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Over the course of a person’s lifetime, about 70% of us will need long-term care.  It’s estimated that the average cost of long-term care just during the last 5 years of life is $233,00- $367,000. For those with long-term care insurance, the average American is still paying $140,000 out of pocket. The price tag associated with long-term care is incredibly intimidating and unfortunately due to high premiums and limited options, many people do not have long-term care insurance coverage. This leaves those without insurance with two options:

  1. Pay hundreds of thousands of dollars for long-term care.
  2. Utilize Medicaid benefits to cover the cost.

When we look at these two options, neither may be attainable. The out-of-pocket cost is too great for most Americans. Yet at the same time, many Americans will not qualify for Medicaid benefits because their assets are too great. This dilemma leaves many searching for more creative options. And the solution may be as simple as restructuring assets.

Medicaid Qualification

There is a common misbelief that Medicaid is only for low-income seniors. However, with proper estate planning, it is possible for most Americans to qualify for Medicaid benefits.

Medicaid is a need and means-based program. Those who apply must qualify by meeting certain benchmarks regarding their ability to pay for care. Annual income and personal assets are the two primary factors. To qualify for Medicaid, an individual cannot have over $2,000 in assets. Therefore, a creative premise to qualify for Medicaid is to become asset poor and impoverished.

Imagine working your entire life to build a legacy for your family, only to intentionally become poor to afford for long-term care. That does not lend itself to being a desirable option. However, this does not have to be the case if you properly restructure your assets.

Asset Restructuring Strategies

The Medicaid “asset test” is complex and varies state to state. Broadly speaking, an individual in New York in 2022 must have less than $16,800 in assets, apart from their home (up to certain value) if they are currently residing in it or plan to return to it.  There are a few different options that allow for asset protection and Medicaid qualification.

  • Ownership transfer: One can simply transfer ownership to a family member or trusted individual. However, this option does pose some risks. If the person were to experience bankruptcy, a lawsuit, or death you risk losing those assets completely. Additionally, Institutional Medicaid in New York does have a five-year look back period. So, proper planning is a must.
  • Asset protection trusts: Assets can be transferred into a properly designed trust that removes them from your estate. These trusts, also known as “Medicaid Trusts,” not only allow for Medicaid qualification but also serve to protect the assets from other creditors.
  • Spousal refusal: Depending on the state, “spousal refusal” may be permitted and is an option for married couples. With spousal refusal, the healthy spouse legally refuses care and support for the spouse who is in need of care. This immediately makes the spouse in need eligible for Medicaid benefits as Medicaid cannot refuse care because of payment refusal by the spouse. It’s important to note that Medicaid does maintain the right to request a financial contribution from the healthy spouse. However, many times they will not follow through with the legal action that is required to seek payment.
  • Spousal transfer: The transfer of assets to a spouse is permitted under Medicaid laws without penalties or being subject to the 5-year look back period. If married, this may be the easiest way to protect your assets.

Ensuring Asset Protection and Medicaid Qualification

Restructuring your assets and implementing various income strategies is complex and varies greatly depending on legislation. To ensure Medicaid qualification while simultaneously protecting your asset, proper planning, preparation, and strategizing is essential. With experience and an understanding of asset protection, an elder law attorney is vital in this process. We invite you to contact our office to discuss asset protection and Medicaid qualification tactics today.

For assistance, please contact our office at (212) 920-6371.

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