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Plan while you’re still in good condition.

Even if your health is good right now, you’ll do yourself and your loved ones a big financial favor by planning for both home care and nursing facility care. If you need assistance in the future, you’ll gain the benefit of reducing your medical and health expenses by having Medicaid cover whatever your insurance doesn’t.

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Portrait of happy female caretaker helping senior man in using Zimmer frame at nursing home yardBy planning for home care now, even when you don’t presently need it, you could eventually save 100% of your money, income and assets, which Medicaid would otherwise require you to pay towards your own long-term care. When nursing facility services are required, although in most cases you will not be able to protect your income advance planning can still save all of your assets.

A careful job of advance preparation considers all contingent factors. It’s best to anticipate the need for home and nursing facility care simultaneously, so that if you do need to enter a nursing home you’re financially prepared. The reason is that unlike the requirements for home care, Medicaid has “look back” and “penalty”periods that apply to nursing home applications. Here’s what the look back and penalty periods are, and how they work.

Currently, when you apply for nursing home benefits in New York, Medicaid will evaluate your financial data going back five years. This is called the look back” period. If there has been any transfer of money or assets to someone other than your spouse (or minor, blind, or disabled child) within the look back period, Medicaid will impose a penalty period” during which no benefits will be paid.

Medicaid calculates the length of the penalty period by taking the amount of the transfer, and dividing it by the monthly cost of nursing homes in your geographic area. This cost – called the “regional rate” – is determined by Medicaid each year for the different regions of New York State. For example, the regional rate for New York City in 2020 is $12,844. Note that the actual cost of your nursing home is likely to be significantly more than Medicaid’s regional rate.

So if you gave your child a gift of $128,440 and entered a New York City nursing home at any time during the look back period, Medicaid would divide $128,440 by $12,844, resulting in a penalty period of 10 months. The penalty period starts as soon as you enter the nursing home, and have completed all of Medicaid’s other eligibility requirements. During the penalty period, the nursing home’s bills will have to be covered on a private pay basis.

Using the above example, if the nursing home’s private pay rate is $17,000 (Many facilities currently cost this much or more), the Medicaid penalty would cost $170,000. If you’re in the nursing home prior to the time the penalty period actually begins, it could cost an even greater amount. A financial disaster like this can be avoided with good planning, yet most people don’t do it. Don’t make that mistake yourself.

If you transfer cash and assets out of your name during the look back period, it will be too late to save 100% of your assets. In most instances, you will sacrifice at least 50% of what you have, even with Elder Law planning.

Consequently, even if you’re healthy now, you’ll benefit by planning ahead. Admittedly it’s not pleasant to consider. However, losing half or all of your net worth to long-term care expenses, and possibly ending up penniless and in poverty, would be far more painful for you and your family.

As you can see, the most powerful use of asset protection strategies is with advance planning, before you need home or nursing facility care. A good example is a case in which we helped a healthy client who does not currently need assistance. We transferred his house to a trust, so that in the event he does require Medicaid benefits, his home will not be subject to a Medicaid lien.

Also, by planning early we increased his chances of moving past the look back period. If he eventually needs nursing home care after the look back period has expired, his transfer will be exempt. That means the equity in his home will not eventually have to be used to reimburse Medicaid for the cost of his care. Instead, it will be fully available to his heirs after he passes on.

Take steps to preserve your finances and dignity while you’re still healthy, and not in need of professional care to help with your day-to-day living needs. Having the financial ability to maintain the lifestyle you’re used to, and your self-respect, is a kind of “medicine” that might be as vital to your well-being as anything you receive from doctors.

25 Strategies to Prevent Financial Ruin from Long-Term Health Care Costs

  1. You can qualify for Medicaid (even if you don’t think so)
  2. The “Wait and See” Approach can Result in Ruinous Health Care Expenses.
  3. Plan for Home Care and Nursing Home Facility Care while You Still Can.
  4. What’s the difference between Medicare and Medicaid?
  5. It’s NOT too Late for Effective Medicaid Planning (even if you think it is)
  6. Why Hire an Elder Law Attorney?
  7. Don’t Prepare Your Own Medicaid Application
  8. Trusts Can Protect Your Home and Your Money!
  9. Special Trusts for Specific Purposes
  10. Protecting Co-op Apartments Require Special Handling
  11. Evaluate Your 401k or IRA Carefully when Planning for Medicaid
  12. Why Take the Lump Sum Option on Your Pension or Retirement Account?
  13. Choose Your Trustee Wisely
  14. Private Annuities can Help Protect Your Assets
  15. Caregiver Agreements Help Achieve Medicaid Eligibility
  16. Keep Your Medicare Insurance
  17. The Durable Power of Attorney
  18. Elder Law and Estate Planning
  19. The Health Care Proxy vs. the Living Will
  20. How to Choose an Elder Law Firm
  21. Streamline Your Financial Affairs and Record Keeping
  22. New York State is More Generous than Other States
  23. Your Attorney can Help Find the Best Care for You
  24. Long-Term Care Insurance Won’t Necessarily Solve the Problem
  25. Compassionate Elder Law Planning Focuses on Your Future Quality-of-Life!
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