Pre-Planning Elder Care: Are You Prepared

Finance | Prager Metis | May 04, 2015

Typically, people do not begin to consider their long-term care until they are well into retirement. In today’s economic environment, it is essential to create and implement an elder care plan in your early 60s to ensure you take advantage of planning opportunities and have your wishes carried out.

Outright Gifts

There are a number of planning strategies that seem like an easy solution, but end up having unforeseen consequences. For example, it may seem that the most efficient way to transfer assets in order to receive Medicaid benefits is through an outright gift. It is the tax implications of an outright gift often that will, and should, dictate how a transfer should be structured.  In addition, a number of important questions should also be addressed: does the person, usually the child, have creditor problems? Is there a chance that they will get divorced? Who will the ultimate beneficiaries of my gift be (and is it who I intended)? If you decide to transfer any of your assets to another person, you should remember that these assets will no longer be in your control.  An outright gift does not protect an asset from creditors, and could be lost in bankruptcy.

New York Medicaid Rules

If you plan to apply for Medicaid, you need to start the proper planning to qualify. Medicaid pays for a number of services, but some may not be covered for you because of your age, financial circumstances, family situation, transfer of resource requirements, or living arrangements. To qualify for this program, you must be a resident of the state of New York, a U.S. national, citizen, have satisfactory immigration status, in need of health care/insurance assistance, whose financial situation would be characterized as low income or very low income.

For an individual to currently qualify for long-term Medicaid services in New York, he or she can own no more than $14,850 in non-exempt assets. The resource level for a couple (or two-person household) is $21,750. Assets that are considered exempt include qualified retirement accounts (to the extent such accounts are in payout status) and the individual’s home, to the extent that the Medicaid applicant, a spouse, a minor, or disabled or blind child is living in the home.

Nursing Home Care

With nursing home care, often referred to as “Institutional Medicaid,” there is currently a five-year look-back period that must be satisfied in order for an individual to qualify for Medicaid. All assets transferred (gifted) during the five-year period preceding the Medicaid application may be viewed by the relevant local Medicaid agency as if the applicant owned such assets on the date of the Medicaid application. As a result, it is crucial for individuals to consider transferring their non-exempt assets as soon as practicable.

There is no “look back” in New York with respect to applications for community-based Medicaid, including home care. This means that there is no penalty for having transferred assets prior to the application for these Medicaid benefits. In the case of Community Medicaid, the income threshold is $825 per month (plus an additional $20 disregard). The remainder of their income must be paid to the nursing home for their care. However, to the extent, a Medicaid recipient has a spouse living in the community and the community spouse has less than $2,980.50 in monthly income (the minimum monthly maintenance needs allowance), the community spouse is guaranteed to keep up to that amount of monthly income as the community spouse monthly income allowance.

The Medicaid spouse can allocate an amount of his own income to the community spouse so that the community spouse has $2,980.50 per month in income. If the community spouse has income in excess of $2,980.50, then all of the institutionalized spouse’s income (minus the $50) must be contributed to the cost of his own care. In addition, if the community spouse has income in excess of $2,980.50 per month, she may also be required to contribute towards the cost of the institutionalized spouse’s care as a legally responsible relative of sufficient means to contribute.

Other notable guidelines:

The allowable resources that a community spouse (the “healthy” spouse) is permitted to retain is a minimum of $74,820 in 2015, or one half the married couple’s resources, up to a maximum of $119,220.

There are other exempt assets and circumstances in which a home may be exempt that are beyond the scope of this article. In the case of Medicaid home care services, or “Community Medicaid,” there is no look-back period.

An individual can transfer assets on the last day of the month and be financially eligible for home care on the first day of the following month.

To the extent that Medicaid recipients have monthly income in excess of this amount, they will have a “spend down” and be required to contribute that excess income towards the cost of their own care. In the case of institutional Medicaid, Medicaid recipients are only permitted to retain $50 per month as an incidental allowance.

Effective planning can be complex, and it will likely be prudent and useful to consult an expert before taking action. In most cases, a qualified Elder Law attorney and CPA can arrange the proper planning to protect all or a substantial portion of your money, property, and investments.


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