Paying For Elder Care

The federal health insurance program for Americans over the age of 65 does not cover everything.  For example, long-term custodial care to assist with “activities of daily living,” which might include bathing, dressing, and eating, is not covered.

As many older people will eventually need such care, their families must find a way to pay for it.  Unfortunately, it is not cheap.  Privately purchased long-term care insurance is one way to handle some of these costs, though it is expensive.  Another solution is applying for Medicaid, a joint federal and state program.  In order to qualify, an elderly person must have total “countable assets” under a certain amount.  There are legal strategies that can help older people qualify for Medicaid, and below are a few options to look into:

• Asset Protection Trusts. A properly established irrevocable trust is one way to shelter assets so they do not affect Medicare eligibility. 
• Private Annuities. If a person needs to apply for Medicaid before the five-year look-back period expires, it is possible to preserve a portion of assets using a properly drafted private annuity or promissory note.
• Personal Care Agreements. A lump sum paid to a caregiver for future services can do a number of things including: reduce the size of the estate so the person will be eligible for Medicaid, and purchase care beyond what Medicare provides. 
• Spousal Refusal. Transferring assets from one spouse to another is not penalized under Medicaid.  However, the well spouse is legally obligated to provide for the other spouse’s care, and their collective assets will be considered for Medicaid eligibility purposes.  If the well spouse signs a spousal refusal, they effectively renounce that responsibility, making the other spouse immediately eligible for Medicaid.

See Greg Daugherty, Top 5 Strategies to Pay for Elder Care, Investopedia, Oct. 21, 2014.