robert Nash focuses on all aspects of estate planning, including estate,
gift and income taxes, trust and probate administration, real estate, and business.
Nash Nash Bean & Ford, LLP www.nashbeanford.com
Geneseo
445 US Highway 6 East
Geneseo, IL 61254
Phone: (309) 944-2188
Fax: (309) 944-3960
Moline
5030 38th Avenue, Suite 2
Moline, IL 61265
Phone: (309) 762-9368
Fax: (309) 944-3960
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