If your spouse and you both need nursing home care, effective long-term care planning guards your money and assets.
In some cases a husband and wife need nursing home care at the same time. Elder Law attorneys at Lamson & Cutner prepare both applications, and implement a series of asset protection procedures. These keep a substantial portion of your home’s value and your investments safe from Medicaid requirements to pay for your own care. That means the funds can be used to make your nursing home stay as comfortable as possible.
Medicaid difficulties couples face.
When a married couple prepares to enter a nursing home simultaneously, Medicaid will treat each as an individual. Restrictions on income and assets are very tight. They can cause a couple to lose the value of their home and savings as a contribution to the cost of their own care. Each spouse can retain only $15,150 in total assets, and can keep just $50 a month in income.
Additionally, Medicaid currently reviews the previous five years of your financial records to check for transfers of any assets to others. This is called the “look back period.” If there are transfers, they impose a penalty that will delay the start date from which you begin to receive Medicaid benefits. In the interim, the expense of your own care must be covered on a private-pay basis.
This delay, from the time each of you first enters a nursing home, until Medicaid begins to pay the monthly cost, is referred to as the “penalty period.” You cannot protect your assets by simply transferring them to your children, if the transfer is within the “look back” window. Under current law, any transfers you make now or in the future will be subject to the look back period for five years.
Here’s an example for a couple entering nursing homes in New York City. If you gave your children $200,000 at some point within the last five years, Medicaid would consider that each parent transferred $100,000. Each $100,000 transfer would then be divided by the Medicaid 2018 established monthly rate of $12,319 for nursing home care in NYC, and neither of you would receive any Medicaid benefits for 8.1 months.
During that time, arrangements have to be made to cover your bills on a private-pay basis. On top of that, the “penalty period” doesn’t even begin until you meet all the other New York Medicaid eligibility requirements. That can extend the number of months during which you don’t receive benefits.
Proper Elder Law planning avoids this calamity, preserving the assets you’ve taken a lifetime to accumulate. Here’s how a Lamson & Cutner Medicaid lawyer does that for you.
The married couple’s nursing home care solution.
The following sequence will protect a substantial portion of a couple’s assets. Generally, somewhere between 40% and 50% will be saved. Please note that the numbers outlined below simply illustrate the concepts involved. If you employ this asset protection strategy, your savings will depend on the actual cost of your particular nursing home, your monthly income, and other factors.
Step 1: First, using the $200,000 example mentioned above, each spouse would make a gift of about $50,000 to a child, sibling or other trusted person. That means a total of $100,000 will have been transferred to others. Since each spouse is giving $50,000, each will incur a “penalty period” of approximately five months once they enter a nursing home. That’s because $50,000, divided by the current Medicaid monthly rate for New York City nursing home care of $12,319, equals 4.1 months.
Step 2: In the second phase, two private annuities in amounts of about $50,000 each are created with a family member or other trusted source, with the remaining $100,000. An annuity is a contract that pays set amounts at predetermined time intervals. By law, the purchase of a private annuity is not a penalized transfer, and the annuity itself is not considered a resource for Medicaid purposes, if it complies with certain requirements. In effect, you are paying the approximate $50,000 and receiving the annuity in return. Using this strategy, neither you nor your spouse will be hit with an additional five-month penalty period, which would otherwise be the case.
Each annuity then pays equal installments of roughly $10,000 per month for five months to you and your spouse, and each of you will use this money to pay the nursing home. This along with any other income you have, covers the costs during the “penalty period” imposed by Medicaid on each of you, due to the gifts in Step 1.
For more information on strategies to protect your money, income and assets, see Lamson & Cutner’s recently published, informative Special Report, 25 Strategies to Prevent Financial Ruin from Long-Term Health Care Costs.
The benefits for your spouse and you with this strategy.
The end result is that instead of being forced by Medicaid regulations to forfeit the entire $200,000 life’s savings to pay for nursing home care, almost $100,000 has been preserved and transferred to a trusted source. This money can then used by your trusted family member on behalf of each of you to supplement your care in the nursing home, and to make your lives more comfortable while you reside there. Whatever is left after you pass on can go to your heirs, providing a financial benefit to your family it would never have had otherwise.