An Overview of Long Term Care Planning in North Carolina

The cost of long term care in the United States is almost unfathomably expensive. According to the latest data from SeniorLiving.org, the average cost of a private room in a nursing home in North Carolina is an astounding $8,060 per month. These costs continue to rise faster than inflation. Even a short period of long term care could quickly eat up a huge chunk of a person’s life savings.

There is some good news: There are steps that you can take now to prepare your estate for future long term care needs. Indeed, long term care planning is an important part of a modern estate plan. In this article, our Charlotte estate planning lawyers provide an overview of long term care planning and Medicaid planning in North Carolina.

The National Institute on Aging (NIA) defines long-term care as professional services that help a person “live as independently and safely as possible when they can no longer perform everyday activities on their own.” Long term care planning is about preparing your finances and your estate to ensure that you are in the best position to cover the costs of these services. Broadly speaking, long term care costs are covered by some combination of the following:

• Direct, out-of-pocket payment for services;
• Private long term care insurance coverage; and
• Government assistance.

The primary government program that provides coverage for long term care costs is Medicaid. Funded by both the federal government and state governments, Medicaid is generally administered at the state-level. It provides strictly-need based benefits to qualifying individuals, including people who need long term care. Here is the problem for most North Carolina families: Medicaid has extremely strict income and asset requirements for long term care and nursing home coverage. Here is what you need to know about Medicaid’s income and asset tests:

• To qualify for long term care coverage through Medicaid in North Carolina, a vulnerable person can have no more than $1,012 and $2,000 in available assets.

If someone has too many assets to qualify for long term care coverage through Medicaid, the government will make them use their own money first. It will only step in when they run out of funds. In other words, long term care can quickly eat away at a person’s entire life savings. This is where estate planning can make all of the difference. By taking advantage of available estate planning strategies—such as relying on the primary residence exemption or setting up an irrevocable living trust, a qualified income trust, or a Miller Trust—you can often preserve Medicaid eligibility while protecting assets.

A Note on Medicare and Nursing Homes: You may be wondering if Medicare can help cover long term care costs. Unfortunately, the answer is generally ‘no.’ Medicare only covers nursing home expenses and related long term care costs for short periods of time, typically after a medical emergency. You will have to go through Medicaid to get ongoing long term care costs covered.

The sooner you begin long term care planning, the better. As explained by the North Carolina Department of Health and Human Services, Medicaid uses a five-year look back period when assessing a person’s long term care eligibility. If you apply for nursing home coverage through Medicaid, the government will review the last five years of transactions that you made.

If you made certain types of transactions within that period—such as gifting assets to your adult children—Medicaid could actually use that against you and require you to pay more for long term care. Transactions that were made before the five year look back period are not subject to review by Medicaid. It is a lot easier to protect your assets from long term care costs if you start early.

At Arnold & Smith, PLLC, our Charlotte estate planning team is focused on protecting the rights and interest of our clients and their loved ones. We see solutions where other professionals see problems. If you have any questions about long term care planning or Medicaid planning, we are here to help. To arrange a fully confidential, no obligation case evaluation, please contact our team today. We provide estate planning services throughout the region, including in Charlotte, Gastonia, Concord, Monroe, Mooresville, and Statesville.