Most people who are getting older start thinking about long-term health care. You’ve probably amassed some assets and would like to know whether these assets will be used to pay your long-term care. Do you need the services of a Medicaid lawyer? What does a Medicaid lawyer do and will a Medicaid lawyer be able to help you?
A Medicaid lawyer generally engages in estate planning to ensure your Medicaid eligibility and asset protection from Medicaid recovery. Aside from Medicaid-related concerns, a Medicaid lawyer will be able to help you draft and supervise the execution of your will, power of attorney, healthcare proxy, and trusts (if needed). A Medicaid lawyer, depending on which stage you are in the process of planning, will be able to offer different strategies to ensure you can avail of Medicaid while preserving your assets.
Medicaid is a joint federal and state program that provides coverage for long-term health care of low-income persons. Because Medicaid only provides coverage for low-income and low-asset persons, people with a higher income and asset level are not eligible for Medicaid.
Unfortunately, long-term health care is expensive and can run in the tens of thousands per month, depending on where you live. Just because you have a house, a retirement fund, and some pension being received monthly doesn’t mean you can afford long-term care, especially when you don’t know until when you’ll be alive. You also probably want to save your wealth for your children and grandchildren to inherit. Here is where a Medicaid lawyer can help you.
Navigating the Medicaid process alone can be intimidating and can lead to severe consequences and penalties, especially when you apply and the case reviewer finds that you have transferred property to others without valuable consideration just to be Medicaid-eligible.
Seeking the help of a Medicaid lawyer before you apply can give you peace of mind in ensuring that your application is well thought through.
Asset and income levels to qualify for New York Medicaid
As of 2022, for New York residents who are single, the monthly income should only be $934 and the assets should not be more than $16,800 in order to avail of Medicaid. For married persons with both spouses applying, monthly income should not be greater than $1367 and assets should not be more than $24,600. For married persons with only one spouse applying, monthly income should only be $934 for the applicant-spouse and the asset limit is $16,800 for the applicant spouse and $137,400 for the non-applicant spouse.
Certain assets are exempt from the computation of Medicaid eligibility such as the family home (equity limit of $858,000), one car, an irrevocable funeral trust, life insurance policy with a face value of $1500 or less, and household goods and personal effects.
Remember that even if your family home is considered exempt when considering Medicaid eligibility, it is not exempt from Medicaid’s estate recovery program when you die, save for certain exceptions.
Stages of Medicaid planning
A Medicaid lawyer will propose a strategy for your Medicaid-eligibility depending on which stage you are in planning: (a) before the lookback period; or (b) during the lookback period.
Determining the Medicaid lookback period
Medicaid’s lookback period prohibits the transfer of assets of a Medicaid applicant without full and adequate consideration during the lookback period.
Most states will differ on the lookback period and the type of care applied for. In most states, the lookback period is 60 months. In New York, however, a new law changed the lookback period for institutional Medicaid from 60 months to 30 months with a phase-in period in between.
This Medicaid lookback period is used to compute for a Medicaid applicant’s period of ineligibility. This penalty period is computed by dividing the amount the Medicaid applicant transferred without adequate consideration with the average private pay cost of a nursing home in your state.
For example, if you are a widow with $100,000 in your bank, and you want to enter a New York City nursing home facility, under New York nursing home Medicaid rules, your asset level should not be greater than $16,800. To fall below this requirement, you transfer $83,300 to your adult son six months before applying for Medicaid, leaving only $16,700 in your bank account. As of 2022, the New York City nursing home Medicaid monthly regional rate is $13,415.
The Medicaid checker will review your application and discover that you have transferred $83,300 within the lookback period of 60 months. The checker will divide $83,300 with $13,415 to arrive at a number of 6.21. This means that from the time you apply, you are ineligible for Medicaid for an additional period of 6.21 months. After this period, you can re-apply for Medicaid and you will be eligible (provided the income and non-financial eligibility requirements are met) because you fall within the asset limit of $16,800.
What to do if your income and assets do not fall under Medicaid eligibility
A Medicaid lawyer will help you with a number of legal strategies to be eligible for Medicaid. These strategies will depend on your income and assets and when you decide to consult your Medicaid lawyer prior to availing of Medicaid.
How to preserve your assets before the lookback period
A Medicaid lawyer near you will explain to you the strategies on how you can be Medicaid eligible and still preserve your assets. The strategies will depend on your marital status, whether you or both spouses are applying for Medicaid, and how long in advance you implemented your Medicaid planning prior to applying for Medicaid.
Before the lookback period, you can employ irrevocable trusts to reduce your assets in paper. In an irrevocable trust, you transfer complete control over the property to the trustee, who then manages it for the benefit of your named beneficiaries. Some examples of irrevocable trusts are the Medicaid asset protection trust, qualified personal residence trusts, qualified terminable interest property trusts, special needs trust, and an irrevocable life insurance trust.
A lot of people are intimidated by irrevocable trusts because of the loss of control over one’s property. An experienced estates planning lawyer, however, will be able to insert provisions on trust protectors and decanting to ensure that the grantor, through his representative, retains some level of oversight over the trust.
Medicaid Asset Protection Trusts (MAPT)
You can transfer your assets (bank accounts and house) in an irrevocable trust where you are entitled only to the income. This income will be counted for purposes of determining income eligibility for Medicaid. The trustee should be someone else other than you or your spouse, possibly an adult child, and you cannot access any of the principal.
If you establish the trust more than five years prior to applying for Medicaid, all the assets in the trust are protected, not only from determining countable assets for purposes of Medicaid eligibility and computing the penalty period, but also from the Medicaid estate recovery program. Assets in the MAPT cannot be used to reimburse Medicaid for your nursing home costs after you die.
If you apply for Medicaid less than 5 years prior to transferring the assets to the trust, however, the entire amount you transferred to the MAPT might be considered for purposes of determining the penalty period. For this reason, it is advisable that if you need long-term care less than 5 years after transferring your assets to the MAPT, your family members can pay for this interim care, instead of applying for Medicaid, so that you will not be subjected to the penalty period.
How to preserve your assets during the lookback period
During the lookback period, a Medicaid lawyer’s strategies will be more limited because transfers during the lookback period may be subjected to penalty.
Spending down countable assets
One way to fall within the asset limit is by spending down your countable assets. Remember that what is prohibited is gifting or transferring assets without full and adequate consideration. You can, however, spend your money when you receive an adequate consideration in exchange, and this will not be considered in computing the penalty period.
In spending down your assets, you can purchase an irrevocable funeral trust and pay off your mortgage and credit card debt. You can also pay a family member who took care of you and compensate such family member for the caregiving services.
Purchasing a Medicaid-compliant annuity
You can also purchase a Medicaid-compliant annuity as a way of spending down your countable assets. By purchasing an annuity, you lower your assets in exchange for a monthly income stream. This income, however, is counted towards the monthly income limit required to be Medicaid-eligible. A Medicaid-compliant annuity is based on the life expectancy of the applicant, immediate, irrevocable, non-transferable, and fixed.
For example, if you purchase an annuity for $50,000 with a life expectancy of 10 years, you will likely receive $416.67 (computed at 50,000 divided by 120 months) plus a small interest, which will be counted towards your monthly income limit for purposes of Medicaid eligibility.
Modern half a loaf strategy
Another way of spending down assets is the modern half a loaf strategy. This involves gifting half of your assets to a family member (which would then be subject to the penalty period) while using the remaining half to purchase a Medicaid-compliant annuity (which is not subject to the penalty period).
In the same example above, if you have $100,000 and you want to fall below the $16,800 asset limit, you can implement the modern half a loaf strategy to the amount of $83,300, which would leave you with only $16,700 as assets. The $83,300 is divided into two: $42,678 is gifted to a family member and will be subjected to the penalty period, while the remaining $42,678 can be used to purchase a Medicaid-compliant annuity. In this case, since only $42,678 was gifted, your penalty period will only be 3.2 months, assuming you intend to enter a nursing home facility in New York City (which has an average cost of $13,415).
Gift and loan transaction
The gift and loan transaction is similar to the modern half-a-loaf strategy, but instead of purchasing a Medicaid-compliant annuity, you lend the money to a family member, payable in equal monthly installments based on your life expectancy. This gives you a lower penalty period, while the monthly equal payments made by your debtor-family member can be used to pay the nursing home facility you immediately need while waiting out the penalty period.
Pooled income trust
Pooled income trusts are for disabled persons who have excess income. Putting their money in a pooled income trust that is administered by a non-profit organization allows the Medicaid applicant to spend down income in order to be covered by Medicaid because excess income transferred to a pooled income trust is not considered countable income for purposes of Medicaid eligibility. The money in the pooled income trust cannot be withdrawn after your death, so it is advisable to use the money in the trust to consistently pay bills without accumulation.
Spousal impoverishment rules
In cases where only one spouse is applying for Medicaid, Medicaid spousal impoverishment rules also allow the income of the applicant spouse to be transferred to the healthy spouse as a spousal income allowance. The maximum income amount that can be transferred to the healthy spouse is based on a Minimum Monthly Maintenance Needs Allowance (MMMNA) that is federally set annually every July.
How a Medicaid lawyer can help you with those things
A Medicaid lawyer will be able to prepare a Medicaid plan based on your assets and income. The sooner you discuss your plans with a Medicaid lawyer, the better, in order for you not to be imposed with the penalty period of Medicaid ineligibility.
When you meet a Medicaid lawyer, it is important you already have an idea of your assets, which should include your house, car, bank accounts, investment accounts, life insurance policy, retirement accounts, and the like. Having this information will allow the Medicaid lawyer to properly evaluate your situation and recommend an effective Medicaid strategy that can be implemented immediately.
Although there are Medicaid specialists who can perform the service of assessing your assets for purposes of Medicaid eligibility, it is always better to get the services of a Medicaid lawyer since a Medicaid lawyer can provide the whole service, including the establishment of a trust to protect your assets.
Should you need a Medicaid lawyer in New York, we at the Law Offices of Albert Goodwin are here for you. We have offices in New York, NY, Brooklyn, NY and Queens, NY. You can call us at 718-509-9774 or send us an email at firstname.lastname@example.org.