Long-Term Care Insurance v. Medicaid Trust?

Long-term care insurance (LTCI) and the Medicaid Trust (MT) are asset protection tools i.e. to minimize your exposure to the nursing home costs.

Long term care insurance (“LTCI”) protects your assets from the nursing home. However, another advantage is paying for a caregiver, to provide you care, in your own home, and may assist you in paying for the assisted living facility. The disadvantage is financial. The cost of paying for LTCI is not inexpensive, and you may not make use of the LTCI.

The MT protects your assets only, your home, investments and savings. However, unlike the LTCI, the MT does not provide care, unless you pay for it, from the MT. Will Medicare or Medicaid be available in the future? Our advice is, if you can afford LTCI, purchase it. However, in the event LTCI is unavailable to you for medical or financial reasons, the MT is an excellent asset protection planning strategy.

Although, the MT is susceptible to the five year look back period. Therefore, the MT must be in place, and funded, five years before entering the nursing home. Otherwise, your assets are NOT protected and Medicaid will NOT pay for nursing home cost.

Additionally, the other MT major disadvantage is the trust is irrevocable. As a result, if you fund the trust, you loose control of the assets, and they cannot be removed or returned to you.

However, the major advantage of the MT, is its simplicity and low cost. It is relatively cheap compared with the ongoing costs of LTCI.

Nevertheless, our preference is LTCI, if affordable and available. Most of our clients, if not all, (client never say “Take me to the nursing home”) would prefer to "age in place" i.e. stay at home and receive home care. However, there are no right and wrong answers in choosing either LTCI or MT. Each client has their own situation, concerns, preferences, circumstances, and financial issues. The key is protecting your assets from the nursing home cost.

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