What Is Medicaid Planning?

When most people think of “estate planning” they think of protecting loved ones after their own death and/or creating a plan for the distribution of their estate assets after their own death. Both of these objectives are typically part of a well thought out estate plan; however, a comprehensive estate plan can, and should, accomplish much more than those two limited objectives. Every estate plan is unique, and should be tailored to the needs and goals of the individual creating the plan. There are, however, some popular secondary goals and objectives found in most estate plans, including Medicaid planning. If you are unfamiliar with the need for Medicaid planning, now is the time to learn and discuss your options with a Medicaid attorney.The life expectancy for the average American has almost doubled over the last century. While living longer is certainly good news, it also means you have a greater chance of needing long-term care at some point in your life – and the cost of that care will not be cheap. Nationwide the average cost of a year stay in a long-term care facility is about $80,000 for a semi-private room. In the State of New York, you can expect to pay more than the national average with a semi-private room averaging just over $131,000 per year and a private room running, on average, almost $137,000 per year. With an average length of stay of 2.5 years it is easy to see how long-term care costs can add up and quickly drain the “nest egg” you have worked all your life to establish.

Before you assume your private healthcare insurance will help cover long-term care costs, think again. First, most employer sponsored insurance plans terminate when you reach retirement age. Plans that do continue into your retirement years are unlikely to cover long-term care costs unless you purchased a separate, and usually costly, long-term care coverage rider. Medicare isn’t an answer either as the Medicare program only covers expenses related to long-term care under very limited circumstances and then only for a very short period of time.

The good news is that the Medicaid program does cover long-term care costs. The not so good news is that qualifying for Medicaid without losing your hard earned assets can be tricky. The reason for this is that there is both an income and an asset test for Medicaid applicants.

When you apply for Nursing Home Medicaid benefits your application is subject to a five year “look-back” period. What this means is that your finances for the five year period prior to the date of your application will be scrutinized. Any asset transfers made during that five year period may be disregarded and the value of the asset transferred effectively imputed back into your estate. For example, imagine that you and your spouse owned a vacation home worth $100,000. About a year ago you began to foresee the need for long-term care for your spouse and the corresponding need to qualify for Medicaid benefits to help pay for that care. Knowing the value of the vacation home will disqualify you for benefits you gifted it to your adult daughter shortly thereafter. Pursuant to the five year ‘look-back” period rules, when Medicaid reviews your application they will likely disregard that gift and add the $100,000 back into your “countable resources.”

If your assets exceed the program limit,  you will effectively be required to use your available assets before Medicaid will start helping. Your life savings can be gone in a matter of months if you are forced to pay out of pocket for long-term care.

Incorporating Medicaid planning into your estate plan is the best way to make sure that your assets are protected while still ensuring that you qualify for Medicaid should the time come that you need help paying for long-term care. Medicaid planning uses perfectly legal tools and strategies to remove assets from your “countable resources” well ahead of time so that your estate is in a position to qualify for benefits when you apply for them.

If you have additional questions or concerns about how you can include charitable gifting in your estate plan, contact the experienced New York estate planning attorneys at The Law Offices of  Kobrick & Moccia,. by calling 800-295-1917 to schedule your appointment.