The term “Medicaid planning” can be confusing on the surface. Medicaid is a health care program for people with very limited resources. Why would you want to try to be in this position?
This is a very good question, and we will provide the answer in this post.
You earn Medicare eligibility when you pay FICA taxes on the job. If you work for at least 10 years, you will qualify for Medicare coverage when you reach the age of 65 under currently existing laws.
This is a very solid source of health insurance, but there are copayments, deductibles, and premiums that must be paid out of your pocket. These are usually manageable for most people, but there is one enormous inadequacy.
Medicare will not cover a stay in a nursing home, and it does not pay for in-home custodial care.
If you are thinking that you will not need long-term care, you should understand the facts. The United States Department of Health and Human Services has stated that about 35 percent of seniors will eventually reside in nursing homes.
Over half of Americans that are over the age of 65 will need some type of paid long-term care eventually, so this is a possibility you should take seriously.
Long-Term Care Costs
According to Genworth Financial, the median annual cost for a private room in a nursing home in the Manhattan, NY area was over $158,775 in 2021. For a home health aide, the median charge was $68,640 a year.
This is a lot of money to come up with late in your life, and a married couple can potentially be inundated with two different sets of nursing home bills.
Medicaid will pay for custodial care, and this is why some people that qualify for Medicare seek Medicaid eligibility. Since it is a need-based program, the limit on countable assets is just $30,182 in New York.
The “countable” qualifier is key because your home is not a countable asset with an equity limit of $1.033 million in 2023. However, if you qualify for Medicaid, the program would seek reimbursement from your estate after your passing.
As a result, if you are in direct personal possession of a home as a Medicaid beneficiary, a lien could be placed on the property during the Medicaid recovery phase.
Other non-countable assets include wedding rings, engagement rings, and heirloom jewelry. One motor vehicle is not counted, and Medicaid is not concerned about your personal effects, furniture, and other household items.
Prepaid burial plots are exempt along with unlimited term life insurance. An applicant can have up to $1,500 of whole life insurance and the same amount saved for final expenses.
When a married person is apply for Medicaid and their spouse can still live independently, the healthy spouse is entitled to a Community Spouse Resource Allowance.
This is equal to half of the shared countable assets up to a certain limit, and in our state, the maximum allowance is $148,620.
A benefit recipient must contribute their income toward the cost of the care that is being received, but there is an exception made when a healthy spouse needs the income. They can receive a Monthly Maintenance Needs Allowance, and the maximum this year is $3715.50 a month.
You could spend down assets in an effort to divest yourself of countable resources. Many people will give gifts to their loved ones, and you could alternately fund an irrevocable Medicaid trust.
If you create the trust, you would be able to receive income that is generated by the trust’s assets until and unless you apply for Medicaid. However, you would surrender access to the principal, and you would not be able to act as the trustee.
As long as you fund the trust or give the gifts at least five years before you apply for Medicaid, the assets would not count.
Take the Next Step Today!
If you would like to learn more about estate planning and nursing home asset protection, view our on-demand webinar. It is being offered free of charge, and you can click the following link to gain access: New York City estate planning webinar.