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Four ways to plan for your potential long-term care needs

On Behalf of | Apr 11, 2023 | Estate Planning |

As you engage in the estate planning process, you need to take a holistic look at your potential future needs. This includes long-term care. Even if you think that you won’t need this type of care, it’s a good idea to plan for it anyway. After all, statistics show that a significant portion of the population ends up needing some sort of long-term care at some point in life.

And the costs associated with this care can be enormous. You may find yourself on the hook for tens, perhaps even hundreds of thousands of dollars, all of which can severely drain the wealth that you’ve worked to build. This means that your inadequate planning for long-term care could leave your loved ones without the financial support that you intended them to receive.

How do you plan to cover long-term care costs?

You have a number of planning options in this regard. What’s important is that you choose the estate planning path that’s right for you, your estate and your loved ones. Here are four of your options:

  1. Long-term care insurance: One option is to buy a long-term care insurance policy. Although these policies can be beneficial, they can also be costly over time as premium rates rise. You’ll also want to ensure that you fully understand the terms of your policy so that you know what will be covered and where you may have coverage gaps.
  2. Irrevocable trust: Another option is to try to qualify for Medicaid. In order to do so, though, you’ll have to reduce your income and your assets. One way to do this is to place some of your estate into an irrevocable trust. The difficulty here is that you can’t modify a trust once it’s created and you can’t remove assets once they’re placed under the trust’s protections.
  3. Qualified income trust: If your need for long-term care is imminent and you don’t have any other planning options, you might have to turn to a qualified income trust. Here, many of your assets and your income are placed into a trust so that you can meet Medicaid eligibility requirements. However, your assets will be used to reimburse Medicaid expenses to a certain extent.
  4. Gifting assets: Another option at your disposal is the gifting of assets. The IRS exempts several thousands of dollars in gifts to each individual each year, which can provide you with a quick way to reduce your estate so that you qualify for Medicaid while ensuring that your loved ones receive the financial support that you want for them. Seeing your loved ones enjoy these resources is another benefit of this option.

Now is the time to start planning

Long-term care costs can quickly eat away at the value of your estate. That’s why you may want to start planning for long-term care now so that you can leave your loved ones as well positioned as possible when the time comes. If you’d like to learn more about how to do that, now may be the time to discuss your circumstances with an experienced estate planning attorney.

But time is of the essence. After all, the five-year Medicaid lookback period may apply to your case. If you wait too long, you may be putting your estate at a financial disadvantage. So, don’t sit on your estate plan for too long. Instead, think about researching your representation options and reaching out sooner rather than later to those that interest you.