An estimated 60 percent of Americans have at least a rudimentary financial plan in place for their retirement, and about 25 percent plan to leave behind inheritances for their loved ones. Unfortunately, things don’t always work out as planned. Many people find that the cost of living is much higher than they expected once they reach retirement, which can take a significant toll on the finances they worked so hard to set aside for themselves and their loved ones.
To make matters even more complicated, quite a few people count on Medicare, Medicaid, and other resources to help them cover the costs of medical care as they age. When the time comes to rely on those resources, though, they encounter unexpected problems. Some ultimately don’t qualify because of the money and other assets they set aside in their younger years. Others find that there’s a gap between when their Medicare and health insurance end and their Medicaid coverage begins. Medicaid planning services can help retirees avoid those issues, and they offer several additional benefits.
Ensuring Eligibility for Medicaid
One of the main benefits of Medicaid planning is ensuring eligibility for this government program. As mentioned, the assets people set aside for their retirement years and to pass along to their heirs can render them ineligible for Medicaid. Eligibility for Medicaid is based on income and assets, and if a person’s wealth exceeds the preset limits, he or she is considered capable of paying for medical care out of pocket. That, of course, can quickly deplete a person’s savings and estate. With proper planning, though, those assets can be handled in a way that prevents them from affecting eligibility for Medicaid.
Protecting Heirs
Medicaid planning also protects heirs against the costs of medical care, nursing homes, and other expenses their parents or other testators may accrue. Medicaid’s algorithms are absolute. They account for all of a person’s eligible assets regardless of whether they’re meant for that person to live on during retirement or set aside for heirs. As far as they’re concerned, any available assets can be used to cover medical expenses even if that means detracting from an heir’s inheritance. Planning in advance can safeguard a person’s assets so they’re still available to their heirs even after extensive medical expenses come into play.
Protecting Spouses
Additionally, Medicaid planning services can protect spouses from the effects of exorbitant medical expenses. For example, say one spouse needs long-term care in a nursing home but the other one doesn’t. If so, the spouse who goes to a nursing home can leave enough money for the other spouse to live on. That money doesn’t affect the ill spouse’s eligibility for Medicaid, and it’s protected against any medical bills that spouse accrues. Taking advantage of that protection requires careful planning, though.
Avoiding the Look-Back Period
Furthermore, planning helps people to avoid Medicaid’s look-back period. This is the timeframe during which Medicaid can delve deeper into applicants’ assets to determine if they recently took measures to protect them. If the organization finds out that an applicant transferred funds to an heir or took other steps to shield them, it can impose significant penalties or deny eligibility. In most cases, the look-back period is five years though it can vary from one state to the next. By planning well ahead, people can protect themselves against eligibility issues, penalties, and other related problems.
Safeguarding Your Assets After Retirement
Medicaid can be a boon for retirees. It covers the cost of medical expenses when other resources have been exhausted. Setting aside money for retirement or to pass along to heirs can affect a person’s eligibility for Medicaid, though. Professional Medicaid planning services can help people protect their assets, spouses, and heirs as well as their own best interests.