Having experienced firsthand for almost thirty years the ravages and cruelty inflicted by Alzheimer’s, senile dementia, Parkinson’s, ALS and MS upon individuals and their families, it can be particularly galling to learn that some have unnecessarily spent hundreds of thousands of dollars on their long-term care as a result of misconceptions and/or misinformation they relied upon. The following are the most common and financially devastating misconceptions:
1. It’s Too Late To Do Anything: This misconception is particularly devastating in cases where an unmarried person is already in a nursing home for long-term care or will be shortly. While the individual and his or her family may know of the existence of the five year look back (period of disqualification for nursing home Medicaid) for assets gifted (with some exceptions), they may be unaware that they can engage in what is commonly referred to as a Medicaid crisis plan.
If properly constructed and implemented, a Medicaid crisis plan can protect approximately forty to fifty percent of the assets of the individual already admitted or being admitted to a nursing home for long-term care. Without its implementation, one would be required to spend down his or her (non IRA/retirement) savings until he or she has $14,850 or less in available resources. This can be financially disastrous for someone who has managed to save any money during their lifetime.
The “it’s too late to do anything” misconception is also pervasive among seniors who believe that they are too old to engage in elder law planning. Whether one is in his or her 70’s, 80’s or 90’s, it is always better to start the five year look back period running, and reducing the potential extent of one’s exposure to the cost of long-term care, than leave all of one’s savings exposed to the cost of care.
2. Transfer of Asset Rules Do Not Apply to Community Medicaid: One of the distinct advantages of engaging in Medicaid asset protection planning in New York is that while a non-exempt transfer of assets will create the five year look back period for nursing home Medicaid, it will not, under current law, have any impact on one’s eligibility for Medicaid home care (community Medicaid).
Thus, hypothetically one could transfer all of his or her savings and still be eligible for Medicaid home care the first of the month after the transfer assuming one needs assistance with activities of daily living and complies with the rules regarding one’s income (which can also be protected with a pooled community trust).
3. Assets Funded in a Revocable Living Trust are Not Protected for Medicaid Purposes: Regardless of how large the leather bound binder containing your Revocable Living Trust is, the assets used to fund said Revocable Living Trust are counted as available resources for Medicaid eligibility purposes, and Medicaid will be able to place a lien/claim against said assets/resources during your lifetime for the value of the services provided.
The only advantage for Medicaid planning purposes of a Revocable Living Trust occurs once the creators of the Trust are deceased. Upon their death, the trust becomes irrevocable and thus, no longer subject to the imposition of any claims or liens by Medicaid. Under New York law, Medicaid only has liens upon one’s probate assets (assets in one’s name alone upon his or her demise), thus, the assets in the Irrevocable Trust (previously Revocable) are excluded.
4. IRA/Retirement Assets are Not Countable and Available Resources for Medicaid Eligibility: All too often one who has IRA/retirement assets will believe that said assets will disqualify him or her from Medicaid eligibility. However, the IRA/retirement assets, irrespective of their amount, are not counted as an available resource for Medicaid eligibility purposes so long as the applicant for Medicaid is receiving their required minimum distribution. Thus, even if one has thousands or millions of dollars in IRA/retirement assets, he or she could be eligible for Medicaid nursing home or Medicaid home care, and the balance in the IRA/retirement account would not be considered an available resource for Medicaid eligibility purposes. However, the minimum required distribution would be considered as countable income to the applicant.
It is also important if one has an IRA/retirement account to ensure that said account has named beneficiaries/alternate beneficiaries, and that one’s estate is not named as a potential beneficiary or becomes the beneficiary by default. If one’s estate is the beneficiary of the IRA/retirement, then Medicaid would have a lien/claim against the amount paid to the estate for the value of the services it provided.
I am hopeful that the above will help resolve some of the common misconceptions about elder law planning that have resulted in the unnecessary loss of assets to many.