If you're over the age of 65 or have a disabled loved-one, you may have heard the term “long-term care,” but just what does it mean?
In short, long-term care is a broad term used to describe a wide continuum of services, which are needed by people with chronic health issues for extended or indefinite periods of time. The services associated with long-term care can range from assistance with bathing and cleaning to skilled nursing services. More basic services can be provided at home, like bathing and cleaning, but more complex services are most generally rendered at assisted living facilities or nursing homes.
As you might imagine, the costs of long-term care provided at assisted living facilities or nursing homes can be very significant, often between $4,000 and $7,000 per month, in Arizona.
Who Pays for Long-term Care?
For those over the age of 65 who don't have, or can't qualify for, long-term care insurance, won't Medicare pay for long-term care? Probably not. And even if it does, probably only for a short period of time.
If Medicare won't pay for long-term care and you don't have long-term care insurance, then you may need to foot the bill yourself.
But how long can you afford to pay those monthly costs on a fixed income?
Fortunately, there is another option: Medicaid.
Medicaid is a federal program for people who need long-term care and may not be able to pay for it indefinitely.
Unfortunately, Medicaid places very significant restrictions on both the amount of income you receive and the value of the assets you own.
The good news is that there are ways to structure the legal ownership of assets, which you've spent a lifetime acquiring, that can protect those assets while also allowing you to qualify for Medicaid.
Perhaps the most powerful legal strategy is an irrevocable trust. But not just any irrevocable trust; rather, in order for you to retain any control of the assets owned by the trust, the terms of the trust must be drafted very carefully to satisfy both federal and state laws. Further, the assets transferred to trust must be done so as part of a comprehensive process.
Just what is an irrevocable trust? In short, it is an arrangement whereby one person, called a trustee is the legal owner of property for the sole benefit of another, called a beneficiary. Moreover, a non-beneficiary trustee is held to the highest standard under the law and must act in the best interest of the trust beneficiaries. If the non-beneficiary trustee violates these duties, the trustee can be removed and can face substantial liability for such violations.
A properly structured and funded irrevocable trust can allow you to retain control and enjoyment of your assets for years to come while also protecting your assets from estate recovery and the imposition of liens by the State of Arizona.
Here's where things start to get “sticky.” Federal Medicaid law prohibits the transfer of assets during a 60-month period prior to a person's application for Medicaid. Any transfers made for less than fair market value, i.e. giving away assets, can result in the imposition of a penalty during which the person who gave away those assets will not be eligible for Medicaid. Fortunately, there are ways to handle and deal with this restriction.
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This brief overview of some important considerations associated with ALTCS eligibility is by no means comprehensive. Always seek the advice of a competent professional when making important financial and legal decisions.
Steve Cook is a estate planning lawyer at Cook & Cook. Although his main office is located in Mesa, Arizona, he represents clients throughout the Phoenix, Arizona Metropolitan area including the following east valley cities: Scottsdale, Paradise Valley, Tempe, Chandler, & Gilbert.