The options for protecting assets from Medicaid and the cost of long-term care differs depending on if you’re single (i.e. not married or have survived your spouse) or are married. Also, the planning differs depending on when you need care. In other words, if you can live independently for five years, there are certain planning options available to you versus if you need long term care in the near future.
If you’re single and not likely to need care in the next five years, there are three planning options you could consider:
If you’re single and not likely to need care in the next five years, there are three planning options you could consider:
- Â Sign a ladybird deed to protect your house. With a ladybird deed, you personally retain the ownership of your house during your lifetime. Upon your passing, the ownership goes to the beneficiary you’ve named in the deed which could be a trust (that you have created) or a person you’ve included in the deed. This planning has significant legal and Medicaid benefits. First, it avoids your family or loved ones from having to probate the house upon your passing. Second and importantly for Medicaid, a ladybird deed protects your home from having to be sold. If you own your home in your own name (versus your trust), it’ll be considered an exempt asset and the Medicaid rules won’t require you sell it and spend the proceeds on your care. Finally, a ladybird deed will prevent the State of Michigan from pursing estate recovery against the house after your passing. In other words, Medicaid won’t be able to make a claim against your house and collect from the proceeds upon a sale after your death.
- Establish a Medicaid protection trust to protect your home. This plan provides one additional layer of protection more than the ladybird deed for your house. The Medicaid protection trust will allow you or your loved ones to sell your home while you’re still living and the sale proceeds will be protected from Medicaid. For this planning to work, you’ll need to set up the Medicaid protection trust and deed the house to the trust five years before you need to apply for Medicaid (i.e. when you’re in assisted living or a nursing home). This planning is particularly helpful if you eventually want to move to an independent living community or perhaps want to rent an apartment and no longer incur the cost and time it takes to maintain your home. Finally, this planning is very beneficial if you run out of financial assets and the person who is managing your affairs doesn’t have the resources to keep up the expenses of the house. The Medicaid protection trust will allow the house to be sold and proceeds protected from Medicaid.
- Create a Medicaid protection trust to also protect your financial assets. To qualify for Medicaid, you can only have $2,000 of countable assets. This includes all of your financial assets like your bank accounts, CDs, investment accounts, IRAs, annuities, and the cash-value of your life insurance. To avoid having to spend all of your financial assets on long-term care, you could create a Medicaid protection trust similar to what I’ve described above. In doing that, you will need to name a trusted person (a child or other family member, or friend) to be the trustee. Also, you can’t be a beneficiary of this trust because the assets would still be considered yours for Medicaid purposes. For this reason, you’ll have to be comfortable with the trusted person you’ve chosen to act as the trustee holding those assets and not distributing them. Importantly, there is a way for this trustee to return the assets to you if you need them in the future. Finally, if you’ve done this planning and five years have passed before needing Medicaid, the assets in the Medicaid protection trust will be protected and won’t have to be spent on your long term care.
If you have any questions about these Medicaid planning options for single persons, feel free to contact me at phmulder@cunninghamdalman.com.
