According to the U.S. Department of Health and Human Services, over 70% of adults age 65 and older will require some type of long-term care during their lifetime. And according to the Kaiser Family Foundation (KFF), more than half of American seniors need to cut back on food, clothing, and other basic expenses in order to afford long-term care. The KFF also states that 90% of adults in the US feel it would be “impossible” to pay $100,000 per year for long-term care – despite this being the median cost for such care. While government programs like Medicaid can help offset these costs, seniors may risk losing part or even all of their assets when pursuing this assistance. Asset protection techniques could help seniors qualify for government assistance while protecting their homes and life savings. To discover more about these asset protection strategies, consider speaking with an experienced elder law attorney in Minnesota or Florida. You may call Roulet Law Firm, P.A. at (941) 909-4644 in Florida or (763) 420-5087 in Minnesota to discuss how you can protect your home and life savings from long-term care and nursing home costs. Or, you can fill out the contact form on this page and a member of our team will reach out to you to schedule your consultation.
Why Do I Need Asset Protection Strategies for Long-Term Care?
Seniors may need to explore asset protection strategies for various reasons while navigating long-term care. For many, the primary reason involves Medicaid. This government program can assist with various long-term care expenses, but it is designed specifically for seniors with financial limitations. According to Medicaid, this program serves low-income families and individuals receiving Supplemental Security Income (SSI). It is also the number one way middle-class families are paying for long-term care. That is because middle-class families usually do not have enough assets to pay for the skyrocketing costs of care themselves, but often have too many assets to qualify for Medicaid directly.
Seniors who wish to qualify for Medicaid must meet both asset and income requirements, and they may lose eligibility if they exceed certain limits. However, some asset protection strategies may allow seniors to qualify even if they exceed normal income and asset limits for Medicaid while protecting their home and life savings.
Alternatively, seniors may need to explore asset protection strategies if they risk incurring significant debt due to the cost of long-term care. This type of care can be quite expensive, and families may need to liquidate certain assets in order to cover it. Asset protection strategies help protect your hard-earned savings against claims by creditors. For example, a senior couple might risk losing their home due to a forced sale (foreclosure) after incurring unexpected medical bills.
Can the Florida Homestead Exemption Help With Long-Term Care?
The homestead exemption represents a potential asset protection strategy for long-term care. Florida has one of the strongest homestead exemptions in the country, and it may help seniors qualify for programs like Medicaid. First, it is important to understand that a primary residence that is your homestead does not factor into Medicaid eligibility calculations in Florida. As long as the property has a market value below a certain amount, a couple can move into a nursing home and still qualify for Medicaid. Aside from their primary residence, a couple may need to reduce other assets before applying. The exempt amount changes each year based on inflation.
For this reason, some spouses intentionally transfer as much of their wealth as possible into a primary residence before applying for Medicaid. Some may also purchase new, more expensive properties before applying. Even if the couple moves into a nursing home and never returns to their primary residence, their ownership of the property will not affect Medicaid eligibility as long as they have an intent to return home. In addition, the homestead exemption protects a primary residence in Florida from most creditor claims. Medical debt cannot force the sale of a primary residence in Florida, and there are virtually no upper limits.
Does Minnesota Have a Homestead Exemption for Medicaid?
Minnesota has very similar homestead exemption rule when it comes to Medicaid eligibility. Minnesota also has a homestead exemption for creditor protection, but the exempt amount is limited to about $450,000. However, spouses may increase this exempt amount to $1,125,000 if they use the property for agricultural purposes.
Florida and Minnesota Homestead Protections and Estate Recovery
It is important to note though, that while your homestead may not be an available asset when it comes to qualifying for Medicaid, the state may still recover the costs of benefits it provided from your remaining assets after you pass away; including your home. That means that while your home may not be included as an asset when it comes to applying for benefits, the state may recover proceeds from the sale of your home after you pass away. In fact, in Minnesota, the state will often put a lien on your home to secure its claim for recovery. In order to protect your home and savings from long-term care and nursing home costs, it is important to plan ahead as federal law allows you to use specific planning strategies and techniques to protect your assets for your spouse and family.
Can I Use a Trust for Asset Protection During Long-Term Care?
Seniors may use specific types of trusts for asset protection during long-term care. The most obvious example is a Medicaid Asset Protection Trust (MAPT). A MAPT can protect your home and any other assets you put into it from both spenddown requirements and from recovery by the state after you pass away. However, a MAPT needs to be established five years before long-term care occurs, so it may be worth discussing a MAPT with Roulet Law Firm, P.A. sooner rather than later. Like all trusts, a MAPT represents a separate legal entity – and assets held in this trust will not affect Medicaid eligibility and are protected from recovery by the state after your passing.
Can I Use Life Insurance for Asset Protection During Long-Term Care?
Along with trusts and primary residences, life insurance may also be exempt from Medicaid eligibility calculations. While this exemption applies to term life insurance and most employer-provided life insurance policies, any policy with a cash value is not exempt. That being said, a senior can simply remove themself as a beneficiary – ensuring that the policy no longer affects their eligibility for Medicaid. Instead, they may name someone else as a beneficiary – such as a child or spouse. Another obvious strategy is to choose a term policy instead of a cash-value policy.
Should I Start Transferring Wealth to My Beneficiaries Early?
Seniors who need to qualify for Medicaid and fund long-term care may consider wealth transfers before they pass away. Gifting represents a viable asset protection strategy, and it allows beneficiaries to inherit wealth while helping seniors qualify for Medicaid. Federal gift tax exemptions are at historically high levels, and it may be possible to transfer wealth without incurring excessive tax penalties.
However, it is important to be careful with gifting as doing it incorrectly can result in adverse tax consequences, unintended beneficiaries, is subject to a look-back period and may even result in you not qualifying for benefits you would otherwise have been entitled to. That is why it is important to discuss your planning goals with a qualified professional before doing any gifting.
Learn More About Asset Protection With Roulet Law Firm, P.A.
While there are numerous asset protection strategies to consider when approaching long-term care, the most appropriate method may depend on the specific needs of each family. Online research might provide various ideas for families striving to afford long-term care, but a consultation with an experienced elder law attorney in Florida or Minnesota is advisable as the rules are extremly complex and failure to follow them exactly could result in a loss of benefits and put your home and life savings at risk. Families may discuss their options in more detail alongside an experienced elder law attorney at Roulet Law Firm, P.A. To continue this discussion, call us today at (941) 909-4644 in Florida or at (763) 420-5087 in Minnesota. Or, you can fill out the contact form on this page and a member of our team will reach out to you to schedule your consultation.
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