You may want to plan ahead for MassHealth eligibility. It’s estimated that 70% of people over the age of 65 will require some type of long-term care services during their lifetime, according to the Administration for Community Living. That could mean needing assistance with at least a couple of activities of daily living, such as eating, dressing, or bathing, and possibly even a higher level of care. Women who need long-term care stay in the facilities for an average of 3.7 years, while men stay for an average of 2.2 years.
In the Boston area in 2021, the approximate daily cost for a shared room in a nursing home was $433, resulting in an annual cost of $157, 863. For many people, that’s a big expense that they just can’t afford. The key is to plan ahead for MassHealth eligibility in case you need long-term care in the future.
Without Estate Planning
If you apply for MassHealth long-term care, whether you’re single or married, you can have only $2,000 in countable assets in your name. If your spouse plans to continue living in the community, your spouse can keep approximately $137,400 in their name.
Let’s say that Sarah and Mike are an older married couple with two adult children. They have a house worth $250,000 and also $200,000 in savings. They have done no estate planning, and Mike requires long-term care after having a stroke. In order for Mike to qualify for MassHealth, they will have to spend about $62,000 because Sarah is only allowed to keep $137,400 in assets, not including the home.
If Mike later passes away and Sarah needs care, she will have to spend down the remaining assets before becoming eligible for MassHealth because long-term care applicants are allowed only $2,000 in assets. Depending on the level of care needed, a lien may be placed on the family home as well.
With Estate Planning
What if Mike and Sarah had the same assets, but created an estate planning strategy using a trust to plan ahead for MassHealth eligibility? They could create an irrevocable trust and transfer their home and $100,000 into it.
Five years and one day from the date of these transfers, Mike will be able to qualify for MassHealth right away since Sarah will only have $100,000 in assets.
In this scenario, Sarah and Mike were able to save $100,000 from long-term care costs and protect their house from a possible MassHealth lien. When Sarah dies, the home will receive a full step-up in basis (i.e., readjustment of the value of the home which will be at a higher market value at the time of inheritance) so that it can be sold through the trust with no capital gains taxes due.
By planning ahead for MassHealth eligibility, a large amount of assets have been protected and taxes on the family’s estate have been greatly reduced. In order to utilize a strategy like this, timing is key—you can’t just wait for an emergency to hit, you must plan now. To learn more about the estate planning options available for your family, contact us to set up a free, confidential consultation.
