Long term care can be provided in a nursing home, assisted living facility, or at home with aides. While each setting has its advantages and drawbacks, they all have high cost in common. With care often costing over $10,000 per month long term care could wipe out your life savings. However, we often help clients qualify for Medicaid to fund care in all three settings without going broke.
While New Jersey Medicaid can fund long term care in all three settings, qualifying for Medicaid is not easy. Because eligibility is governed by complex rules that sometimes defy common sense, individuals who don’t work with an elder law attorney are not likely to protect much. Fortunately, FriedmanLaw’s elder law team can help you use gifts, prepaid funerals, qualified income trusts, annuities, and other tools to qualify for Medicaid without impoverishing your family.
You may have heard that once you need long term care it is too late for Medicaid planning, but that simply is not true. Even though Medicaid may impose penalties for most gifts made within five years before applying for Medicaid, in many cases, gifts, annuities, maximizing family allowances, and other Medicaid planning techniques can save a lot despite the five year look back period. However, planning must take account of complicated Medicaid laws and regulations. Gifting too much or too little or applying for Medicaid too soon can be very costly.
For Medicaid purposes, a gift is any transfer for less than market value to friend, family, charity, religious organization, school, etc. Most gifts (whether or not taxable) made within five years of applying for Medicaid trigger a penalty period that delays Medicaid eligibility. However, some gifts are exempt– such as certain gifts for a spouse or disabled person and some gifts of a home– provided the gift meets various technicalities. For instance, a gift of mom’s house to a child avoids penalties where the child qualifies as a caregiver child but may trigger penalties otherwise.
Perhaps the biggest Medicaid planning issue is timing. To minimize the impact of Medicaid gift penalties, it usually is important to start the penalty period as soon as possible unless gifts are extremely large. For instance, your $120,000 gift to your grandchildren in January 2017 would trigger a roughly 12 month penalty period so you might assumes the penalty would end January 2018. However because a penalty doesn’t start until you otherwise are eligible for Medicaid and apply, the penalty period might not even begin until 2018 or later unless you work with elder law attorneys like FriedmanLaw to accelerate the penalty start date.
Sometimes we help clients protect assets by funding long term care in a nursing home, assisted living facility, or at home without incurring a Medicaid penalty period. This may involve gifts to or in trust for a disabled child, spousal annuities, prepaid funeral accounts or other techniques. Yet savings won’t occur unless these techniques follow Medicaid law, which can be tricky. In addition, unless wills and powers of attorney are coordinated with Medicaid planning, anticipated savings may never arise. Therefore, like other elder law attorneys, FriedmanLaw strongly advises against do it yourself Medicaid planning especially since technicalities and exceptions apply to all the planning techniques discussed in this post.
Other complex issues that can arise in Medicaid planning include minimizing estate recovery, maximizing spousal allowances, qualifying as a caregiver child, placing excess income in a qualified income trust (also called Miller Trust), and using special needs trusts to protect settlements and inheritances. Space limitations prevent us from addressing these topics here but we do discuss them in other blog posts or elsewhere on SpecialNeedsNJ.com, and check our blog frequently for more timely articles on Medicaid planning.
