Estate planning can be a complicated process. While the basics are important, like naming beneficiaries in your will, there are other things you need to consider as well. Many people create living wills that include power of attorney documents in the event of incapacitation or coma. Others focus on the creation of trusts to reduce tax liabilities and protect special needs heirs, minor children or even pets.
One critical consideration many people forget to plan for is the potential need for long-term care. This is especially important for people who have conditions like Alzheimer's that run in their families. A condition like that could mean that as you age, you will no longer be able to live on your own or care for yourself.
In that situation, you would likely need to move to a nursing home or assisted living facility at some point. The cost to stay in these kinds of adult facilities can be many thousands of dollars each month.
Medicare won't cover nursing home expenses
if you currently have Medicare or will rely on it when you retire, it is important that you realize that Medicare does not cover skilled nursing services or assisted living expenses. You will have to assume those costs on your own, and that could mean completely using up the assets you've acquired over your life.
Living in a nursing home may mean that you have nothing left to give your heirs. Everything from the equity in your home to your savings accounts may end up paying for nursing homes. In some cases, people spend everything they've ever earned and still end up requiring Medicaid to cover ongoing living costs afterward.
Proper planning can protect your legacy and help cover nursing home care
Unlike Medicare, Medicaid does cover nursing home costs. However, there are income and asset limits for people who use Medicaid coverage. Most people living on Social Security can qualify for Medicaid, but the amount in your bank account could end up preventing you from receiving Medicaid coverage.
In order to qualify for Medicaid without incurring financial penalties, you should start planning now. Medicaid has a five-year look-back period. Any amount that you transfer to your family or into a trust in the five years before you apply for Medicaid will count against you. You will have to pay that much out of pocket before Medicaid will start to cover you.
Planning ahead of time by creating a trust or transferring assets to loved ones over time can protect you and your estate. It helps ensure that you can receive the coverage for Medicaid you may need in the future, and it ensures that your assets go toward your family, not to repay a government insurance program.