Planning for Long Term Care by Colin Sandler, LCSW, CCM
The cost of long term care in a skilled nursing facility can be upwards of $400/day. This translates to over $12,000 per month with many facilities in Westchester as high as 14,000 per month. At $150,000 plus per year, most people cannot afford this level of care. That is where New York State Medicaid program comes in.
Many people plan in advance for this type of care by purchasing Long Term Care Insurance or by making certain legal maneuvers (i.e., Trusts) to protect their assets. Ideally this is done with some forethought as there is a “five year look back” when seeking Medicaid benefits in a nursing home. This means that Medicaid will require 5 years of ALL financial statement for all accounts held within the past 5 years. This will also include a review of federal tax returns. The Medicaid office will scrutinize these financial documents line by line and can request further documentation on any transaction of interest but most specifically, they look at anything over $2000.00. Any gifts made to family members in the last five years can cause a penalty period in establishing the Medicaid eligibility. Thus, they will deny Medicaid coverage for a period consistent with the funds gifted. Your house is also counted as an asset and must be liquidated. There are some circumstances where your house is does not have to be sold. Some examples are (a) you have an adult child who has been living there for more than 2 years as your primary caregiver, (b) you have a spouse who remains there (c) your home is co-owned by someone else and they refuse to sell or (d) your home is co-owned by a sibling who lives there.
Many people believe the “$14,000/yr” gift allowable by the IRS is also allowable by Medicaid. These types of gifts can cause significant penalties with your application.
To further complicate things, there are exclusions and loopholes for certain situations. For instance:
Scenario 1: Mary is entering a nursing home. She has $300,000 in the bank and owns her home. Her son, who is 50 years old, is collecting Social Security Disability. Mary can transfer all of her assets (the money and the home) to her son with NO penalty due to the fact that he is disabled. Mary will immediately qualify although she will still be subject to disclosing the 5 years of financials.
Scenario 2: Mary is entering nursing home and her spouse John will remain at home. He can keep the home, approximately $75,000 in non-retirement assets, all of their retirement assets (as long as they are in distribution status) and $2980.50 per month of their joint income. This strategy is called Spousal Impoverishment. Mary’s share of the assets should be reduced below the $14,850 limit but John would not have to contribute unless there is more income than the allowable amount.
Scenario 3: Mary enters a nursing home but the couple have assets and income that well exceed the spousal impoverishment limits in scenario 2. The couple can transfer all of the excess assets to John’s name and Mary could qualify for Medicaid. This strategy is called Spousal Refusal and it does not come without risks. Your county can pursue John legally to force some contribution to her care. Again, the IRAs are exempt but they income Mary gets may need to go to the nursing home.
Scenario 4: Mary enters a nursing home and has the $300,000 and her home and she did not preplan. She has no spouse and no disabled child. Mary and her family can work with an elder law attorney to utilize a “gift/note” strategy. This strategy can usually protect about 40-50% of the assets.
There are many more details and strategies that need to be determined based on the individual situation of the potential applicant.
One of the most valuable tool in allowing for any planning or strategy is to have a Power of Attorney which offers the appropriate powers needed. It is essential that everyone have a power of attorney appointed. In addition, they must be sure that document allows sufficient powers to successfully manage the Medicaid planning process
Anyone considering this route should speak with a Medicaid specialist and/or an elder attorney to make sure they are utilizing every possible option to protect their assets.
Colin Sandler, LCSW, CCM, is owner of Medicaid Solutions, 2127 Crompond Road, Cortlandt Manor, NY. She has been providing advice on aging to seniors and their families for over 20 years. Email her at Colin@Medicaidsolutions.com or call 914-924-2566; www.medicaidsolutions.com