Very few New York seniors have the financial resources necessary to cover the cost of an extended nursing home stay. Medicaid planning strategies let you preserve your existing assets while maintaining eligibility for benefits to cover the cost of your long-term care needs.
You Can’t Count on Medicare
Many seniors mistakenly believe that Medicare benefits cover long-term care. Understanding the limitations of Medicare is an essential part of proactively planning for any future care that you may require.
Medicare covers all seniors, regardless of income. Medicare Part A covers hospital care, while Part B covers doctor’s visits, lab work, and more general medical needs. Part A will cover a stay of up to 100 days in a skilled nursing facility for a specific illness or injury following a hospital stay of three or more days. An extended stay in a long-term care facility is not covered.
Medicaid pays for the nursing home costs of most seniors in the United States. However, this program is means-tested. There are strict income and asset requirements. If you don’t plan ahead, you will be forced to exhaust all of your financial resources before you qualify for benefits.
Gifting Assets Isn’t the Answer
Giving assets to children, grandchildren, or other heirs won’t help you qualify for Medicaid benefits in most circumstances. Medicaid has a five-year lookback period where all financial transactions an applicant makes are subject to a strict review process. Gifting assets—or selling them for below market value—can result in the applicant being denied benefits. This is because the government assumes these assets should have been applied to the cost of future long-term care needs.
Seniors who are found in violation of the lookback period can try to recover the assets in question to have the penalty period reevaluated. If this is not possible, the only other option is to attempt to qualify for an undue hardship waiver—which requires a senior to prove they will face an inability to provide food, shelter, and other basic needs without assistance.
Spending Down Assets Must Be Done Carefully
Spending down assets is a common Medicaid planning strategy, but this doesn’t mean you should go on a simple shopping spree. The goal is to pay for necessary expenses in a way that preserves Medicaid eligibility.
Ideas for spending down assets may include:
- Paying off your mortgage or other forms of debt
- Updating your home by making overdue improvements or by adding modifications that make it handicapped accessible
- Creating an irrevocable funeral trust to pay for funeral and burial costs in advance
- Purchasing a Medicaid exempt annuity to convert a lump sum of cash into a monthly income stream for yourself or your spouse
- Creating a detailed life care agreement to reimburse a caregiving family member or friend for their assistance
Countable Assets Can Be Converted Into Exempt Assets
Countable assets for Medicaid applicants include cash, savings accounts, checking accounts, stocks, bonds, investments, and vacation homes. In some cases, converting countable assets into exempt assets can help a senior qualify for benefits.
Exempt assets include personal belongings, household items, a vehicle, IRAs or 401Ks in payout status, burial funds up to $1,500, non-refundable pre-paid funeral agreements, and the applicant’s primary home with an equity value under $893,000. Additional assets may be exempt if the applicant is married and their spouse will continue to live at home.
Establishing a Medicaid Trust
For seniors with substantial assets, creating a Medicaid Asset Protection Trust (MAPT) may be necessary to preserve program eligibility. Assets in a trust are not legally owned by the senior, but they can continue to use income from the trust to pay for necessary expenses. The trust also protects assets from Medicaid’s estate recovery efforts after a senior’s death.
Unfortunately, a MAPT created when a senior is already in poor health will violate the five-year lookback period. If you are interested in this asset protection tool, you need to create the trust while you are still healthy and living at home.
Schedule a Free Consultation With Our Brooklyn Medicaid Planning Attorney to Learn More
Elder law attorney Theodore Alatsas has extensive experience helping New York seniors qualify for the Medicaid benefits they need to cover long-term care costs while preserving assets for their heirs. Alatsas Law Firm can create a Medicaid planning strategy that meets your unique needs and provides peace of mind regardless of what the future holds.
Alatsas Law Firm is conveniently located for residents of Brooklyn, Queens, and Staten Island. Our ground floor office is handicapped accessible with a subway stop and two bus lines nearby. Contact us today to schedule a free, no-obligation initial consultation.