As my grandmother grew older, my parents moved her and my Aunt Lucy out to Long Island.  Shortly after that, my grandmother was diagnosed with Alzheimer’s disease.  She struggled with it for 12 years.  The severity of the disease started out small, but rapidly affected her health and memory.  At the onset of the disease, my Aunt Lucy cared for my grandmother exclusively.  During the last 5 years of the disease, however, when the task of caring for my grandmother became too great for one person, a   team of aides was brought in to give her “around the clock” care.  Since my grandmother had never sought the advice of an Elder Law attorney before she became ill, nor did my Aunt Lucy seek such advice when my grandmother became ill, the choice was made to use my grandmother’s hard earned savings to privately pay for her health care needs.   That pretty much wiped out all of my grandmother’s hard earned savings.

During one of my last conversations with my grandmother, she asked “who are you?” before she stopped mid sentence and pointed out the window.  She saw an angel.  My grandmother was upset that I did not see the angel.  The angel might have actually been there, calling for my grandmother, because she passed away soon thereafter, but I don’t think an angel would have allowed my grandmother’s circumstances to cause her family such stress and pain.

My parents, who did not need my grandmother’s money, never insisted on having my grandmother pursue proper estate planning.  After 12 long years, my grandmother had nothing left.  It all went to her medical care.  In all my life, I have never met a person, who before getting sick, was as generous as my grandmother.  She always showered her children and grandchildren with gifts, and more importantly, love and affection.  At the end, she had neither to give.

What if she had estate planning in place?  What might have been different?  First, she could have saved most or all of her assets had she not needed to pay out of pocket for her long term health care.  Second, she could have left those remaining assets to the person who made the biggest difference in her life, my Aunt Lucy, who devoted her entire life to care for her and her family.  If someone was deserving of my grandmother’s hard earned savings, it most certainly was my Aunt Lucy.  However, even if there were assets left to give, my Aunt Lucy would not have been a beneficiary because my grandmother had no Will.  Without a Will, all of my grandmother’s assets would have gone to her living children, even though her children were financially secure and did not need the money.  Finally, my family could have suffered a lot less grief and worry had my grandmother’s wishes regarding her finances and advanced health directives been set forth in proper estate planning documents.  Lesson learned….take care of your affairs while you are in good health.  Don’t leave matters to chance!

Medicaid is a means tested-program.  In short, it means that you must be poor.

What does poor mean in terms of Medicaid?  It means that you can only have a certain amount of money and possessions (called Resources) in your name.  It also means that your well spouse (a/k/a Community spouse) can only have a certain amount of Resources in his or her name.

In addition, depending on the type of Medicaid benefits you receive, Medicaid will only let you, and your spouse, keep a portion of your income.  The break down looks like this for 2009, and appears will be the same for 2010.

The institutionalized person (person in a nursing home) can only have:

• Resources: – maximum of $13,800 of non-exempt assets.
• Income Level: $50 per month.

The Community spouse (healthy spouse) is allowed to keep:

• Resources: – minimum of $74,820 and a maximum of $109,560.
• Income Level: – $2,739 of the couple’s combined income.

If the couple’s or institutionalized person’s resources exceeds $74,820 or $13,800, respectively, then the excess normally must be spent on the cost of the Long Term Health Care before Medicaid eligibility can be established.

Anything above the Resource level may cause the Department of Social Services (the government organization that oversees the Medicaid program at the County level) to deny your Medicaid application or force you to contribute towards your health care.

Can I transfer assets out of my name to drop down to those Resource levels?

Yes, but for nursing home care, Medicaid will look back over the 5 years preceding the date of your Medicaid application to see if you transferred assets out of your name.  If it sees a transfer in the last 5 years, they will penalize you.  The penalty is a one month denial of Medicaid benefits for approximately every $11,000 you transferred.  The penalty is there to dissuade you from transferring your assets rather than spending them on your Long Term Health care costs.  My next Blog will reveal the 5 Secrets!

FACT: According to the Agency for Health Care Policy and Research, 4 out of every 10 people over the age of 65, will wind up in a nursing home at some time.

FACT: The average cost of nursing home care on Long Island is approximately $12,000 per month.  That number can even be much higher depending upon the nursing home facility and the required care.

QUESTION: Would you be able to afford those fees should you or a loved one need to be placed in a nursing home?

Medicaid is a Federal program that will pay for most of your Long Term Health Care needs.  Medicaid is the single largest payer of Long Term Health Care in the country.

Chances are, Medicaid is the right choice for you.  However, you need to know the rules of Medicaid to successfully have them pay for your Long Term Health Care needs.  Those rules can be maddening to understand, so we thought it would be an excellent idea to reveal 5 secrets about the Medicaid program.

Secret 1:      No penalty for transferring assets to a spouse. You can legally transfer as many assets as you want to your well or community spouse and not suffer a penalty from Medicaid.  That’s right, you can transfer $1 million if you wish to your spouse, and still successfully apply for Medicaid benefits, so long as you use Secret # 2 along with the transfer.

Secret 2:       Spousal Refusal. In New York State, a well or community spouse can sign a statement refusing to pay for the medical expenses of the institutionalized spouse and Medicaid, in New York, will determine eligibility of the applicant without considering the resources of the community spouse.  This is known as “spousal refusal”.  This will allow for the institutionalized spouse to receive nursing home care services right away and have those services paid for by Medicaid.

Secret 3:       You can legally transfer all your assets away to a disabled child. If you have a child that is receiving Social Security Disability, you can hand over all of your resources to that child, thereby protecting your assets and still have Medicaid pay for your Long Term Health Care immediately. A pretty nifty tool if you fall under this category.

Secret 4:       No look back period for Home Care. If the institutionalized spouse needs only non-nursing or custodial care (ex: toileting, bedding, assistance walking around, etc.), and that care takes place at home…there is no look back period of 5 years.  The look back period is 0 days!  That means you can transfer all your wealth away and the 1^st day of the month following the transfer, you could be eligible for Medicaid benefits. A great option if you are not in need of full blown nursing home care.

Secret 5: Preplan!! The ability to preserve your assets and still have Medicaid pay for your future Long Term Health Care can be greatly increased if you just plan for that in advance.  Plan when you are healthy and the 5 year look back period will not be such a huge obstacle.  With preplanning you will still be able to keep control of your assets and you will avoid having to rely on the first 4 secrets. Transfers can take place to an irrevocable trust, or to other non-exempt recipients not discussed in this article.

Keep in mind that the information contained in this article is a simplification of the extremely complex rules and laws surrounding New York State Medicaid.  By transferring assets to another person or to an irrevocable trust, you can protect all or part of your savings, but often times there can be adverse tax consequences and/or a penalty period of ineligibility.

It is always a wise idea to have the rules and concepts behind Medicaid explained to you by an experienced attorney who concentrates on Medicaid Planning. Furthermore, it is best to consult an attorney before making any transfers on your own.

Call the Law Office of Craig A. Andreoli, P.C. for a complimentary consultation on Medicaid Planning.  We can help advise you as to whether with proper planning you can qualify for New York State Medicaid benefits.

A: There are various reasons why a person can get Medicaid benefits without being penalized. The most obvious is that they qualify for Medicaid. Meaning, among other things, they have a resource level below $13,050. Medicaid will deny you benefits if you have more than $13,050 (increased recently from $4,350) of available resources. A penalty period will be imposed for non-exempt transfers of assets, during a 5 year look back period, meant to reduce the applicant’s available resources below the $13,050 resource level. Notice I mentioned non-exempt transfers. There are exempt transfers, i.e. transfers that a Medicaid applicant can make without having Medicaid invoke a penalty period. You could use these exempt transfers to divest yourself of assets. Transfers to a spouse and/or a disabled child will not affect Medicaid eligibility. A Medicaid applicant can also transfer assets to certain types of trusts that will not interfere with an applicant’s eligibility. One such trust is a Special Needs Trust. Strict adherence to the statutory requirements must be taken to effectively create a Supplemental Needs Trust and they are only available to applicants who are disabled. Using any of these exempt transfers may help to reduce your resource level and decrease or eliminate any Medicaid penalty period.

It should be noted that any course of action taken to divest assets may have adverse consequences for the applicant, his spouse or even any perceived beneficiaries of the applicant’s estate with respect to taxes or government benefits. Therefore, it is always a good idea to have a competent legal professional outline a balanced estate plan that can achieve your desired goals.