If your spouse and you both need nursing home care, effective long-term care planning guards your money and assets.

Elder Law attorneys at Lamson & Cutner can assist with protecting your assets from nursing home costs in NYC, Westchester, & The NY Metro Area.  In some cases, a husband and wife need nursing home care at the same time.  We prepare a joint application for the spouses, and implement a series of asset protection procedures.  These can in most cases 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, and perhaps still leave something to your heirs.

Medicaid difficulties couples face

When a married couple prepares to enter a nursing home simultaneously, they will file one Medicaid  application.  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.  The married couple can retain very little in total assets ($42,312 in 2024), and each can keep just $50 a month in income.

Additionally, Medicaid currently reviews the previous five years of their financial records to check for transfers of any assets to others.  This is called the “look back period.”  If you don’t know how to protect money from Medicaid costs and there are transfers, Medicaid imposes a penalty that will delay the start date from which the couple  begins to receive Medicaid benefits.  In the interim, the expense of their care must be covered on a private-pay basis.

This delay, from the time they first enter a nursing home, until Medicaid begins to pay the monthly cost, is referred to as the “penalty period.”  They cannot protect assets from nursing home costs by simply transferring them to their children, if the transfer is within the “look back” period.   Under current law, any transfers they make now or in the future will be subject to the look back period for five years.

Here’s an example for a couple, both of whom have entered nursing homes in New York City.  If they gave their children $300,000 at some point within the last five years, Medicaid would consider that each parent transferred $150,000.  Each $150,000 transfer would then be divided by the Medicaid 2024  established monthly rate of $14,273  for nursing home care in NYC.  The result would be that neither of them would receive any Medicaid benefits for 10.5 months.

During that time, arrangements have to be made to cover their bills on a private-pay basis.  On top of that, the “penalty period” doesn’t even begin until they are “otherwise eligible” for Medicaid.    That can further extend the time during which they don’t receive benefits.

Even if you have not done any planning in advance, taking the proper Elder Law steps avoids this calamity. These steps can protect a good portion of your assets from nursing home costs and help you preserve what 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 in most cases 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 $300,000 example mentioned above, each spouse would make a gift of about $75,000 to a child, sibling or other trusted person.  That means a total of $150,000 will have been transferred to others.  Since each spouse is giving $75,000, each will incur a “penalty period” of approximately five months once they enter a nursing home.  That’s because $75,000, divided by the current Medicaid “regional rate” for New York City nursing home care of $14,273, equals  5.25 months.

Step 2: In the second phase, two private annuities in amounts of about $75,000 each are created with a family member or other trusted source, with the remaining $150,000.  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.  The rationale of the applicable law is that the purchase of the annuity contract is a fair exchange, and not a gift.   Using this strategy, neither 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 $12,500 per month for six months to  each spouse, and each will use this money, together with other income (e.g., Social Security, pension) to pay the nursing home.  This covers the costs during the “penalty period” of a little over five months that was imposed by Medicaid on each spouse, due to the gifts made in Step 1.

The benefits of this strategy to you and  your spouse

The end result is that instead of being forced by Medicaid regulations to forfeit the entire $300,000 life’s savings to pay for nursing home care, about $150,000 has been preserved and transferred to a trusted source.  This money can then be 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, protecting assets from nursing home costs and providing a financial benefit your family would never have had otherwise.

Possible exemptions from the Medicaid transfer penalty

While it will be necessary to use the strategy discussed above in most cases, there are certain exemptions from Medicaid’s transfer penalties that may be available in particular cases.  These are discussed here.

To learn more about protecting your assets from nursing homes in NYC, Westchester, & The NY Metro Area, contact Lamson & Cutner today.