What is Long Term Care?
For asset protection purposes, Long Term Care encompasses non-medical care in a nursing home, assisted living facility or at home. Medicare often pays for the first 20 days in a nursing home and may also pay a portion of charges for the 21st through the 100th day in a nursing home, if “skilled care” (e.g. meaningful therapy) is being provided. After that, Medicare and your supplemental medical insurance do not cover the cost of this care, except for specific medical tests, visits, procedures and prescriptions.
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How is Long Term Care Paid For?
Long Term Care is typically “private pay” unless you have Long Term Care Insurance, or qualify for Nursing Home Medicaid. Medicaid may also provide some “at home care”, but to qualify for this, you are only allowed to keep minimal assets.
What is Long Term Care Insurance and How Does it Work?
Long Term Care Insurance is an insurance policy you can purchase from a private insurance company. Under Long Term Care Insurance, you pay an annual premium, and in exchange for that premium, the insurance company pays a daily benefit when you are unable to independently perform either two or three “activities of daily living”, such as bathing, using the bathroom, walking, feeding yourself, etc. The particulars vary among different policies.
What is a Long Term Care Partnership Policy?
Certain Long Term Care Insurance policies are called “Partnership Policies”. Under a Partnership Policy, some or all of your assets can be protected from long term care costs. The particulars are dependent upon the level of insurance you decide to purchase
How Do I Qualify for Nursing Home Medicaid?
In order to qualify for Medicaid, a single individual is allowed to keep only about $30,000.00 in assets, plus prepaid funeral and burial expenses and personal property. Additionally, a single individual who has IRA or retirement accounts can normally protect those accounts by taking the annual Required Minimum Distributions (RMDs). The annual RMDs for Medicaid purposes are a bit larger than the RMDs for IRS compliance purposes. An individual who does not realize this difference may wind up exposing all of their retirement accounts to nursing home costs.
For a married couple, the spouse residing at home can keep additional assets, including the residence, between about $75,000.00 and $154,000.00 in other assets, plus a vehicle, personal property (such as furniture and jewelry), funeral and burial costs, and IRA or retirement accounts in proper payout status. However, through a process New York State recognizes called spousal refusal, the spouse at home can often keep far in excess of those amounts, if they have a properly drafted power of attorney.
What is the Look Back Period?
There is a five-year “look back” period for people applying for nursing home Medicaid. That means the local county, which administers the Medicaid Program, looks back over five years’ worth of financial records for “uncompensated transfers”, otherwise known as gifts. For every $13,200.00 (approximately) in gifts*, the Medicaid Applicant is denied Medicaid for one month. This is known as the “penalty period”, and should not be confused with the “look back” period. Thus, the best way to protect assets is to take action at least five years before you need long term care. But, even with no prior planning, an individual or couple with significant assets can protect the majority of those assets because some transfers do not cause a “penalty period”, including: transfers between spouses (not considered gifts) and some transfers to special needs and disabled children (they are exempt).
How Can I Protect My Assets?
Asset Protection Trusts: To assist you in protecting your assets, we prepare Asset Protection Trusts, whereby you can protect your residence or stock or bank accounts, for example, and you can still live in the house and get your STAR and other exemptions, and you can continue to receive interest and dividends from your bank accounts or investments. Once in the Trust, however, the asset itself no longer belongs to you – it belongs to the Trust. Therefore, you would not want to put retirement accounts into a Trust. Doing so would trigger a “lump sum income taxation” of all previously untaxed portions of the asset. Also, there are negative tax consequences to gifting property that has appreciated since you purchased it.
Powers of Attorney: Often, having a properly and precisely drafted Power of Attorney is key to being able to engage in asset protection planning for individuals needing Long Term Care.
Will: If your Will leaves everything to your spouse, and if your spouse is in a nursing home, or is likely to need nursing home care in the near future, you should make a new Will. If you don’t and you pre-decease your spouse while they are in a nursing home, and if you leave your entire estate to that spouse, you are in effect leaving your entire estate to the nursing home, or to the county to repay Medicaid previously received by your spouse, if your spouse has an extended stay there.
*This amount applies to counties in the Northeastern part of New York State, whereas a different amount applies to other regions of the state.
The Witecki Law Office provides the following estate planning services: Wills and Trusts, Asset Protection, Medicaid Planning, Elder Law, Powers of Attorney, Probate and Administration, Guardianships, and Health Care Proxies.
