Long-term care is something most of us will have to consider at some point in our lives, so planning is essential. While we cannot predict the timing or level of care, we can take steps to prepare for an unexpected medical and financial crisis to help reduce the stress on ourselves and our family members. The cost of long-term care continues to rise, but Medicaid planning can protect your assets, such as your home, hard-earned savings, retirement fund, or anything you wish to pass on to your loved ones.
Medicaid is a federal and state program that helps seniors with limited assets and income afford long-term healthcare. Many seniors believe their only option to qualify for the program is to “spend down” their assets. However, proactive Medicaid planning can protect a substantial portion of your estate if done correctly. That means preparing at least five years before the potential need for benefits. The program’s eligibility rules are complicated, as is the application process. That’s why many people choose to hire an elder law attorney who specializes in Medicaid planning to evaluate their estate and reorganize assets over time.
In New York, Medicaid qualification requires a five-year look-back period of all the Medicaid applicant’s financial transactions. The program verifies income and makes sure you have not gifted property to others under fair market value to reduce countable assets. Gifting assets is subject to a penalty that results in a period of ineligibility for benefits. If you begin early, you can ensure qualification for benefits when you really need them.
Qualifying for Medicaid Without a Penalty
A combination of options gives you the best outcome when applying for Medicaid benefits. An elder law attorney can customize a Medicaid planning strategy that works for your specific needs and goals so that when you find yourself in need of long-term care services, you can receive Medicaid benefits to offset long-term care costs that can range anywhere from $60,000 to $210,000 a year.
The rising costs of long-term care can be overwhelming and unaffordable, depending on an individual’s needs. Your Medicare policy does not cover long-term in-home or nursing facility services, and long-term care insurance premiums are very high. To discover whether more options are available to you, you will need a list of your countable assets to determine ways to spend down that comply with Medicaid rules. It makes sense to spend down if it offers advantages. Some examples of spending down include:
- Make home modifications like stairlifts, wheelchair ramps, walk-in showers, and other convenient amenities
- Purchase an irrevocable funeral trust
- Pay off debt
- Gift assets at fair market value with legal documentation
- Create caregiver agreements to compensate for care
Caregiver Agreements are formal agreements to compensate caregivers who can be relatives or friends, but they need to be carefully drafted by a professional.
Qualified Income Trust
You may still have too many assets to qualify for Medicaid benefits, but those assets can be protected from Medicaid’s Estate Recovery Program. Your elder law attorney may recommend transferring them to an irrevocable trust, sometimes referred to as a Medicaid Income Only Trust, a Qualified Income Trust, or a Miller Trust. An irrevocable trust is managed by a trustee you choose, who then has legal control of the assets in the irrevocable trust. Once those assets are transferred to the irrevocable trust, they are no longer countable assets for Medicaid estate recovery, but the act of transferring the assets to the irrevocable trust may make you ineligible for a period of time if it is not made 5 years prior to applying for Chronic Care Medicaid benefits or 2 1/2 years prior to applying for Community Care Medicaid benefits.
Promissory Note/Gift Planning
A common way to minimize the amount of money that may be lost towards paying for your long-term care needs if you have too much to qualify for Medicaid benefits, is to utilize a Promissory Note/Gift Planning strategy. This strategy can be complicated, but basically a gift is made to a non-exempt person and then a promissory note (loan) is made to the same person with the applicant’s money. The gift will create a penalty period. The repayment of the promissory note (loan) is used to privately pay for long-term care services during the penalty period. At the end of the penalty period, the applicant is eligible for Medicaid benefits. This strategy caps how much may be lost towards long-term care costs allowing the applicant a pool of money to enhance his quality of life and leave a legacy to his heirs.
The surest way to avoid violating a look-back period when qualifying for Medicaid is to consult a qualified Medicaid planning and elder law attorney before you gift or transfer any assets. If a violation has already occurred, they can also offer assistance to correct the problem.
Always seek professional legal advice when creating your long-term care strategy using Medicaid. Applications are rarely successful due to mistakes when filling out forms, and it can have devastating long-term consequences on a family and their finances. Begin well before you anticipate needing long-term care. Become well-informed about all your options as you go through the application process. Proactive planning and expert legal strategies can help protect your assets and offer considerable help for your long-term care costs. We hope you found this article helpful. Please contact us today at (631) 686-6500 to schedule a complimentary consultation to discuss your Medicaid pre-planning needs.