There's a large population of people in their 60's, 70's and 80's who fit a common profile. They've saved up several hundred thousand dollars over the course of a 40-year working career. They purchased a home 30 years ago and have substantial equity in it. Their spouses have died and now they live alone.
What if there was a way to get Medicaid to pay for home care, and you still retained the benefit of all your money and assets?
Often children begin to feel very concerned as they notice a parent becoming more forgetful. Maybe an illness gets worse, or Mom or Dad now stumbles and falls. If you or a loved one fit this scenario, home care is an option that can provide help and safety for an elderly or infirm person, who needs assistance with routine activities of daily living.
Many people incorrectly believe that they will be ineligible for benefits because of Medicaid’s five-year “look back.” In New York, there is no look back for Community Medicaid, which includes home care and assisted living. There are some challenges in getting Medicaid to pay for it, but Lamson & Cutner's Elder Law attorneys have effective solutions. Here's a discussion of the challenges first.
The problem for the single person who needs home care.
Currently, the cost for eight to twelve hours of daily care is approximately $4,800 to $7,200 a month. If 24-hour a day care is eventually needed, that expense could increase to over $10,000 monthly. To qualify for Medicaid coverage, a single person must have assets valued at no more than $14,850. Income is required to be $845 or less per month.
While a home is an exempt asset from the $14,850 eligibility limitation, if Medicaid does pay for your care, it may become entitled to place a lien against the property when you die or move out permanently. When the property is sold, Medicaid will have the right to execute its lien and get reimbursed for the cost of the benefits it provided. At today's rates of thousands per month for the cost of care, the equity in most homes would be exhausted after just a few years.
For example, let's say your home is worth $500,000. It was purchased 35 years ago for $35,000, and the mortgage has been paid off. If you were receiving 24-hour care valued at about $10,000 a month, the equity in the home will be quickly consumed in a little over four years.
Often, the person who needs home care has too much income, cash and other assets to qualify for Medicaid benefits. If you have to pay for your own care, that means your life savings and net worth will ultimately be depleted by the cost, forcing you into poverty. Nothing will be left to pay for many basic necessities or any luxuries, and there won't be anything to leave to your heirs.
Compounding the difficulty is the fact that children are often not in a financial position to help in any significant way.
Fortunately, a Lamson & Cutner Medicaid lawyer can assist you in handling the situation advantageously.
The single person's home care solution.
Lamson & Cutner's answer to the dilemma is a simple three-step plan. It can be implemented quickly, and make you eligible for Medicaid home care within just a couple of months. Here's how it works:
Step 1: If you own your home, transfer it to a protective trust. Under New York law, a trust is a legal entity that is in effect considered to be a separate "person." Consequently, you no longer legally own any property placed in a trust. Generally, a child or other trusted person is named as trustee, and has specific requirements to follow for managing the assets in the trust. Here's how it will help you.
With this procedure, Medicaid can't place a lien against your property. It's also shielded against claims from other future creditors. That's important because if you simply transferred the property to your kids outside of a trust, it could have legal exposure. For example, a child can be the target of a lawsuit. He or she might get into an accident, suffer a business failure, or get divorced. Having the trust avoids these difficulties.
You get to live in the home for the rest of your life, and nobody can force you to move. After you pass on, it will be transferred to your children or anyone else you name, and they will be eligible for significant tax benefits.
These are just a few of the advantages. To learn more about how trusts can work for you, download Lamson & Cutner, P.C.'s new Special Report, 25 Strategies to Prevent Financial Ruin from Long-Term Health Care Costs. It's free.
Step 2: Transfer liquid assets such as bank accounts, CD's, and securities to children or to a trust. This enables you to qualify for coverage under the Medicaid ceiling of no more than $14,850 in assets. These assets are protected by the trust in the same manner your home is, if you own one.
Step 3: Transfer excess income to a "pooled income" trust, which will be used to cover your bills. By placing excess income in a pooled income trust, you will have no more than $845 a month in income, which is the Medicaid limit for a single person in New York. These trusts are administered by certain charities, and are an important link in obtaining eligibility for Medicaid. Here's how they work.
Every month excess income over $845 is transferred to the pooled income trust. You simply write a check for the amount of the excess income, and send it to the trust. You can then submit bills to be paid by the trust. So, for example, if you have Social Security income of $1,800 a month, then you keep $845 in your own bank account and spend it as you please, and you send $971 to the trust every month. The trust then pays your bills with this money.
The pooled income trust functions almost like a bill paying service. Through the trust, excess income can be used to pay for food, clothing, monthly rent or mortgage, telephone, electricity, taxes, home repairs - all living expenses except medical premiums and medical bills. The trust charges a small monthly processing fee for the service.
It's called a pooled income trust because the assets of all participants are "pooled" together for investment and management purposes, however you have your own segregated account, established solely for your use. When you pass on, whatever is left over in your trust account is used for other beneficiaries of the trust, helping the charity to continue providing services to those who need them.
What this strategy accomplishes is to preserve your "excess" income. It enables you to pay your living expenses and retain your lifestyle while still qualifying for Medicaid coverage of home care. Certainly, few people today could live on $845 a month in New York.
The benefits you receive through these strategies.
Medicaid will pay for your care, and in most cases you'll hang on to all of your income and assets. Medicaid will also supplement any gaps in your Medicare or other medical insurance. That means you won't have large out-of-pocket expenses for medical care. There's also a wide range of community programs to take advantage of, such as adult day care.
When you pass on, what you worked for your entire life can be given to your children and family members, instead of being used to reimburse a government agency. The more you preserve now, the greater amount there'll be to pay for your own necessities and luxuries, and eventually to leave to your heirs.
Here's an example of a situation Lamson & Cutner's Medicaid lawyers handled for an elderly single woman suffering from a terminal illness:
The client suffers from a terminal illness, is incontinent and requires assistance with all activities of daily living. At the time she retained L & C, she had already employed a home care attendant she was comfortable with, and was paying for out of her own funds. L & C attorneys prepared a Medicaid application for home care, which was approved, and in addition were able to "vendorize" her attendant. That means that through contacts at the home care agency, L & C arranged for her attendant to become certified and accepted as an employee of the agency, with the cost of her salary fully paid by Medicaid. The happy end result was that the client retained the assistant she wanted, and got the home care help she needed, completely covered by Medicaid.
This is another case in which Lamson & Cutner helped an elderly woman with a significant assets and a substantial monthly income:
A widow in her 70's suffered from Alzheimer's disease and other health problems. L & C asset protection attorneys assisted her in successfully applying for Medicaid, while retaining access to her financial resources. Her assets were placed in a protective trust, and excess income from a number of pensions were transferred to a pooled income trust. Her Medicaid application for home care was approved, enabling her to retain the dignity of receiving care in the comfort and security of her own surroundings.