When you are thinking about your retirement years and the legacy that you will be able to pass along to your loved ones, have you considered the impact of long-term care costs? Clearly, this is unpleasant territory, but it really should be addressed with clear eyes.
Sobering Statistic
It can be hard to imagine a time when you will be unable to handle all of your own day-to-day needs, but if you think about someone who is in their 80s, it might not be so difficult.
The life expectancy for an American who is 67 is 85 to 87 years, and this is a telling statistic. If you live long enough to collect a full Social Security benefit, you will probably experience life as an octogenarian.
Nursing Home Costs
Geriatric researchers tell us that most seniors will eventually need living assistance, and more than one-third of American elders will reside in nursing homes. The median annual cost for a private room in a nursing home in the Manhattan area is over $173,000, and the figure is likely to rise in the future.
It is natural to assume that Medicare will pay for long-term care since this is a healthcare expense that many seniors incur. Whether it makes sense or not, Medicare does not cover the custodial care that nursing homes provide.
What’s the Solution?
For most people, the solution is Medicaid eligibility. This government health insurance program will pay for a stay in a nursing home, and Medicaid waiver or Community Medicaid programs cover professional in-home care.
Of course, Medicaid is a need-based program, so it is only available to people who have very limited resources. The limit on assets is just $30,182, but your home, one vehicle, and your personal belongings are not counted.
Healthy Spouse Allowances
When a married person is applying for Medicaid to pay for long-term care, their spouse is entitled to certain allowances. One of them is the Community Spouse Resource Allowance which allows the healthy spouse to keep half of the countable assets.
However, there is a limit, and it stands at $154,140 in New York in 2024. These is also a minimum allowance of $74,820.
We should point out the fact that these allowance figures are updated each year to account for inflation.
A Medicaid beneficiary who is living in a nursing home will receive a monthly personal needs allowance of $50, but the rest of their income must go toward the cost of the care that is being provided.
However, if a healthy spouse is relying on the income, they can continue to receive it, but there is a limit. This is called the Monthly Maintenance Needs Allowance, and the limit for the rest of this year is $3,853.50.
Medicaid Trusts and the 60-Month Look Back Period
You could fund an income-only Medicaid trust to remove countable assets from your own name so you can qualify for coverage. If you go this route, you will not be able to access the principal, but you will be able to receive income that is generated by the trust’s assets.
This can be a very effective nursing home asset protection strategy, but is important to act in advance. The funding of the trust must take place at least five years before you apply for Medicaid coverage
If you violate this provision, your application will be delayed. The period of ineligibility would be tied to the amount of the divestitures.
For example, let’s say that the state determines that the average cost of nursing home care is $180,000 a year. If you fund the trust with $360,000, you parted with enough to pay for two years of nursing home care, so your eligibility would be delayed by two years.
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We have recorded a webinar that you can view to gain a more thorough understanding of estate planning and nursing home asset protection. There is no charge, and you can visit this page to gain access: Manhattan, New York estate planning webinar.
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