When you have been able to accumulate resources that you probably won’t exhaust while you are living, it can be satisfying to know that you have a legacy to pass along to the people that you love. Many individuals make projections in this regard based on the normal expenses that they have during their senior years. This makes sense, but there is a looming threat that everyone should prepare for in advance.
Medicare will be available to you when you reach the age of 65 if you or your spouse worked and paid taxes for at least 10 years. It will provide a very strong health insurance underpinning, but you should be aware of the out-of-pocket expenses that you must pay yourself. There are co-payments, deductibles, and premiums. Plus, the portion of the program that pays for outpatient treatments and visits to doctors only covers 80 of covered expenses; you pay the remainder.
These expenses are manageable for many people, but there is one huge gap that can be truly devastating. The majority of senior citizens will someday need living assistance according to the United States Department of Health and Human Services. A significant percentage of them will spend their final days in nursing homes. Medicare will not pay for it.
We practice law on Long Island. Long-term care costs are expensive everywhere in the country, but nursing homes are particularly expensive in our area. At the time of this writing, you can expect to pay more than $120,000 for a year in a private room in a nursing home. There are some people that spend multiple years receiving nursing home care.
There is another facet to take into consideration when you are considering the impact of these expenses. A lot of people will reside in long-term care communities before they enter nursing homes. These facilities come with an annual price tag that exceeds $40,000. And remember, if you are married, you can double these figures if both you and your spouse ultimately receive long-term care.
Nursing Home Asset Protection
Fortunately, there are strategies that can be implemented to preserve your legacy for the benefit of the people that you love.
Medicaid is a jointly administered federal/state government health insurance program that does pay for nursing home care. Since it is intended for financially needy individuals, there is a low asset limit. For folks in most parts of the country, it is just $2000, but it is a little bit better for New Yorkers. Our Medicaid asset limit that the time of this writing in 2018 is $15,150.
When you look at this limit, it can seem extremely low, and it is, but some of the things that you own do not count, including your home. However, there is an equity limit, and it stands at $858,000 in New York at the present time. If a healthy spouse is remaining in the home, there is no equity limit at all.
Speaking of the healthy spouse, there are certain allowances that can ease the financial burden. The spouse that is still capable of independent living is entitled to a Community Spouse Resource Allowance. This is equal to half of the shared countable assets that are held by the couple jointly, but there is a limit.
In New York, it is $123,600, and there is also a minimum Community Spouse Resource Allowance of $74,820. To explain the minimum through an example, let’s say that you and your spouse have a total of $100,000 in countable assets. Your spouse is applying for Medicaid to pay for nursing home care. Half of your assets would be $50,000. However, because there is a minimum that can be retained, you would be able to keep $74,820.
Under program rules, almost all of the income that is brought in by the person that is using Medicaid to pay for long-term care must be contributed to help pay for the care that is being received. This requirement is waived if the healthy spouse is relying on the income to maintain a minimum standard of living. The healthy spouse can receive a Medicaid Monthly Maintenance Needs Allowance of $3090.
When it comes to assets that are in play, you could give gifts to your loved ones or convey them into an irrevocable trust, but advance planning is crucial. All gift giving must be completed at least five years before you apply for Medicaid coverage.
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If you would like to discuss Medicaid planning with one of our elder law attorneys, call us at 631-265-0599 to schedule a no obligation consultation.