Elder law: planning for long-term care without spending a lifetime of savings.

Author:Gansmann, Kara
Position:LAW JOURNAL 2017

With more than 40 million Americans age 65 or older, seniors comprise the fastest growing segment of the country's population. The U.S. Census Bureau predicts that by the year 2050, there will be 86.7 million citizens older than 65. The senior population also is experiencing a growing health care crisis: Alzheimer's disease. This disease, affecting 5.4 million Americans, is touted as one of the most expensive diseases to manage. Those with Alzheimer's disease could require assisted living facilities with specialized memory care or nursing homes. Even seniors without Alzheimer's may need nursing home care. In considering the potential for long-term care, seniors are now growing more concerned with how to pay for that care.

In North Carolina, monthly nursing home costs can conservatively range from $7,000 to $10,000. These costs can quickly impoverish even the most fiscally responsible planners. Further, most seniors prefer to avoid spending their money on long-term care costs. While many seniors will qualify for Medicare health coverage, Medicare does not cover long-term care costs. As a result, many seniors, including mid- to upper-level wealth seniors, are seeking other options like long-term care insurance or Medicaid to pay for nursing home care.

Medicaid is a government program designed to provide comprehensive medical care to nursing home patients who are generally aged, blind or disabled. Medicaid benefits are only available to medically eligible applicants with limited income and resources. When a Medicaid applicant has assets that exceed what is allowed by Medicaid rules ("countable resources"), those resources must be spent or transferred to qualify for Medicaid. Compensated transfers contemplate an exchange of assets for fair market value. If countable resources are transferred for less than fair market value, an applicant could be penalized if the transfer occurred within the five years prior to a Medicaid application. This five-year "look back" period defines whether an uncompensated transfer will be penalized. The penalty equates to a number of months that an otherwise eligible Medicaid applicant will have to wait before Medicaid covers the costs of long-term care. Essentially, a penalized applicant may have to pay privately for nursing home care beyond the five-year "look back" and through the penalty period.

Medicaid eligibility rules vary by state, subject to federal guidelines. These rules can be complicated. Seniors often work with...

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