Today people are living longer and many individuals look forward to enjoying their golden years. While this should be a time of leisurely activities and the joys of grandchildren, many elders are faced with challenging health issues, covering the high cost of long-term care, financial concerns and the potential of family disputes.
At O’Connell and Aronowitz, our experienced Elder Law attorneys provide clients with solutions to these pressing issues. We work closely with elders and their loved ones in Albany, Saratoga Springs and across upstate New York to help them manage the complexities of aging. We strive to ensure that the seniors we assist are protected financially, have access to the healthcare they need, and can continue to enjoy a high quality of life.
Long-term Care Planning
The high cost of long-term care, whether for medical or non-medical needs, is a serious concern for many people. While some people mistakenly believe that Medicare will cover these costs, this program only pays for limited services that do not include skilled care provided at home or in a nursing home. Elders also often require non-skilled care and assistance with daily tasks such as dressing, feeding, shopping and light housekeeping. By failing to adequately plan for these needs, many seniors risk depleting their savings.
Long-term Care Insurance
One option for those who qualify is long-term care insurance which covers the cost of services for personal and custodial care in the home or in an assisted living or skilled nursing facility. This insurance is becoming more expensive, and the type of coverage varies greatly among insurers. The experienced Elder Law attorneys at O’Connell and Aronowitz can help you select a policy that best suits your needs.
Long-term care insurance can be expensive and some elders may not qualify. Another option is Medicaid, the largest payer of nursing home care in the country. This is a federal program run by the states that is designed to provide medical assistance to low-income individuals, and those who are 65 or older. Qualifying for these benefits can be difficult because some seniors may have financial resources that exceed the eligibility threshold.
Our experienced attorneys have extensive knowledge of Medicaid Planning issues and techniques, such as:
- Transferring your home to protect it for Medicaid purposes
- The impact of gifting on your Medicaid eligibility
- Preserving assets if your spouse applies for Medicaid
- How Medicaid look back period and penalty periods work
For further information on these topics, you can click on the bullet points above.
Transferring your home to protect it for Medicaid purposes
Why should I consider transferring my home?
If you transfer your home more than five years before you apply for Medicaid to pay for nursing home costs, your home will not be counted as one of your assets for Medicaid eligibility purposes. This allows you to “preserve” the asset and allow it to be passed on to the next generation. Three basic ways to transfer your home are explored below.
What happens if I deed my home to my child?
In that case, your child would own the home and you have no further legal rights to it. You would lose your STAR exemption for school taxes, and, if your child later sells the home, they may have to pay significant capital gains taxes because they would be using your cost basis in the property.
What happens if I deed my home to my child, subject to a life estate interest in me?
You will retain your STAR exemption. In addition, your child will receive a “step up” in basis equal to the home’s value at your death, thereby potentially reducing capital gains if they later sell it. Despite these advantages, there are disadvantages. You would need your child’s cooperation if you wanted to sell the home during your lifetime. If a sale did occur, you would need to receive some of the sale proceeds, which could result in you having too many assets to qualify for Medicaid.
What happens if I transfer my home to an Irrevocable Trust, with my child as a remainder beneficiary?
You will retain your STAR exemption and your child will receive a “step up” in basis at your passing. The trustee of the trust could sell the home during your lifetime, without the concern that part of the sale proceeds would flow to you. The sale proceeds could be used to invest in assets that you receive income from or they could be used to purchase a new home for you to live in.
The impact of gifting on your Medicaid eligibility
In the normal course of their lives, older people often make monetary gifts to their family and friends. It may be as simple as a $50.00 check to each of the grandchildren during the holidays or it might be a more significant gift of $10,000.00 to a child who lost their job and needs money to pay their mortgage and provide for their family.
Will I be penalized by Medicaid for making gifts?
Most gifts, be they large or small, generally have very little to do with Medicaid Planning by the elderly person. They are made out of love, gratitude, or a desire to help someone during a difficult time. Regardless of the motivation, however, if the gift is made within five years of a Medicaid application by the elderly person seeking to pay for their nursing home care, the gift may result in a “penalty period”. The five year period before the Medicaid application is known as the “look back period”.
What happens during a penalty period?
During a penalty period, Medicaid is not available to pay for nursing home costs. If Medicaid is not available and the elderly person no longer has funds of their own, then no money is potentially available to pay the nursing home bill.
Can I appeal the imposition of a penalty period?
If you apply for Medicaid and receive a Notice of Decision from the Department of Social Services (DSS) that gifting during the look back period will result in a penalty period, then you have sixty days to appeal the Decision and request a Medicaid Fair Hearing.
Under New York State Social Services Law, if you made the gifts for reasons that have nothing to do with qualifying for Medicaid, then DSS cannot impose a penalty period against you. In that case, you should appeal the Decision and request a hearing.
What happens at the hearing for my appeal?
During the hearing, you can be represented by an attorney and offer witnesses and documentary evidence to prove your case. DSS will also be present and will submit its case in support of the imposition of the penalty period.
If you are no longer mentally competent, your presence at the hearing can be excused. Your lawyer would then attempt to prove your motivations through the testimony of friends, family, and other witnesses – such as your medical providers.
How can I increase my chances of winning at the hearing?
While every case is different, if you can prove the following facts at your Hearing, you will have a good chance of winning your case:
- When you made the gifts, you were healthy and independent and not considering a potential nursing home admission.
- Your gifts were part of a pattern of gifting over the course of your life, not just something you did before you needed a nursing home.
- After the gifting, you continued to be financially solvent and able to pay your regular bills with no difficulty.
Having an experienced attorney present your case will undoubtedly increase your chances of success at a Medicaid Fair Hearing. If you or a loved one have made prior gifts and now face a Medicaid penalty period, you should contact a qualified elder law attorney to discuss your case. Skilled representation can help you access the benefits you need and deserve.
Preserving assets if your spouse applies for Medicaid
If my spouse applies for Medicaid for nursing home care, what assets can I keep?
Medicaid rules allow you (as the “Community Spouse”) to retain the following assets as “exempt resources”:
- $74,820 in monetary assets (and sometimes more),
- the family home,
- all the tangible personal property within the family home,
- irrevocable pre-paid funeral arrangements, and
- one car.
What happens if I have more assets than allowed?
You will need to “spend down” those assets private paying for nursing home costs, until you reach the allowable level. However, there may be some alternatives. For example, you could spend some of the excess resources on necessary home repairs because the home is an exempt asset. For example, $5,000 in funds in excess of the allowable limit can be used to pay for a needed furnace replacement, instead of being spent down on nursing home costs.
Can I refuse to make my assets available to pay for the nursing home care of my spouse?
Yes, you can. That is known as a spousal refusal. If you file a spousal refusal, then the Medicaid authorities may seek to force you to provide the resources by litigating the matter in court. If you file a spousal refusal, the Medicaid authorities must evaluate the eligibility of your spouse as if you had no such resources.
Is all tangible personal property exempt as a resource?
No, if you have items of specific intrinsic value, such as a coin collection or valuable pieces of art, they would potentially be considered non-exempt.
Do I have to contribute any of my income to the care of my spouse?
The Community Spouse is also entitled to $3,259.50 per month in income in 2021, which is known as the Minimum Monthly Maintenance Needs Allowance (MMMNA). If the Community Spouse does not have that amount in their own name, they are entitled to income from the Institutionalized Spouse to reach the $3,259.50 level.
For example, if the Community Spouse receives $1,500 in Social Security and the spouse in the nursing home (the “Institutionalized Spouse”) receives $2,000 in Social Security, the Community Spouse is entitled to $1,759.50 of the Institutionalized Spouse’s $2,000 in Social Security in order to reach the $3,259.50 MMMNA level.
Given all these rules, are there planning opportunities?
If your spouse is entering a nursing home and applying for Medicaid, you do not need to be impoverished as a result. The rules regarding income and asset exemptions are complex, but they yield many planning opportunities to maximize the preservation of assets and income for the Community Spouse.
How Medicaid look back and penalty periods work
What is the Medicaid look back period?
The Medicaid look back period is the period of time for which you have to provide financial records if you apply for Medicaid to pay for nursing home care.
How long is the look back period?
The look back period is five years from the date of a Medicaid application. If you apply for Medicaid to pay for nursing home care on October 1, 2021, you would need to provide the Department of Social Services (DSS) with financial records going back to October 1, 2016.
What type of records would I need to provide?
It depends, but generally all your financial statements, i.e. bank statements, annuity statements, retirement account statements, and any other statements you receive that show the details of your financial history for the prior five years. Additional required records may include items like copies of checks, statements of sale for real property, or cash value statements for insurance policies.
Why do I need to provide all this information?
DSS is looking to see if you gifted away any of your assets during the five year look back period. For example, if they see a check for $10,000 from you to your child one year ago, they will want to know if that represents a gift from you to your child.
What happens if I did make a gift to my child in the last five years?
Generally speaking, gifts to your child during the look back period will result in a penalty period.
What is a penalty period?
A penalty period is an amount of time which will delay the onset of your Medicaid coverage.
How are penalty periods calculated?
The amount of the gift you made is divided by the transfer rate for our region, which is set by the state. In Northeastern New York, the transfer rate is $11,689 in 2021. In order to calculate a penalty period, you take the amount of the gift and divide it by the transfer rate. The resulting figure is the penalty period, in months. For example, if you made a gift of $23,378 to your child in the last five years, then your Medicaid coverage will be delayed for two months ($23,378/$11,689 = 2 months).
Are all gifts considered when calculating a penalty period?
No. In our area, gifts less than $2,000 are generally not considered when DSS calculates the penalty period. The $2,000 level is not a legal limit, but rather a general guideline customarily used. As a result, smaller gifts – the type of which most people might make in the course of their life, are not counted. An example would be regular gifts to friends and family of $50 or $100 for birthdays, holidays, and other special events.
Do all gifts in excess of $2,000 result in a penalty period?
No. Gifts made to a spouse are exempt transfers and are not subject to a penalty period. However, you cannot simply make gifts to a spouse in order to reduce your assets and become eligible for Medicaid. If you are applying for Medicaid, your spouse will only be able to have a certain amount of assets in his or her name. If you gift your spouse an amount over that limit, those funds will generally need to be spent down on your spouse’s nursing home care before Medicaid coverage will start.
Are there any other people that can receive exempt transfers?
Yes. Any transfers you make to your disabled child are exempt. You must take care, however, not to transfer an amount of assets to a disabled child that would make them ineligible for benefits they are receiving in their own name.
Are there any other types of exempt transfers?
Yes. It is an exempt transfer if you transfer your interest in your home to your spouse, your minor child, your disabled or blind child, your caregiver child, or your adult sibling who has an equity interest in your home.
What is a caregiver child?
A caregiver child is a child who has lived in your home with you for at least two years and has provided care to you that has allowed you to stay at home and not move to a facility, such as a nursing home.
When does an adult sibling have an equity interest in my home?
When he or she has lived there for a year and is on the deed or has made other certain significant contributions to the property.
Medicaid Planning and Asset Preservation in General
Medicaid Planning and Asset Preservation can be complex and challenging. In order to properly plan for your long-term care challenges, you should seek advice from experienced Elder Law attorneys. The Elder Law attorneys at O’Connell and Aronowitz offer a compassionate, knowledgeable, and superior level of personal service. If you need advice about Medicaid Planning and Asset Preservation, please call O’Connell and Aronowitz today at (518) 462-5601.
Locations We Serve
Our Trust and Estate lawyers work throughout the capital region to help individuals and families protect their assets and prepare for the future. With offices in Albany and Saratoga Springs, our location allows our attorneys easy access to all areas of the state.
Our Trust and Estate law practice serves several counties throughout upstate New York including Albany, Columbia, Greene, Saratoga, Schenectady, Rensselaer, Warren and Washington Counties. Our attorneys can help provide peace of mind by developing a personalized plan just for you.
To learn more about our legal services in your area, visit our location page.
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