Until you look into the subject, you may wonder why estate planning and elder law attorneys would have any interest in the Medicaid program and Medicaid estate recovery. After all, almost all senior citizens in the United States qualify for Medicare as a source of health insurance.
This makes sense on the surface, but there is a very good reason why Medicaid is relevant.
Long-Term Care
The majority of seniors will need help with their activities of daily living eventually, and just over one-third of them will reside in nursing homes. Long-term care costs can be devastating, and Medicare does not pay for the custodial care that nursing homes provide.
Medicaid will pay for this type of care, and this is why elder law attorneys have a thorough understanding of the program.
Medicaid Planning
Since Medicaid is intended for people with sparse financial resources, there is a low $2,000 asset limit, but your home does not count. However, this is a $1.071 million equity limit in New Jersey in 2023.
People typically divest themselves of assets in an effort to qualify for Medicaid to pay for long-term care. This is often done by funding a special type of trust that provides ongoing income.
However, this takes careful advance planning, because there is a five-year look back period. The divestitures must be completed at least five years before the application is submitted.
Violation of this rule does not technically trigger permanent ineligibility, but in most cases, it amounts to that. If you transfer assets out of your name within this five-year window, your eligibility is delayed for a period that is based on the amount of the divestitures.
For example, let’s say that you transfer enough to pay for two years of nursing home care to your son. Under those circumstances, you would be ineligible for two years.
Medicaid Estate Recovery
The Medicaid program is required to seek reimbursement from the estates of beneficiaries after they pass away. Since a home is the only non-countable asset that has significant value, this would typically be the only piece of property that could be in play.
It is possible to transfer direct ownership of your home to an irrevocable Medicaid trust when you are spending down with future Medicaid eligibility in mind. Plus, there is one exception to the rule.
If an adult child has been living with you to provide a nursing home level care in your home for at least two years, you could give the property to your caregiver child. The look back period would not be a factor.
Special Needs Planning
The recovery scenario can also be applied to special needs planning. People with disabilities often rely on Medicaid as a source of health insurance, and they also receive income from the Supplemental Security Income program.
Someone with a disability could use a personal injury settlement or money that is received from some other source to establish a supplemental needs trust. The trustee would be able to use assets in the trust to make the person more comfortable, and benefit eligibility would remain intact.
After the death of the grantor/beneficiary, assets that remain in the trust could be attached during Medicaid recovery efforts.
If you want to leave an inheritance to someone with a disability that is in this position, you can fund a third-party supplemental needs trust. Medicaid would not be able to go after assets that remain in the trust when the funding is coming from someone other than the beneficiary.
Schedule a Consultation!
Now is the time for action if you do not have a nursing home asset protection plan in place. You can send us a message to schedule a consultation appointment at our Warren, NJ elder law office, and we can be reached by phone at 908-222-8803.
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