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Estate planning should include consideration of funding for long-term care, P.2

In out last post, we began looking at the importance of funding for long-term care. For some people, this will entail purchasing long-term care insurance and setting aside funds years in advance. For many others, there will be no planning but only responding to the need as it arises. For anybody concerned about how they will pay for their long-term care, though, Medicaid planning is useful.

We've already mentioned transferring assets outside the look-back period as one technique for increasing one's eligibility for Medicaid. The problem with this technique, though, is that it takes control of the assets out of one's hands. Another technique, one which can avoid this problem, is placing assets in an irrevocable trust.

Whether trust assets will be counted against one's Medicaid eligibility depends both on the terms of the trust and who created it. There are various ways to set up a trust for Medicaid-planning purposes, including income-only trusts, testamentary trusts, and supplemental needs trusts. There are advantages and drawbacks to each of these arrangements, and one should consult an attorney regarding these.

Protecting one's home is another aspect of Medicaid planning. Under Medicaid rules, states must attempt to recover benefits through deceased beneficiaries' estate. In order to protect one's home from this "estate recovery," one can arrange for a life estate or transfer the home to an irrevocable trust. While the latter can be more complicated than setting up a life estate, they are more flexible.

Other techniques in Medicaid planning are spending down savings on non-countable assets, and immediate annuities.

In using any of these techniques for Medicaid planning, of course, it is important to work with an attorney familiar with the program and its rules, and who is experienced in applying these techniques.

Source: Forbes, "13 Financial Risks You Can Avoid," Eve Kaplan, June 19, 2012.

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