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This document is intended to answer ten of the most frequently
asked questions on:
How To Plan Your Estate To Avoid Your Assets Being Wiped Out
To Pay For Nursing Home Costs
- 1. Will medicare pay for my nursing
home costs?
- A.
No. Medicare does not provide protection for expenses
of long health care:
- Day care at adult centers.
- Home care by relatives or employed caretakers.
- Nursing home care.
- 2. What government program will pay for my nursing home cost?
-
A.
The only government program that will pay for long-term care is
Medicaid which is a jointly financed federal and state medical welfare
program for the poor.
- 3. How can I protect my assets from being wiped
out to pay for nursing home costs ?
- A.
The strategy most frequently used to protect and save the senior's
assets is called the "impoverishment" strategy. Over a period of
time, the senior gradually gives away all or nearly all of his or her
assets for the purpose of qualifying for the Medicaid Program for the
poor. The "impoverishment" strategy or what is sometimes called
"planned poverty" aims to:
- reduce the senior's assets below the minimum amount for
Medicaid and
- qualify him or her for Medicaid, thus
- prevent the assets from being used up to pay for uninsured
health care expenses or nursing home costs, to
- allow assets to be transferred to the children or other family
members on the senior's death.
- 4. If my spouse is going into a nursing home, can he or she transfer all of his or her assets to me and qualify for medicaid?
- A.
No. To determine the eligibility of the spouse who is going into the nursing
home to receive Medicaid, all of the non-exempt assets held by the husband or
wife are added together and then the total divided equally between the spouses.
To the extent the other spouse's half exceeds $74,820 ( in New York State), the
excess is attributed to the spouse going into the nursing home, thereby
disqualifying that spouse from receiving Medicaid. The spouse outside of the
nursing home can retain $74,820 (in New York State) in otherwise non-excludable
assets, plus homestead, plus personal property, plus burial reserve, plus
automobile.
- It is important to understand that under New York law:
- A spouse is charged with legal responsibility for the other spouse's nursing home costs. This means that the income and resources of a spouse are considered as available to the Medicaid
applicant spouse who is going into a nursing home and will be
considered in determining if that spouse qualifies for Medicaid, and
- If the healthy spouse has assets in excess of $74,820,
those excess assets must be spent on medical care until the healthy
spouse's assets are down to $74,820, and
- If the healthy spouse's monthly income is more than
$1,871, the local Social Services Department will normally require 25%
of the excess income to be spent on the nursing home costs of the
spouse in the nursing home.
- 5 How much income can I make and qualify for
medicaid?
- A.
Any person over 64 whose net income is less than $550 per month
($792 for a couple) has satisfied the income means test for SSI
related Medicaid. A single individual residing in a nursing home is
permitted only $50 per month as a personal needs allowance, plus
assets of $3,300 ($4,750 for a couple) + $1,500 burial reserve.(It is
okay to purchase a plot, mausoleum, coffin, tombstone or urn because
they are items bought "in connection with final resting place."
Car and personal residence may be exempt.)
- The law provides that the spouse of an individual who has
established his or her eligibility for Medicaid is entitled to a
monthly income not to exceed $1,871.00 per month.
- 6. Can I transfer my assets to my children just
before I go into a nursing home?
- A.
No. Under the Thirty Six Month Rule (applicable to outright
transfers) and Sixty Month Rule (applicable to certain transfers in
trust), effective for transfers on or after August 10, 1993,
eligibility for medical benefits is denied for a period of time if the
person going into the nursing home transferred assets for less than
fair market value within thirty six or sixty months before his
application for Medicaid benefits. The period of ineligibility begins with the month in which the resources were transferred and lasts for a
number of months equal to the total value of the transferred property
divided by the average cost of nursing home care to a private patient
in that state. (Currently around $4,000 per month in central New York
State)
- 7. What can be done if the senior is already in a
nursing home?
- A.
If the senior is already in a nursing home or about to go into
one, he or she can retain enough assets to pay for thirty six months
care, transfer the balance and not apply for Medicaid until thirty six
months after the date on which the last asset transfers are completed.
- 8. Why should I use a trust to protect my assets?
- A.
Assets are usually transferred to children or other family
members either outright or in trusts. A trust is more desirable
than an outright transfer to a child because:
- a) You may have a bad relationship now or in the future with:
- your child or
- your son-in-law or daughter-in-law
- b) Your child may:
- get divorced
- have creditors or go bankrupt
- invest your assets unwisely
- spend all of your assets during your life
- spend all of your assets as soon as you die
- 9. If I set up a trust can I have access to principal?
- A.
No. The Trustee must not be given discretion to distribute income
or principal to the grantor Medicaid applicant:
- a) Under prior law, Section 1902 of the Social Security Act and
corresponding state law regulations provide that for purposes of
meeting the Medicaid eligibility requirements, the maximum amount
which could be distributed from a trust to its grantor under the terms
of the trust, assuming full exercise of discretion by the Trustees,
will be considered available as a resource to the grantor regardless
of whether:
- The discretion is actually exercised.
- The trust is irrevocable
- The trust is established for purposes of permitting
the grantor to qualify for Medicaid assistance.
- b) Under recent federal legislation (OBRA 1993), if you have access to the principal of a trust, it is considered a resource.
- c) Please note that Estate, Powers and Trusts Law 7- 3.1 and New
York State Case law similarly prohibits access to income and principal.
- d) The trust must be drafted to preclude statutory authority
(EPTL 7-1.6(b)) for invasion of corpus for your benefit. This is
possible in testamentary trusts contained in your Will.
- 10. How can I protect my house?
- A.
Transfer of residence - If the Medicaid applicant is married, he or she may retain a
principal residence in which a spouse resides. The house is exempt property. However, if the
applicant does not have a spouse or the spouse dies and meets other requirements, the house is
not exempt property and is subject to nursing home costs and will preclude Medicaid
qualification. Under recent legislation, the Department of Social Services can file a lien
against your personal residence. In such a case, a transfer of the residence to the children
with the parent reserving a life estate is advisable. Although the value of the life estate
might still be at risk during the applicant's life, there are certain planning possibilities
available to protect the life estate. Note: The retained life estate as stated under Section
2036 of the Internal Revenue Code insures that the full value of the home will be includible
in the parent's estate to insure a step up in basis on the parent's death which enables the
children to sell the house income tax free on the parent's death.
The writer is available via email address if you wish to explore this area in greater
detail. He has practiced law in New York State for 20 years with a practice concentrated in
the areas of elder law, tax, financial and estate planning and avoidance of probate. Your
feedback on this fax would be very much appreciated and help make updates more valuable to
recipients of the file. Also suggestions as to propitiate places to post this fax file would
also be appreciated. It can currently be found on Compuserve: Legal Forum, AARP Forum; America
Online:AARP Forum, Legal Forum, Senior Net; Internet: alheimer@wubios.wustI.edu,
gerinet@ubvm.cc.buffalo.edu and at SeniorCom; http://www.senior.com/estate.html.
PLEASE NOTE THAT THIS DOCUMENT IS NOT MEANT TO GIVE
LEGAL ADVICE, BUT ONLY TO ANSWER CERTAIN FREQUENTLY
ASKED QUESTIONS CONCERNING HOW TO PROTECT ASSETS FROM
BEING WIPED OUT TO PAY FOR NURSING HOME COSTS. YOU ARE STRONGLY URGED TO CONSULT
WITH AN ATTORNEY WHO IS COMPETENT IN THE AREA OF ELDER LAW AND ESTATE PLANNING
PRIOR TO TAKING ANY STEPS TO PROTECT ASSETS SO THAT YOU WILL UNDERSTAND ALL OF
THE RAMIFICATIONS OF YOUR ACTIONS, INCLUDING BUT NOT LIMITED TO ESTATE TAX,
GIFT TAX, INCOME TAX, AND FINANCIAL AND ESTATE PLANNING CONSIDERATIONS.
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