How Can Planning Today Protect Your Health and Estate in the Future?

As individuals age, the need for comprehensive strategies to address potential care requirements becomes increasingly important. Long-term care facilities provide crucial services for people who can no longer live independently. The care offered by these facilities is vital to preserving the older individual’s quality of life and takes the pressure off loved ones who may otherwise become overwhelmed by extensive caregiving duties and/or expenses. In some families, when one child takes over all the responsibilities of caregiving for an aging parent, this leads to friction among siblings and accusations against the caregiver of taking advantage of the parent.

Unfortunately, the costs of long-term care can be exceedingly high and may quickly deplete seniors’ available assets. However, engaging in careful long-term care planning with the assistance of a compassionate estate planning attorney may allow individuals to receive the comprehensive treatment they need and deserve while preserving hard-earned assets for their loved ones. Proactive planning for long-term care costs involves thoroughly understanding Texas’ Medicaid program, exploring various financial tools, and implementing strategies to protect estate resources while ensuring access to quality care. 

How is Medicaid Planning Related to Long-Term Care Planning?

Texas Medicaid plays a significant role in long-term care financing for many residents. However, the program’s strict resource limits can pose challenges for individuals seeking to qualify for benefits while preserving their estate. In Texas, Medicaid applicants must have limited countable assets to be eligible for long-term care coverage. For single individuals seeking long-term care Medicaid, the asset limit is $2,000 in countable assets as of 2025. This limit could change over time. There is also a limit on how much monthly income the recipient may receive, such as retirement income or social security.

However, certain assets are exempt and do not count towards this limit. These exempt assets include one’s primary home, a single car, personal belongings, household furnishings, and irrevocable burial trusts. For married couples, the community spouse can retain a higher amount of assets.

While these limits can be difficult to navigate, individuals may be able to qualify for Medicaid without entirely depleting their assets through the careful use of various asset protection strategies. One common approach is the use of irrevocable trusts, which can effectively remove assets from an individual’s estate for Medicaid eligibility purposes. Another strategy involves converting non-exempt assets into exempt assets, such as using funds to make home improvements or purchase a vehicle. Careful gifting of assets to family members or loved ones can also help reduce an individual’s countable assets, potentially bringing them within Medicaid eligibility limits. 

Crucially, any transfers must be made well in advance of applying for Medicaid, as the program imposes a five-year look-back period on asset transfers. Transfers must be carefully timed and structured to avoid stiff penalties during the Medicaid look-back period. 

Why is Considering the Medicaid Estate Recovery Program Essential For Individuals Considering Long-Term Care?

The Texas Medicaid Estate Recovery Program (MERP) further complicates matters for many families. Under this program, the state may seek to recover Medicaid expenses, including long-term care costs, from a recipient’s estate after their death. There are no exempt assets in the decedent’s estate, and there may be nothing left afterward for the decedent’s adult children to inherit. To protect their estate from MERP, individuals can employ several tactics.

One effective asset preservation method involves using a life estate (sometimes called a Lady Bird Deed) or a Transfer on Death Deed, either of which removes the individual’s home from the estate while allowing them to retain control during their lifetime. This approach prevents the state from seizing the property to recover Medicaid funds and avoids probate. Additionally, individuals can structure their assets to pass directly to beneficiaries through life insurance policies, retirement accounts, and other non-probate assets, which are exempt from Medicaid estate recovery. It’s also key to note that Texas does not pursue recovery claims in certain situations, such as when the deceased is survived by a spouse, children under 21, or a disabled child.

What Other Funding Approaches Are Available For Long-Term Care Expenses?

For those who may not qualify for Medicaid or prefer other options, several alternative financing strategies exist. A skilled attorney can help you determine if alternative funding methods may be right for you or your loved one by evaluating factors such as home equity, health status, and long-term financial goals. Options include:

  • Long-term care insurance: Long-term care insurance policies can help cover the costs of various types of care, including in-home assistance, assisted living, and nursing home care. By purchasing long-term care insurance early, individuals can potentially secure lower premiums and ensure they have coverage in place before health issues arise. Some long-term care policies are structured so that if the funds are not used for long-term care, then the policy pays beneficiaries as a life insurance policy.
  • Reverse mortgages: Reverse mortgages allow homeowners to tap into their home equity without monthly loan payments, providing funds that can be used for in-home care, medical bills, or other expenses. This option is particularly beneficial for situations where seniors wish to age in place or when one spouse needs care in a facility while the other remains at home. The funds provided by a reverse mortgage often will not fully cover long-term care costs on their own but can be part of a larger financial plan. However, the reverse mortgage generally means that the home will not be available to pass on to the homeowner’s children when the homeowner dies.
  • Annuities: Long-term care annuities combine a deferred fixed annuity with long-term care insurance, offering both guaranteed lifetime income and coverage for long-term care expenses if needed. These annuities typically have less stringent health requirements than traditional long-term care insurance and provide tax advantages, as the long-term care benefits are not taxable.
  • If the concern is monthly income slightly over the limit to qualify for Medicaid, then a Supplemental Needs Trust, also called a Miller Trust, may be helpful. The Miller trust allows the income to be used for non-essential items, such as trips to the beauty salon or barber or a weekly dinner at a restaurant, while the Medicaid funds pay for the care facility. Any funds left over at the end of the beneficiary’s life will be taken by Medicaid, so the maker would not want to ever accumulate a large sum in the Miller trust.

Why is Today the Best Time to Create Your Long-Term Care Plan?

While it is never too late to plan for long-term care costs, proactively considering how these expenses will be covered is strongly recommended. By beginning the planning process well before care is needed, you will have more options available and can take full advantage of strategies like trusts and gifting without running afoul of Medicaid’s look-back period. Early long-term care planning as part of a larger estate plan also allows for more effective asset management, potentially growing wealth that can be used to fund future care needs.

How Can Our Firm Assist With Your Planning Journey?

By addressing long-term care planning within the context of overall estate planning, you can create a cohesive strategy that safeguards assets, ensures care needs are met, and preserves your legacy for future generations. Our experienced legal team at South TX Family Law can help you financially prepare for your future care needs so you and your loved ones can have peace of mind. To schedule an initial consultation with a trusted attorney, contact our San Antonio office today at 210-775-0353.