Avoid Long-Term Care Planning Mistakes

1.)    I am allowed to gift $19,000 to each of my children this year without filing a gift tax return under the IRS’s annual exclusion.

Yes, the IRS allows you to gift $19,000 per person without filing a gift tax return, but the IRS will not be reviewing your Medicaid application if you get sick. Your local county Department of Social Services reviews Medicaid applications including nursing home applications with the dreaded five-year lookback.  

DSS is looking for gifts and uncompensated transfers that will create a penalty period based on the amount gifted and the regional nursing home rate for your county. The higher the gift totals, the more months you will have to pay the nursing home out of your pocket.

Monthly nursing home bills run $16,000 to $20,000.

2.)    We want to get a divorce to protect our assets from Medicaid.

New York State law favors marital relationships when one spouse becomes ill and requires Medicaid services. Spousal refusal, spousal exemptions, and spousal impoverishment rules ensure that the healthier spouse will not be financially compromised or penalized because an ill spouse requires serious long-term care paid for by Medicaid. 

Divorced spouses are considered strangers under Medicaid law, and rushed and poorly planned separation agreements could lead to penalizable transfers from one ex-spouse to another.

3.)    He has to go to a nursing home because he needs 24-hour care.

Community Medicaid Home Care includes an option that provides up to 24 hours of nursing home quality care each day in your home. It is called the Nursing Home Transition & Diversion waiver and allows a person who would have most likely ended up in a nursing home to remain home with extended care. 

4.)    We have a long-term care insurance policy but do not think it is any good.

If you have a New York Partnership Plan (most likely purchased early in the 2000s), then you have a long-term insurance plan that would cover a high percentage of your care needs for the short term and allow you to save most or all of your assets from Medicaid. These dual protection insurance plans carried higher premiums, but they avoided any reliance on an emergency Medicaid plan with potential penalties.

Even if you do not have a NY Partnership Plan, check out your plan’s lifetime maximum, daily rates, and riders – you may have a good plan and not even know it.

5.)    We are way too young to set-up Medicaid planning.

If you have an adult child who is trustworthy and instills confidence in you with their decision-making, then it is never too early. Even if you only protect your primary residence with a Medicaid Asset Protection Irrevocable Trust and name your adult child as trustee, you start the clock. Nursing Home Medicaid has a five-year lookback and NYS has a regulation yet to be enforced that would create a two-and-a-half-year lookback on Home Care Medicaid. 

Will we see both lookbacks in the near future? We are watching. With possible big Medicaid changes on the horizon, the earlier your assets are protected, the better. If your child is too young, you can choose a trusted sibling to be trustee. You should still maintain control over the bulk of your financial assets, but allow the trust to protect your home and any other owned real estate.

Real estate is the hardest thing to shield from creditors or protect from Medicaid if proper planning and professional Medicaid guidance is not followed

Alan D. Feller, Esq., is managing partner of The Feller Group, located at 572 Route 6, Suite 103, Mahopac. He can be reached at alandfeller@thefellergroup.com.