This report is based on talks by Marvin Anderman, Esq. to Local 1101 RMC Chapter meetings on May 24th, 2017 and January 19, 2022.
Everyone’s situation is different, and the rules in every state are different, and change from time to time, so please take this report as a general outline. This report is not intended to provide legal advice, which you should obtain by consulting a lawyer of your choosing. Space considerations prevent the discussion from being complete.
As we get older, we face the possibility of needing long-term care, whether from a family member, a home health aide, or assisted living or a nursing home. Medicare does not pay for most home care or nursing home care, unless it is a short-stay for rehab after a hospital stay of at least three days in a hospital, and then only if the patient goes directly from the hospital to the nursing home or rehab facility.
As for Medicaid eligibility rules, they vary from state to state and are subject to change. The eligibility requirements that exist at the time one applies for Medicaid are the ones that apply to the applicant. In recent years, Medicaid has come to realize the benefit in covering the cost of home health care aides and has provided varying levels of coverage based on physical need. Also, in certain instances, Medicaid will pay a family member to provide the services of an aide.
The good news is that most people do not have to spend much time in a nursing home, nor are their assets and income so low that they would qualify for Medicaid. If one applies for Medicaid because they expect to be confined to a nursing long-term, the applicant is expected to utilize their income to pay the nursing home’s bill. Only income from IRAs, 401Ks and Social Security would be payable to the nursing home. Of course, income from interest and dividends would also be payable. Some people have assets sufficient to throw off enough income to foot the nursing home bill. Most do not. The latter may seek to protect assets such as the equity in their home from Medicaid.
It is possible to shield assets such as the equity in a home by transferring ownership of the home to a Medicare Eligibility Asset Protection Trust (MEAPT). A MEAPT, to protect an asset, must be irrevocable and the grantor (person creating the trust) cannot also be the trustee. In addition, there is currently a look back period of five years, counting backwards from the inception of the trust and inclusion of the property. This calls for planning well in advance of the need for nursing home care. Clearly, one should seek the advice of counsel before making decisions along these lines.
Before we get into protecting assets, here’s one important rule. Make sure someone in your family knows what benefits you are entitled to, where to find your important papers, and how to contact your former employer’s benefits department. The same applies to your spouse or partner. You can’t protect an asset if no one knows it exists. Discuss your plans with the important people in your family. And make sure to check at least once a year that your beneficiaries and executors on all documents, including power of attorney, are in line with your current situation and perspective.
It’s a good idea to make a will, even if you have named a beneficiary for everything, just to protect against surprises. A will needs to be probated only if there are assets that will pass to someone under it.
So how do you protect your home and savings? Here are some options:
- Consider buying long-term care insurance. If you are a New York State resident, relatively young and in reasonably good health, you can purchase long-term care insurance through the New York State Partnership for Long-Term Care. https://nyspltc.health.ny.gov. The plans are expensive, especially if you are over 70, and may not pay all the costs, but this is the best way to protect your assets. The younger one is when applying and the better their health, the more likely they are to qualify for this insurance. If you live in another state, investigate whether long-term care insurance is being sold and whether you meet the requirements.
- Give away your money. If you want to leave money to your children, for example, you can give some of it to them while you are alive. But when Medicaid is calculating your assets, they invoke a “look-back rule.” Right now the look-back period is 60 months, which means they count any assets you have gifted within the past 60 months. They won’t go after your children for the money, but they will count it as part of your money. And if Congress succeeds in drastically cutting Medicaid funding, this look-back period may increase.
- Spend your money on things that you need such as a prepaid funeral from a reputable funeral home or possibly a wheelchair ramp that you may need.
- Sign over your house to your child/children while continuing to live in it. This can be a risky strategy since you cannot guarantee that they will outlive you. If they file for bankruptcy, have a money judgment entered against them or get divorced, you could find your home is owned by someone else. To mitigate these issues, transfer ownership to another person that you trust not to lose ownership, but make it subject to a life estate for yourself. This means you have the right to stay in the home, which cannot be sold without your approval, although you will have to pay for maintenance, real estate taxes and upkeep if you want to keep a senior exemption like STAR in NY State. Note that this strategy is also subject to the look-back rule for Medicaid eligibility purposes.
- Set up a Medicaid Trust. See above for a brief discussion of the MEAPT.
A properly drafted trust will allow you and your spouse to remain in the home, keep your STAR or other senior property tax relief, sell the home through the trustee so long as the proceeds remain in the trust, benefit from the capital gains exclusion (so long as tax rules don’t change), buy a new home for your benefit, use the assets for the benefit of your children, grandchildren, or other beneficiaries, protect your beneficiaries from creditors, and avoid probate for property in the trust and thus Medicaid estate recovery, in most instances.
Obviously, this is complicated, and you should figure out whether it is worth it to you. Do you have significant equity in your house that you want to protect, for example, or are you carrying a large mortgage and/or home equity loan? Do you have significant assets that you don’t need to live on that you want to protect for future generations? Are you comfortable with a family member controlling your trust assets? If the answer is yes, be sure to consult a qualified lawyer for advice for your particular situation before you make any decisions.
Reach Marvin Anderman at 646-253-4776, Monday-Friday, 9am-5pm,
Leave voice mail if he is unavailable
No obligation or charge for conversation for 1101 RMC members.