Taking Legal Challenges Head-On

Four ways to help ensure you can cover long-term care costs

On Behalf of | Jan 18, 2023 | Estate Planning

The possibility that you’ll need long-term care at some point in your life is significant. In fact, some studies show that about 70% of all people over the age of 65 will need some sort of long-term care in their lifetime, and 20% will need that care to last longer than five years.

That can be a depressing statistic to think about from an emotional perspective, but it also has very real financial ramifications. Given that some forms of long-term care can costs tens of thousands of dollars, perhaps even hundreds of thousands of dollars, per year, it can quickly gobble up the wealth that you’ve worked hard to accumulate over your lifetime. While this can impact what you have available to leave your loved ones, it also affects what kind of care you can receive.

How can you plan for your long-term care needs?

As stressful as all of that may sound, you can effectively plan for your potential long-term care needs. It requires diligence and preparation, but you also have to know how to use the estate planning process to your advantage. Let’s look at some of the tools that may be at your disposal and what you can use to protect your wealth and your long-term care needs:

  1. Gift money to your loved ones: One effective way to cover your long-term care needs is to qualify for Medicaid. In order to do so, you have to reduce your assets to the point that you qualify for the program. One way to do this is to gift money to loved ones. The IRS allows sizable gifts to individuals each year, which can quickly reduce your assets. Just remember that Medicaid has a lookback period, so that may be a process that you want to start now.
  2. Consider long-term care insurance: Another option is to obtain a long-term care insurance policy. These policies can be expensive, but if you use them correctly, they could significantly help offset your costs. Just make sure you stay current on premium payments and understand all of the terms and conditions of your policy.
  3. Use an irrevocable trust: With this estate planning tool, you place assets in the trust and relinquish control over them, meaning that you can’t remove assets from the trust once they’re placed there. This starts the five-year lookback period. These assets that are placed in an irrevocable trust are also protected from creditors, which means that once that lookback period has passed, you may qualify for Medicaid while keeping those assets with those you intend to inherit.
  4. Spend down assets: If you hope to qualify for Medicaid, you may need to simply spend some of your money. But you can do this wisely by doing things such as paying for your funeral in advance, as well as the funerals of your loved ones. This may require the use of some additional estate planning documents, which you can discuss with your attorney.

Act sooner rather than later

Given the Medicaid lookback period, to ensure that you have the resources that you need to offset your potential long-term care costs, you need to act sooner rather than later. But qualifying for Medicaid and planning for your long-term care needs can be complicated. That’s why if you’re facing these matters, you may want to discuss them with an attorney who knows the ins and outs of effective estate planning.

Hopefully, you can rest easy knowing that you have an effective plan in place to protect your interests.