Long term care options are often costly, especially for residential facilities. Some people assume that they’ll be able to count on programs like Medicaid to cover these. However, Medicaid is a needs-based program that takes the applicant’s assets and their ability to pay into account.
Medicaid won’t start picking up the expenses of long term care until you’ve exhausted your ability to pay the bills. This includes using your assets to cover the costs. For some people, this is problematic because they want to pass their assets down to their loved ones.
You can’t just give away assets when you’re applying for Medicaid. Anything of value you sell or give away during the 60-month period prior to applying can result in a penalty. This five-year time frame is known as the look-back period.
There are options for taking steps to apply for Medicaid without having to pay the penalty for passing down assets to your loved ones. One thing that you can do is to start giving gifts to your loved ones well in advance of the time you might need long term care.
Federal law dictates how much you can give to a person before they have to pay a gift tax. In 2020, the limit is $15,000 per recipient from a single gift-giver during the entire year. This means that if you’re married, you can give a person $15,000 and your spouse can give that person $15,000.
Medicaid planning might not seem like a big deal to some people, but it can help you considerably when you’re facing high bills for long term care and need to find a program like Medicaid to pay them.