Seniors usually enroll in Medicare, which is a government-initiated program for health insurance to help pay for eldercare. Individuals are eligible for this health insurance when they reach the age of 65 or may have a chronic disability due to their life circumstances. It's not regular medical insurance, as it's divided into four parts, covering hospital stays, prescription drugs, and medical coverage, among others.
Unfortunately, healthcare insurance doesn’t cover everything. For example, long-term custodial care is not covered by Medicare. It can quickly become challenging and burdensome for seniors who require elder care, especially on their finances. With the assistance of The Kelley Financial Group, an individual may develop strategies that help pay for elder care while still preserving their assets.
The Cost of Elder Care
A senior may reach a point where they require assistance to do everyday activities due to physical and mental impairment. However, this long-term custodial care doesn't come cheap and may even put a dent in someone’s savings quickly.
Individuals not wanting that level of care can go for a single bedroom in an assisted living community. Others who can still live in their own home could utilize home care aides.
Remember, this page covers only averages; the costs can run higher than the estimates, especially in high-cost areas. The Kelley Financial Group team helps seniors find ways to pay for elder care through different strategies.
Long-Term Care Insurance
An individual can start paying for long-term care coverage before turning 60 years. This is not for everyone, as the premiums an individual would pay are costly. It can cover home health care, personal care, nursing home care, and adult daycare. The insurance plan offers flexibility and more options than public-assisted programs like Medicaid.
Medicaid and Asset Spend Down
Some people may be comfortable with Medicaid as their primary option. In this case, they’ll have to work around a plan of depleting assets to be eligible for Medicaid. This Federal and State program was initiated to shelter low-income earners in society. It covers various health care services, including nursing home care and adult day care, depending on the individual’s state that they’re residing in.
Individuals must meet certain income and asset requirements to become eligible for Medicaid, depending on the State an individual resides in. In Pittsburgh, Pennsylvania, an individual becomes eligible if their household income taxes are below $18,075 on a household size of one person.
Moreover, the individual needs to have assets under certain amounts, including bank accounts, cash value of life insurance, bonds, and stocks. Home equity, to some degree, will affect eligibility; if an individual owns a home, they may not qualify for this cover. Usually, people become eligible when they transfer their assets to family and friends or spend down until enough assets are depleted.
As Medicaid can be complex, you may want to seek services from financial advisors in Pittsburgh, PA, like The Kelley Financial Group.
Asset Protection Trust
One way to shelter an individual’s assets without having to deplete them for Medicaid eligibility is through an irrevocable trust. This process will transfer assets to a trustee who’ll now have control over all assets. Once applied, it cannot be changed or broken without the permission of a beneficiary. It’s different from a revocable trust, where the person retains the rights over their assets and can change arrangements. A revocable living trust is suitable for other things but not Medicaid eligibility.
Other Elder Care Strategies
Gifting Assets Before Elder Care
Another way to deplete assets for Medicaid eligibility is by gifting assets to family and friends. However, financial advisors are often against taking this route since it's riskier than asset protection trusts. Once an individual transfers their assets to a family member, it legally belongs to the said party. Even if the person is trustworthy, that money may become the bargaining chip in case of divorce or a failed business. Therefore, creating a trust is suitable.
Medicaid has a five-year look-back plan for a trust. If an individual puts asset’s in a trust, then goes to a nursing home and stays there for five years, the money in the trust will not count in Medicaid eligibility. However, if the money was transferred within the five-year look-back period, then it’ll affect an individual Medicaid eligibility to some degree.
Setting up an Annuity
Suppose an individual wants to apply for Medicaid, and the five-year look-back period is over; they can still preserve a chunk of their assets through promissory notes or drafted private annuity compliant with federal laws. Individuals can preserve 40% to 50% of their assets using this eldercare strategy. People with high net worth are unlikely to use this strategy as they’ll not benefit from it.
Let’s say a person transfers $500,000 to a trust in a location where the maximum rate is $8,000; the penalty period will be greater than the five-year look-back period. It can even be longer than the individual nursing home stay.
Contact Expert Financial Advisors in Pittsburgh, Pennsylvania
The knowledgeable advisors at The Kelley Financial Group help individuals, even those with seemingly impossible situations, create a financial plan or strategy to help them navigate elder care.
We will then develop a monthly or yearly plan outlining the costs of a plan and resources that can mitigate these costs. We strive to optimize the use of public resources to protect family assets. Individuals planning their elder care should contact The Kelley Financial Group for further assistance.
This material was prepared for The Kelley Financial Group’s use.
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which strategies or investments may be suitable for you, consult the appropriate qualified professional prior to making a decision.
The Kelley Financial Group and LPL Financial do not offer tax or legal advice or services. We suggest that you discuss your specific situation with a qualified tax or legal advisor.