One common fear of older Americans is having to spend their last days in a nursing home. According to the Centers for Medicare and Medicaid Services, 70% of people over age 65 will required long-term care at some point. Nursing homes usually mean not only loss of personal autonomy, but also an incredible financial burden. As of this year, nursing homes in Arkansas cost an average of $59,460 a year. Most people end up paying for nursing home care out of their savings until they run out. At that point, they may qualify for Medicaid to cover the cost.
Medicaid Trust in Fayetteville Disadvantages
In Fayetteville, Arkansas, as well as other cities in the US, long-term care insurance is an option that can assist in keeping seniors out of nursing homes. Under many policies, care at home is covered by the long-term care insurance. Unfortunately, many seniors are still forced into a nursing facility at some point because their condition requires a higher level of skilled care. However, if you are not eligible for long-term care insurance or cannot afford the premium, another option is a Medicaid Trust. Someone other than you or your spouse must be named as the trustee, usually your adult children. Although there are advantages to this type of estate planning tool, there are also disadvantages to be considered.
A major disadvantage is that a Medicaid Trust needs to be established several years before nursing home care is required. Another disadvantage is that a Medicaid Trust in Fayetteville Arkansas must be irrevocable, meaning that the grantor of the trust principal completely loses control and access to the assets. The trust must also be created before the grantor becomes incompetent, otherwise the trust cannot be established. Another disadvantage is the cost of establishing and managing the trust. The set-up fees can be considerable.
Finally, the drafting of a Medicaid trust in Fayetteville, Arkansas is complicated by the Internal Revenue Code. Although the Arkansas Department of Human Services, which manages Medicaid, does not use the tax laws when evaluating transfers for Medicaid purposes, those tax laws still apply to the trust. Therefore, income, estate and gift tax consequences must also be carefully considered.