With millions of Baby Boomers reaching retirement age and beyond without any type of plan, many believe that it is too late to begin planning for elder care. Others have unnecessarily spent tens or hundreds of thousands of dollars in care and other needs because of the lack of an elder law plan. These are some of the most common misconceptions regarding elder law planning as well as how you or your loved one can avoid them.
It Is Too Late to Plan
For single or married elders, one of the most common and most devastating misconceptions about elder law planning is that it is too late. For seniors that are about to go into nursing home care or are already a resident, most have been informed of the five year look-back period for Medicaid and believe that there is nothing that can be done.
However, Medicaid allows for a “crisis plan” that protects between forty and fifty percent of a person’s assets that is already, or is about to be, placed in long-term care. Without a crisis plan, seniors are required to spend down to the Medicaid limit before they qualify for coverage under the government program.
Transfer of Assets and Medicaid
In New York, one of the biggest benefits to asset protection planning for Medicaid is that the five year look-back period does not impact the eligibility of Medicaid home care, otherwise known as community Medicaid. While the nonexempt transfer of assets does fall under the five year look-back period, a senior could transfer all or most of their assets and still qualify for home care in the next month. The look-back period can run during the home care and qualifying for long-term care becomes much easier.
Revocable Living Trusts
It is important to note that assets used to fund a revocable living trust count as assets for Medicaid eligibility, and the program is allowed to place a lien against those funds for the services provided to you while you are under Medicaid care. As a result, placing assets in this type of trust is not very productive for the purposes of Medicaid asset planning. However, once the trust creators pass away, the trust become irrevocable and is no longer subject to further claims made by the Medicaid system.
IRA, Retirement Assets and Medicaid
Many seniors do not realize that assets in an IRA or other retirement accounts are not considered assets for the purposes of Medicaid planning as long as the minimum distributions are being taken out every year. Even if the assets in your retirement accounts far outweigh the mandatory maximum for eligibility, you can still qualify for Medicaid care. The only assets that are counted towards Medicaid eligibility are the minimum distributions being taken out annually from the accounts.
However, it is important to have a beneficiary named to the retirement accounts that is not your estate. If you name yourself or your estate becomes the holder of the retirement accounts, Medicaid can place a lien on those funds for compensation of services provided while you were alive, thus affecting the inheritance of your loved ones.