What is Medicaid Planning?
Once we reach an advanced age, we may no longer be able to care for ourselves and will require assistance in our day-to-day lives. The concern for many seniors is the fact that long-term care is incredibly expensive. Whether you hire an at-home caregiver or spend time in an assisted living community, you could be looking at hundreds of thousands of dollars. According to Paying for Senior Care, Nassau County is home to about 1.36 million residents, with seniors aged 65 and older making up 18.2 percent of the County’s population. The average monthly cost in this area for assisted living care is $5,991—simply too much for many families. While the actual rates could be higher or lower, depending on the facility, they are well above the state average of $4,800. So, what can you do about it? Speaking with New York Medicaid planning attorneys from Davidov Law Group can result in clear options that shield the assets you have worked hard to build while still allowing you to qualify for Medicaid.
There are numerous things to consider, such as tax consequences, strict transfer rules, exemptions, and many other intricate aspects in Medicaid planning. Our elder law team in New York can walk you through the process, explaining it step-by-step and answering any questions you may have. We will discuss the pros and cons of each option, finding a plan that works for you. First, we listen, then we educate, then we empower you to make informed decisions about your future.
What Happens When You Fail to Engage in Medicaid Planning?
Medicaid planning is both ethical and legal. As such, it is something that everyone should engage in as a means of avoiding the negative fallout from doing no Medicaid planning at all. While most of us want to believe we will live in our home until we die—therefore, will not need long-term care—others think they might need this care, but not for many years.
Waiting until you actually need long-term care means you have waited much too long. When you work with New York Medicaid planning attorneys from Davidov Law Group, you can develop a Medicaid asset protection plan that provides long-term care when you need it, while preserving your property for your heirs. If you fail to engage in Medicaid planning, you may find yourself dealing with the following:
- Your Medicaid approval for long-term care could be significantly slowed down. When you have a strategy in place for distributing or transferring assets, Medicaid approval can occur much quicker. When an agent must carefully examine any recent property transfers to ensure there are no violations of Medicaid requirements, your approval may slow to a crawl.
- Your Medicaid application could be denied due to recent asset transfers. With Medicaid’s automatic look-back period, if you transferred assets during that period, you could be ineligible for Medicaid long-term care benefits.
- Long–term care insurance might not fully pay for all costs associated with long-term care. Some people may fail to engage in Medicaid planning because they have purchased long-term care insurance so believe they are fully covered. Unfortunately, even though long-term care insurance is expensive, it may not cover all the costs associated with nursing home care or assisted living care, leaving a serious “gap” between insurance benefits and costs of care. If you have failed to engage in Medicaid planning, that gap could result in significant out-of-pocket costs.
- You may have mistakenly relied on health insurance or Medicare to pay for long-term care. While health insurance or Medicare may pay for a short-term stay in a nursing home or assisted living facility, neither will pay for long-term care. You must have an asset protection plan in place now, in case you need long-term care in the future.
- Your spouse will not be protected. When you fail to engage in advance planning for long-term care, your spouse may not have the assets and resources necessary to care for himself or herself should you require long-term care. When you fail to have a Medicaid asset protection plan, your spouse could lose property when they are forced to liquidate assets to pay for your long-term care. Without proper planning, even if Medicaid pays the costs initially, they could place a lien on your property, leaving your spouse without a home or other assets.
It is crucial that you engage in advance planning to protect your assets and ensure you qualify for Medicaid when you need it. When you wait to plan, you may have waited too long. Your New York Medicaid planning attorneys from Davidov Law Group can effectively help you protect your home and other assets through Medicaid planning.
Protecting your Family with a Medicaid Planning Attorney
Protecting your family through careful Medicaid planning is essential. Medicaid planning encompasses a wide variety of services—from simply assisting in the collection and preparation of documents to the complete restructuring of financial assets. Many of the complexities associated with Medicaid planning lie in the fact that the monthly income or resources of the individual are more than Medicaid allows. This is not an insurmountable problem, however, as income can potentially be converted into Qualified Income Trusts, and excess resources can be converted into no-countable assets. There are many different Medicaid planning tools that can be tailored to your unique situation. Some of the benefits of Medicaid planning include:
- The expense of long-term care is avoided. Your loved one can receive the care they need but might not otherwise be able to afford.
- There will be no delay in benefits. The simplest of errors can result in the denial of Medicaid benefits. Since eligibility for Medicaid is so complex, it is essential that you engage in early Medicaid planning, avoiding a denial or delay of much-needed benefits.
- The healthy spouse will be able to continue living at home. If you do not engage in Medicaid planning, the healthy spouse may not have the financial resources to continue living in the marital home.
- You will save unnecessary stress and time. The Medicaid application and review process can be extremely time-consuming and stressful. When you have engaged in Medicaid planning, the process is greatly accelerated, saving you undue anxiety.
- You can ensure your heirs can afford an education or live in their own homes. Medicaid’s estate recovery program could conceivably deplete assets you intended to leave to your children or grandchildren.
What is a Medicaid Asset Protection Trust?
Assets can be protected through a Medicaid Asset Protection Trust—sometimes known as an Irrevocable Income Only Trust. To fully protect your assets and avoid scrutiny, the MAPT must be created at least 2.5 years prior to when home care is needed, or 5 years prior to when nursing home care is needed. Medicaid Asset Protection Trusts are irrevocable—although in New York State, an irrevocable trust can be revoked with the consent of the beneficiaries and the grantor. If revoked, a MAPT no longer protects the assets from Medicaid.
The trustee of the MAPT may not be the Grantor or his or her spouse. As you might imagine, this means you are giving up a certain level of control when you use a Medicaid Trust. You do, however, have the ability to remove and replace a trustee and you are also allowed to change the beneficiaries of the trust. If your home is placed in the MAPT, you can retain the right to live in your home at no cost for the remainder of your life.
Your spouse will have the same right. You can maintain any property tax exemptions you receive, such as STAR. As the Grantor of the MAPT, you can receive interest, dividends, or rental income generated by the trust, but cannot use the principal. Your New York Medicaid planning attorneys from Davidov Law Group can help you determine whether a MAPT is right for you.
LTC (Long-Term Care) vs. Living Trusts vs. MAPT
While long-term care insurance and Medicaid Asset Protection Trust may be thought of as alternatives to one another, they are not. Long-term care insurance protects your assets and income against the costs of nursing home care and it can pay for someone to come into your home and care for you. MAPT protects your assets, your home, and your life savings, but does not protect your income. When you use MAPT to protect your assets at least five years ahead of the time you need long-term care, then Medicaid will pay for that care and your assets are protected. A pooled income trust may also be a good option to help pay towards your care. Long-term care insurance can be prohibitively expensive for many while using a MAPT or living trust to shield your assets is relatively inexpensive.
Are there Medicaid Benefit Asset Exemptions?
To be eligible for Medicaid nursing home benefits, as a single individual aged 65 or older, you must have income less than $2,523 per month and assets of less than $2,000. COVID-19 stimulus checks and Holocaust survivor reparations are not counted as income. These income limits are more complex for married applicants. When only one spouse is considered, the income of the non-applicant spouse is not used in determining eligibility for the applicant spouse. There are assets that are exempt under Medicaid rules, including the following:
- You are entitled to one car, regardless of value, and a second vehicle that is seven years old or older will also be considered exempt.
- In general, your personal property is exempt, however, if you have an expensive art or jewelry collection, those might become countable assets.
- Your home may be exempt if it is within the equity limits (If your spouse continues to live in the marital home, it is exempt regardless of value). The home equity interest allowable for 2022 is $636,000. For the home to be exempt, the Medicaid applicant must currently live in the home or have the intent to return to the home.
- Medicaid provides for a Community Spouse Resource Allowance that ensures the spouse that does not require nursing home care continues to have the minimum support necessary to reside in the community. The maximum federal limit for spousal resources as of 2022 is $137,400. Within these federal standards, states can set their own standards.
- Your life insurance is exempt up to $2,500 total and combined cash value. Since Medicaid is primarily looking for accessible resources, the death benefits are not calculated.
- When properly structured, your 401(k) or IRA may be considered exempt, however, the payout amounts will be considered countable income.
- Assets that cannot be sold, like a timeshare, are considered exempt.
- Generally speaking, rental or income-producing property is considered exempt as far as assets, the income is counted toward the allowable income limits.
- Prepays for funerals are considered an exemption when counting assets for Medicaid.
How to Select the Best Medicaid Planning Attorneys to Protect Your Family
Engaging in Medicaid planning sooner rather than later is always the best option. However, if you feel as though you may have waited too long, contact New York Medicaid planning attorneys from Davidov Law Group. We have extensive experience in Medicaid planning, therefore, may be able to implement certain strategies to help you, even at this late date. We have an in-house CFP with a depth of experience in financial matters for your benefit. We build strong client relationships and ensure we understand your goals prior to making any recommendations. Reading our book—“Keeping it in Your Family—Protecting Your Family and Leaving a Lasting Legacy,” can provide answers to any questions you may have.
How Davidov Law Group Will Protect Your Family and Preserve Your Legacy
The New York Medicaid planning attorneys from Davidov Law Group are living proof of the American Dream as immigrants, and children of immigrants. We are a family-owned firm whose parents made significant sacrifices to provide a better future for us. Few estate planning firms have an in-house Certified Financial Planner to help clients plan holistically as Davidov Law Group does. Contact Davidov Law Group today to join the more than 2,500 families protected by our firm.