Elder law attorneys provide answers to people who have questions about challenges that seniors often face. Long-term care is one of them, and you may assume that Medicare will pay for it. We look at the inconvenient truth in this post, and we offer a solution.
Medicare Eligibility Parameters
When you work and pay FICA or self-employment taxes, you get something in return of your contributions. In 2024, you receive one credit for every $1,730 you pay taxes on, and the maximum annual accrual is four credits.
You become eligible for Social Security and Medicare when you have 40 credits. For Medicare, the eligibility age is 65 for everyone at the time of this writing.
The age at which you can qualify for Social Security is not as simple and straightforward. It is 66 for people who were born between 1943 and 1954, and the age goes up by two months for every birth year after that.
This two-month-per-year increase stops at 67 for people who were born in 1960 or any later year. This is the eligibility age for the full benefit, but you can accept a reduced benefit when you are as young as 62 years of age.
However, your benefit will be reduced by up to 30 percent if you receive it early. Additionally, you are penalized by one dollar for every $2 that you earn above a particular threshold. This year that ceiling stands at $22,320.
Delayed Retirement Credits
While we are on the subject, we should paint a complete picture. You could go another direction and delay the submission of your application for Social Security. If you do this, your benefit increases by 8 percent for every year that you delay after you reach full retirement age.
You can do this until you are 70 years of age; at that point, there is nothing to gain if you continue delaying.
Out of Pocket Medicare Costs
It is important to recognize the fact that there are some out-of-pocket costs that you must pick up yourself when you qualify for Medicare, and there is one major expense that is not covered at all.
Part A is the hospitalization portion, and you do not have to pay a premium for this coverage, but there is a $1,632 deductible per benefit period this year.
Part B covers treatments and services that are provided by doctors and other health care providers. There is a monthly premium of $174.70 in 2024, and there is a $240 deductible. After you pay the deductible, you have to cover 20 percent of the costs out of your own pocket.
There can be premiums, deductibles, and co-payments for the prescription drug coverage, and the exact details depend on the plan that you choose.
Medicare does not pay for the custodial care that nursing homes provide, and it does not cover in-home care either, so this presents a challenge.
Long-Term Care Facts and Figures
When you look at the statistics, you see that there is a good chance that you will require long-term care at some point in time. About 70 percent of seniors will receive living assistance, and over half will incur assisted living costs.
Just over one third of elders will reside in nursing homes, and these facilities are quite expensive. The average length of stay is one year, but of course, there are those that spend multiple years receiving nursing home care.
When we say that the care is expensive, you are looking at a median cost of over $14,000 a month for a provide room in the Oakdale, MN area.
The Medicaid Solution
You can protect your assets from these potentially devastating costs if you take the right steps in advance. Medicaid will cover long-term care, but you can’t qualify if you have significant assets in your name.
The limit on assets in the state of Minnesota is $3,000, but some assets don’t count. Your home is in this category with a $713,000 equity limit this year.
Other non-countable assets include one motor vehicle, household items, personal effects, wedding rings and heirloom jewelry, and $2,000 set aside for final expenses. You can have unlimited term life insurance since it has no cash value along with up to $2,000 in whole life.
With regard to homeownership, you could potentially qualify as a homeowner, but this is not advisable. There is a Medicaid estate recovery mandate. The program is required to seek reimbursement from the estates of beneficiaries.
If you die while you are in direct possession of a home, it would be available to Medicaid during the recovery phase.
Irrevocable, Income-Only Medicaid Trust
Many people can afford to retire because they have nest eggs that generate income for them. If you divest yourself of assets to qualify for Medicaid, you will lose this income, so it can be a nonstarter on the surface.
However, there is a solution. You could convey assets into an irrevocable, income only Medicaid trust.
As the name would indicate, you would not be able to revoke the trust, and you would no longer have access to the principal. The good news is that you could accept distributions of the trust’s earnings until you apply for Medicaid.
There is a five-year Medicaid look back period, so you have to complete divestitures at least five years before you seek eligibility. With this in mind, you can fund the trust when you are still capable of independent living to gain peace of mind.
Schedule a Consultation Today!
If you are ready to work with an Oakdale, Minnesota estate planning and elder law attorney, we are here to help. As you can see, long-term care costs loom large, but you can take steps in advance to protect your legacy.
This will be part of a comprehensive plan that is crafted to suit your specific needs, because there is no one-size-fits-all plan that is right for everyone. Going forward, we will always be available to help you revise your plan if and when updates are necessary.
To get started, give us a call at 651-478-8999 or send us a message through the contact form on this website.
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