If you are close to retirement or helping your aging parents with their future plans, it is essential to think about health care needs that might arise later. This includes planning for the cost of Medicare and protecting Medicaid eligibility. How can you prepare for your future health needs in an estate plan?
What should you know about Medicare?
Medicare is a federal program that provides health insurance to people with disabilities and people who are 65 or older. This program involves four different parts:
- Medicare Part A: This covers care in hospitals or nursing facilities, hospice care and some home health care.
- Medicare Part B: This covers certain medical care, medical supplies and preventive services.
- Medicare Part C: These are alternative plans offered by private companies approved by Medicare. They cover everything that Part A and Part B cover.
- Medicare Part D: This adds prescription drug coverage to the original Medicare and other types of Medicare plans.
Each type of Medicare has different costs and coverage limits, which can greatly affect your financial planning. It’s important to consider your expected income when you retire to determine your Medicare Part B and Part D premiums, as these depend on your income level. Including these insurance policies in your planning can help avoid unexpected costs that can deplete estate assets.
What should you know about Medicaid and the five-year lookback period?
In addition to ongoing health costs, you should consider the potential for future care. Medicaid – which can cover the costs of long-term care that Medicare does not cover – can provide support. However, if you or your parents may require this support, you need to plan ahead because this program has strict income and asset limits.
An important part of this planning is understanding the five-year lookback period. This is the time Medicaid checks any asset transfers you made. If you transferred assets for less than their value during this period, you might face penalties. These penalties can delay the start of Medicaid coverage.
Estate planning tools like trusts can help you prepare for the need for long term care and protect your assets. However, early planning is crucial to ensure you have coverage when needed.
What should you do to prepare for future medical needs in your estate plan?
Here are some steps to take when incorporating Medicare and Medicaid into your estate planning:
- Assess current and future healthcare needs: Start by evaluating your current health and consider potential future needs. Think about family health history and personal health risks to estimate the kind of care you might need later.
- Plan for potential costs: It is important to prepare for future healthcare costs as you approach retirement. Consulting with a financial planner can provide personalized advice and solutions.
- Legal considerations: Make sure to have important legal documents like a will, a living will and powers of attorney for finances and healthcare in place. Regularly review and update these documents to reflect your current wishes and circumstances. An experienced estate planning attorney can help you prepare these documents.
- Educate family members: If you are creating a plan with your parents, make sure you understand their wishes and financial details. If you are planning for yourself, communicate your plans clearly to your children or caregivers to prevent any confusion or stress during health crises.
By considering Medicare and Medicaid when you create your estate plan, you ensure that you or your loved ones will have the necessary coverage and support during the later years. Whether you are planning for yourself or assisting your parents, the right information and preparation can secure a stable and worry-free future.