Month: December 2021

Medicare generally covers only about three months of nursing home care immediately following a hospitalization, but you have other options, including Medicaid.

To be eligible for Medicaid’s long-term care coverage, you must exhaust many of your personal resources. In general, the person entering the nursing facility may have no more than $2,000 in “countable” assets.

Believing this, many couples purchase long-term care insurance, which can be expensive. But middle-income married couples may be able to bypass long-term care insurance and rely on Medicaid for long-term care due to spend-down exclusions.

While the person entering the nursing facility may have no more than $2,000 in countable assets, in 2021, a nursing home patient’s spouse can keep half of the couple’s countable joint assets up to certain limits (around $100,000). Some states are even more generous.

And not all assets are counted against this limit. Excluded, for example, are the couple’s principal residence, if the spouse not entering the nursing home or another dependent relative lives there; one motor vehicle of any value; personal possessions, such as clothing, furniture and jewelry; prepaid funeral plans; a small amount of life insurance; and other assets that are considered inaccessible for one reason or another. Plus, the spouse does not have to use his or her income to support the nursing home spouse receiving Medicaid benefits.

Say you and your spouse have a home worth $400,000, a car worth $20,000 and savings worth $200,000. If you enter a nursing home, your spouse would keep the house and the car, but for Medicaid to kick in, you’d have to spend down your savings and investments to roughly $100,000.

Of course, this is only the tip of the iceberg. If you need help understanding Medicaid spend-down rules, we can provide additional input. Please call or email us.

An improving economy generally means higher interest rates, and higher interest rates typically cause bond prices to fall. But that doesn’t mean you should avoid bonds altogether. The key is to select bonds that tend to not be as affected by interest rates as many others.

Municipal bonds are one option, depending on your individual financial situation. A municipal bond is a debt security issued by a state or local government or governmental entity, typically to raise money for building roads, schools, etc. The interest is usually exempt from federal income taxes. Bonds issued by the state in which you live are generally exempt from state taxes as well.

The tax advantages are why investors with high income levels have traditionally sought municipal bonds or bond funds. Although the actual yield may be lower than on a taxable investment, the “tax-equivalent yield” (the yield after you’ve factored in the fact that you aren’t taxed on the bond’s interest) may actually be higher. For example, assuming a combined 38% state and federal tax rate, a 4.15% yield on a 10-year municipal bond is equivalent to a 6.69% tax-equivalent yield.

But there are several other reasons to buy municipal bonds. Municipal bonds may not be as volatile as other fixed-income investments. Additionally, a strengthening economy, which typically accompanies an interest rate hike, can improve issuers’ financial health and bolster municipal bonds.

If you think municipal bonds might be right for you, we can help you select them, so please call or email us. We’re here for you.