Uncertainty in life is a certainty. Our lives are in a constant state of flux, which requires planning in order to be in a position to address the unforeseen. Estate Planning and Asset Protection applies to almost everyone, regardless of age. As a person ages, they may be concerned about planning for the cost of their care while continuing to maintain their lifestyle, and about transferring their wealth to their children with minimal tax consequences.
Once a person has accumulated savings and wealth, a fundamental financial planning priority is to protect assets from creditors. Most people are concerned that they may spend some time in a nursing home and that the substantial cost of their care will rapidly deplete their hard-earned life savings, leaving nothing to pass on to their heirs.
Many misconceptions exist about the Medicaid application and qualification process. The most common include: once a person is in a nursing home, it is too late to protect any assets; by adding a child’s name to a bank account, the account is protected; and for a married couple, assets titled in one spouse’s name are not available to pay for the care of the other spouse. Another serious misconception is that if a person does not have a lot of money, he or she will not be able to get into a good nursing home. While these may be common thoughts, they are incorrect.
Substantial changes to the Medicaid laws were adopted in New York State effective February 8, 2006. As a result, rules concerning Medicaid eligibility and the ability to protect assets from a long term nursing home stay have undergone many changes. The following is a quick summary of the provisions of the law:
- Phase-in the extension of the look-back period for a Medicaid application from three to five years.
- Changes the way gifts of assets made during the look-back period are penalized. The penalty period will now begin to run after a person applies (and would have been otherwise eligible) for Medicaid. NOT when the asset was gifted.
- Disqualifies Medicaid applicants if the equity value of the applicant’s residence exceeds $750,000.
- Requires applicants and their spouses who purchase an annuity after February 8, 2006 to name the State of New York in first position as death beneficiary to pay back Medicaid benefits (or in second position where there is a spouse, minor or disabled child). Any changes made to annuities purchased before February 8, 2006 to prevent the State from recovering may also be considered a transfer of assets.
- Exempt transfers between spouses, to disabled children, trusts for the sole benefit of disabled children and caretaker children were NOT affected by the DRA.
- “Institutionalized” Individual can retain the following: (1) $13,800 in resources, life insurance with a face value of $1,500 or less, unlimited irrevocable burial trust account, and $50 per month in income.
- “Community Spouse” can retain the following: (1) $74,820 in resources (or one-half of the couple’s combined assets up to a maximum of $99,540, whichever is greater), house with up to $750,000 in equity, a vehicle of any kind, and $2,739 per month in income. If there is not sufficient income available to provide the community spouse with his or her income allowance, additional resources may be retained to generate extra income. In those circumstances, the community spouse can retain up to $109,560 in resources if needed to generate extra income.
The Medicaid program is a “needs-based” program. This means that if you have assets above the qualification limits, you will not be eligible to receive Medicaid benefits as a matter of right and will be required to privately pay for your care in a nursing home. The limit of assets you are permitted to own to qualify for benefits depends upon whether you are single or married.
An elder law attorney can appropriately advise you on how the penalty periods work after a gift or transfer is made and can review and make suggestions for title ownership of assets, as well as establishing an asset protection plan that is appropriate to your own situation so that you receive the best quality of care possible.