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One of the greatest fears Americans have is ending up in nursing homes. This can often come with a hefty price tag. Depending on your location, and the level of care you need, it can range anywhere from $40,000 to $200,000 per year. Many people end up paying for nursing homes out of their savings until they have none. Then, with no savings, they turn to medicaid to cover the costs. Paying with private money is great, since you are more likely to gain access to a better facility. In addition, doing so eliminates or postpones dealing with the medicaid bureaucratic system. If you plan carefully though, you can protect your estate – in order to give it to your spouse or children. This can be done by purchasing long term care insurance, or by making sure you get benefits from Medicare and Medicaid programs.
Congress has a period of ineligibility for medicaid, for individuals who transfer their assets. If a transfer is made prior to Feb 8, 2006 – Medicaid officials only look at transfers made within 36 months prior to the medicaid application, or 60 months – if the transfer was made to/from certain types of trusts. If a transfer was made after Feb 8, 2006, then there’s a look-back period of 60 months.
This means planning for medicaid, is something you need to do ahead of schedule. The look-back period determines what transfers will be penalized. The length of the penalty will also depend on the amount of money transferred. The penalty period, is created by the dividing the amount transferred by the avg. monthly cost of nursing home care in the respective state. For example, if $100,000 was transferred, in a state where the average cost of care is $5,000 – then the penalty period will be for 20 months. This period doesn’t begin until the individual has moved into a nursing home, has spent down to the asset limit for medicaid eligibility, has applied for medicaid coverage, et all. Consequently, if a person transfers $100,000 on April 1, 2013 and then moves to a nursing home on April 1, 2014, and spends down his assets to the medicaid eligibility limit on April 1, 2015, – then that date is when the 20 month penalty period begins.
Our NYC Medicaid Planning Lawyers can help you plan, and advise you on, when transfers should be made – with a full understanding of the consequences. People who make transfers need to make sure they don’t apply for Medicaid before the look back period expires. If you plan on making a transfer, you need to speak to an elder law attorney who can advise you. The penalty can be extended longer than 5 five years depending on the size of your transfer.
One of the methods used before the Deficit Reduction Act of 2005, was “half a loaf,” which was the medicaid applicant giving away half of his assets. Before applying for medicaid, the applicant would transfer half his resources. This would create a medicaid penalty period. The applicant would already be in a nursing home, and used the other half to pay for care while waiting for the penalty period to finish. After the penalty expired, the individual would apply for medicaid coverage.
The DRA eliminated this type of planning. In some states, it may still be available as a strategy. It’s crucial you consult with a medicaid planning lawyer in NY before making a transfer. Any strategy must weigh the pro’s and con’s. That means taking into account the nursing home resident’s income, expenses, and the cost of the nursing home. If you give money to your children, it’s now their money. You shouldn’t rely on them to hold the money for you. They may not give it back. They may lose the money, or lose it to due divorce, bankruptcy, or lawsuits. In addition, if you give money to your children – this could impact your grandchildren’s ability to get financial aid in college. Transferring money to your children could also result in financial implications for them. Your children may lose tax advantages as a result of the extra income from your assets. They may end up paying higher taxes as a result of having more assets.
Never transfer assets when medicaid planning unless you keep enough money in your name to pay for your needs, and can pay for your care during the period of ineligibility for medicaid. If you’re married, you should transfer your home to a spouse. This gives the spouse control over your assets and allows the spouse to sell it after you become eligible for medicaid. Your spouse can then, in his/her will, give the house away to someone else. If you don’t do this, the nursing home can come after your home/assets – in order to sell them to pay for your care.
Most transfers are penalized. Certain transfers are exempt from the penalty. Even after you enter the nursing home, you can transfer any asset to the following individuals without having to wait for a period of medicaid ineligibility: your spouse, your child who is blind/disabled, into a trust for someone under age 65 – and disabled, children under age 21, your child whose lived in your home for at least 2 years prior to you moving into a nursing home and who provided you with care, sibling who an equity interest in the house and has lived there for at least year before you moved to a nursing home.
Medicaid is a program which provides medical assistance to people with low income/assets. It’s available to people who qualify for public assistance or SSI. It’s available in some states for people with higher incomes. In New York, it’s available for people over 65 years, or who are blind/disabled – and whose incomes are too high to qualify for public assistance/SSI. These individuals typically must spend down the excess income on medical costs, until they reach the mandated income level. One alternative, is that NY allows recipients living in the community to to protect their income by using trusts for income. Once you reach eligibility thresholds, medicaid will cover all of your medical care: hospital bills, doctor bills, nursing home coverage, home care, and more. If you’re on medicare, you keep and use medicare. Medicaid covers the medicare deductibles and the services not provided by medicare.
Medicare Parts A & B – is the traditional medicare. It’s a federal program for people 65 years or older, or disabled persons who receive social security disability benefits. It’s the health insurance component of social security. Medicare Part A handles hospitals, and nursing/home healthcare. Medicare Part B is optional, it covers physician costs and medical services/supplies. Medicare is the most cost effective, and beneficial health insurance senior citizens can get. Everyone eligible for it, should take it, and get the optional Part B. Medicare has many holes. It has deductibles, limited payment periods, and restrictions on the services covered. Two restrictions are that it only covers nursing home care, if it is skilled – versus custodial care, and it only covers 100 days of nursing home care per illness.
This form of medicaid provides services well beyond those provided by Medicare. It includes home nursing, home physical therapy, and home care. Medicaid rules regarding transfers/gifts and eligibility for community based care are very different from the rules for getting nursing home coverage. In New York, transfers/gifts won’t disqualify you from receiving community based care, including home services – but will cause a disqualification for nursing home care.
Any medicaid recipient residing in the community in 2015 can keep $825 of income per month. An individual in an institution is restricted to a personal allowance of $50 per month. In 2015, income allowed for a couple in a community — is $1209 per month, plus an unearned credit of $20. They are allowed $21,750 in resources.
In order to receive Medicaid, someone who is disabled/over age of 64, can have a non-exempt resources of no more than $14,850.