You have to develop a practical strategy for aging if you want to be fully prepared for the future. It may be easy to understand the fact financial planning is important as you look ahead toward the different stages of life, but the latter portion can sometimes be misunderstood.
As you start to see your retirement years come into focus, you may look forward to crossing things off of your bucket list as you enjoy yourself and spend quality time with your loved ones. Making sure that you have the resources to enjoy these years is part of the financial planning equation, but it is not the only part.
The Twilight Years
After your active years, there are the twilight years that inevitably follow. The idea that you will simply grow old in a rocking chair as you take care of all of your own day-to-day needs before you pass away peacefully in your sleep, in the bed you have slept in during your retirement years, may be an oversimplification.
No one is especially anxious to contemplate challenging end-of-life matters, but reality is what it is. At some point in time, you are probably going to need help with your day-to-day needs.
There are those who can receive assistance from family and friends at home for a while, but ultimately, a very significant percentage of elders reside in nursing homes. The figure is 25 percent among people who are 85 years of age and older. According to a government survey, the average length of stay is around 2.4 years, and 10 percent of people in nursing homes require the care for a minimum of 60 months.
Across most of New Jersey where we practice law, nursing home costs are in excess of the national averages. Many facilities charge more than $100,000 per year, and the costs have been consistently rising. If you are budgeting for expenses that you may incur in 20 or 25 years, it would be logical to expect nursing home costs to be well above the averages that we are seeing today.
To be direct and to the point, if you ever require nursing home care, it is very likely that the nursing home will be your final place of residence. You are really not going to need any financial resources for yourself above and beyond what you have to pay for nursing home costs.
With this dynamic in mind, you would essentially be giving the inheritances that you want to leave to your loved ones to the nursing home if you ever require care if you have to pay out-of-pocket. This is why Medicaid planning is important if you want to keep assets in the family.
The Medicaid program does pay for long-term care, and it pays for the majority of the nursing home care that is being received by senior citizens in the United States. You can’t qualify for Medicaid if you have more than $2000 in countable assets in your own name. For this reason, Medicaid planning involves divesting yourself of assets that are considered to be countable.
What assets are not counted? Your wedding rings and heirloom jewelry are not counted, and the things that you have around the house and your personal belongings are not countable assets. You can have a whole life insurance policy valued at up to $1500, and unlimited term life insurance is allowed.
One vehicle that is used for transportation is not a countable asset, and the biggest non-countable asset is your home, but there is an equity limit. The limit in the state of New Jersey in 2016 is $828,000, but there is no equity limit at all if a healthy spouse is remaining in the home.
Speaking of the healthy spouse, if you were to apply for Medicaid to pay for long-term care, your spouse could keep half of the shared countable assets while he or she is capable of independent living. This is called the Community Spouse Resource Allowance. During the current calendar year, the maximum Community Spouse Resource Allowance in New Jersey is $2,980.50, and the minimum is $1,991.25.
Schedule a Medicaid Planning Consultation
It is possible to divest yourself of the assets that are considered to be countable in an intelligent, measured fashion so that you can preserve your legacy as you look ahead toward future Medicaid eligibility. If you are ready to get started, our firm would be glad to answer your questions and help you put a plan in place.
To set up a Medicaid planning consultation, give us a call at (908) 222-8803 or send us a message through our contact page.