Medicaid Planning – Will You Be Able To Afford Healthcare When You Retire?
While vast numbers of middle class American retirees continue to legally
qualify for Medicaid, most of us tend to think (incorrectly!) that if we are
homeowners or make a decent living, we will not be eligible for Medicaid upon
retirement. This article serves to
dispel that myth and provide a basic understanding of the legal framework
surrounding Medicaid Planning.
For many of us, growing old without Medicaid could mean spending
our life-savings on prescription drugs, home-care or nursing home care. The reality is that with careful planning
ahead of time, you can ensure that you and your loved ones retire with the
security that your medical needs will be covered by Medicaid. With the new changes surrounding Medicaid, it
is more important than ever to plan ahead.
Under the current New York laws (2022/2023), a single person who
is blind or disabled or is over 65 years old, can qualify for Medicaid if:
- your combined resources are $16,400 (increasing to $28,134
in January, 2023)
- your only real estate
is your primary residence, and your financial stake in it is under $906,000
- your monthly income
does not exceed $934 (increasing to $1,563 in January, 2023)
If you
are married, you and your spouse are allowed to receive a total of $1,367 in monthly
income (going up to $2,106 in January 2023) and keep $24,600 in resources (going up to
$37,908 in January 2023).
But what if
your monthly income or resources exceed the above amounts? What if you own two
apartments? What if you own a taxi medallion? What if your pension is $3,000
per month or more? With health
care costs skyrocketing, and with long term care in New York City costing
between $13,000 and $16,000 per month, you would not be able to afford to
retire and still pay our medical bills.
Even if your monthly income and resources are
within the parameters outlined above and you can or have qualified for
Medicaid, if you own your home, Medicaid – and not your children or
grandchildren – may get it after you pass away.
Luckily, there is a legal way to help you
qualify for Medicaid and to keep your home for your children and grandchildren. It is called Medicaid Planning.
When should
you begin to plan for Medicaid?
It is never too early to begin planning. If you are in your 50s, planning to retire,
are in good health and not in immediate need of long-term care (such as
home-attendants or nursing homes), you are in a very good position to begin
planning for Medicaid.
If you have suffered an accident or have
suddenly fallen ill and need long term care, there is still a legal way for you
to obtain Medicaid and to save a at least a portion of your assets for your
family instead of spending all of it on your medical bills.
Transfers of Property
Proper and
timely Medicaid planning can protect your life savings for your family – your spouse,
children, and grandchildren. This means
that you will be able to keep your home, income and other assets and still
qualify for Medicaid. As of 2024 (month not yet determined) transfers of assets
will be “penalized” even for homecare Medicaid, and not solely Nursing Home
Medicaid. This means that there will be
a wait period for as long as potentially 30 months before you will receive home
care if you have to transfer assets in order to gain Medicaid eligibility.
Medicaid has
access to your financial, tax, and other records and can see exactly when you
transferred, how much you transferred, and to whom you transferred it. If Medicaid finds that you had $30,000 in
your bank account in March, but only $200 in April, it will request bank
documents, including all receipts, to determine if you spent the money in a
legitimate way for Medicaid eligibility.
They will also calculate the period of ineligibility for home care based
on the value of the transfer.
Transfers to a Trust
Transferring
assets to a special trust can help those who have higher monthly income and
more assets than allowed by New York law to qualify for Medicaid. The trust must be set up carefully, by an
experienced attorney who specializes in such trusts.
If you will
need to use Medicaid to go to a doctor, get medication, and for emergency room
visits (this is known as “community Medicaid”), you can transfer you assets to
the special trust and qualify for Medicaid soon after the transfers are made.
If you need
to go into a nursing home (this is known as “institutional Medicaid”), then you
need to transfer your assets to the trust at least 5 years in advance; and if
you require home care you need to transfer your assets at least 30 months (or
2.5 years) in advance. If you transfer
your assets less than the applicable period before needing one of the above
mentioned services, then you will be “penalized” for the transfer and will not
receive Medicaid until a certain amount of time passes. During this period, you will be required to
pay for your care out of your own pocket.
The trust can
be set up in a way that would allow for you and your spouse to always live in
your home and for you to get income from assets that are in the trust. When you pass away, your property will be
divided among the beneficiaries you designate in any way that you direct.
Transfers to Family Members
Some people
believe that it is easier to transfer their apartment to a family member
instead of transferring it to a trust.
It may be easier, but it may turn out to be not as safe, and in the end much
more expensive.
Transferring
to your spouse may not help you become eligible for Medicaid. In most circumstances, whatever your spouse
owns is considered to be yours as well.
Slightly different rules apply if you are receiving long term care while
your spouse is at home, but note that the danger is that transfer may make your
spouse ineligible for Medicaid.
If you
transfer your apartment or your money to your child (or another family member),
your child (or family member) is now the sole owner of your property. If he gets into an auto accident and there is
a judgment against him, what used to be your money and your apartment can be
taken away under that judgment. In
addition, he may lose your assets in a divorce or to his own creditors. We use trusts to protect your property from being
lost in this way.
Transferring
assets to a trust will also allow you tax benefits that you will not have if
you transfer your real estate to a family member.
Are all transfers the same?
Transferring assets to certain people
may make you eligible for both community Medicaid and institutional Medicaid
without any penalties. These people include:
- A spouse
- A blind or disabled
child
- A trust for a blind or
disabled child
- A trust for a disabled
adult under age 65
You
may also transfer your home to the following people and qualify for both types
of Medicaid without any penalty:
- Your spouse
- A child who is under
21 or who is blind or disabled
- A trust for a disabled
person under age 65
- A brother or sister who
has lived in the home during the year before you went into the nursing
home and who already owns some part of the home
- Your child, who has lived
in the house and took care of you for at least two years before you went
into the nursing home
Besides transferring to a trust or directly to other people, there are other ways to transfer your property, but planning ahead is always crucial to your success in qualifying for Medicaid and being able to pass your property to your family. Because of the complexity of Medicaid rules, as well as the legal instruments used to plan for eligibility, you must consult an experienced attorney who specifically focuses on this area of law. Don’t delay planning for your health care upon retirement – call our offices today!
Irina Yadgarova,
Esq. Law Offices of Irina Yadgarova PLLC
Elder & Estate Associates
