Long-term care costs can deplete a person’s assets, leaving little to pass on to loved ones. Estate planning offers several strategies to protect assets from the high costs of nursing home care.
These methods help ensure that you can secure your financial legacy while still receiving the care you may need.
Creating a trust
One effective strategy involves creating an irrevocable trust. By transferring assets into an irrevocable trust, you effectively remove those assets from your estate. This means the assets within the trust belong to your chosen beneficiary. They no longer belong to you, which means you might more easily qualify for Medicaid.
Medicaid is a government program that can cover long-term care costs for those who meet specific financial criteria. Since the assets in a trust do not count towards Medicaid eligibility, this approach can safeguard those assets for future generations. However, timing is crucial because Medicaid has a five-year look-back period. Transfers made within this period may result in penalties.
Seeking long-term care insurance
Another option is long-term care insurance. This type of insurance policy covers the cost of long-term care services, such as nursing home care or in-home care. While premiums can be expensive, long-term care insurance can provide significant financial protection. This option allows you to pay for care without having to spend down your assets. It is important to purchase this insurance early, as premiums increase with age and health conditions.
Building a life estate
For homeowners, creating a life estate can be an effective way to protect the family home from long-term care costs. A life estate allows you to retain the right to live in the home for the rest of your life, while legally transferring ownership to another party. This transfer removes the home from your estate, potentially protecting it from creditors who might try to sell it to cover nursing home expenses.
By incorporating certain asset management strategies into your estate plan, you can better protect your assets. The idea of long-term care costs can be daunting, but taking the right steps will ensure your financial legacy remains intact.