According to The Kaiser Commission on Medicaid and the Uninsured*, an estimated seventy-percent (70%) of Americans aged 65 or older will need Long Term Care, such as a stay in a nursing facility, during their lifetimes. Additionally, those over 85 years of age are four times more likely that those aged between 65 and 84 to need Long Term Care.
These estimations indicate that it is more likely than not that one will need Long Term Care during his or her lifetime. Accordingly, it behooves individuals who are aged 60 and over to plan for their Long Term Care needs. Few individuals would like to place the burden of paying for Long Term Care on their families or see their hard earned assets depleted by the cost of Long Term Care.
Indeed, the costs of long term care are substantial. According to most estimations, the average cost of nursing home care in the New York City area is approximately $12,000.00 per month, or $144,000.00 per year, for an individual.
Given the cost of long term care, and the fact that Americans have increasingly longer lifespans, the cost of purchasing long term care insurance is usually prohibitively expensive for seniors. If you are considering paying for long term care insurance out of pocket in New York State; however, you should explore those providers that participate in New York State’s Partnership for Long Term Care. Aside for many guaranteed benefits, NYS will also give you a credit on your tax return for 20% of the premiums paid towards those policies, even if you are paying those policies on behalf of a parent. You can explore more about New York State’s Partnership for Long Term Care by clicking here.
In light of the above, it is no surprise that The Kaiser Commission on Medicaid and the Uninsured* estimates that the cost of long term care often exceeds what individuals and their families can afford to pay. Accordingly, many individuals will need to rely on Medicaid to pay for their long term care needs.
For many, Medicaid coverage provides the most practical means of affording long term care; however, not everyone qualifies for Medicaid coverage. In general, Medicaid is an insurance program for those who are financially needy. Accordingly, seniors can only qualify for Medicaid if they meet certain asset and income requirements. Although these requirements vary depending on the type of care one needs and whether or not the person who needs coverage is married, it suffices to say that the limitations on one’s income and assets are quite low. Additionally, even if one does qualify for coverage, Medicaid will seek to recover its outlay from your assets.
The primary means by which someone who exceeds the maximum income and asset threshold for Medicaid coverage will qualify is by “giving” away their assets. Typically, the assets are placed into a specialized type of trust whose use has been approved by the court. The trust allows the trust creator to receive the income from the trust while still remaining eligible for Medicaid coverage. The trust also serves to protect the assets from Medicaid recovery. There are many other benefits to placing the assets in trust rather than gifting them outright, although the benefits will vary depending on your individual circumstances.
The primary downside to giving away your assets, aside for giving up control over those assets, is that Medicaid will penalize you for giving away your assets within five years prior to the date that you need Medicaid coverage for long term care. Accordingly, planning for Medicaid coverage requires you to plan five years in advance, and should be done while one is still healthy. For this reason, I suggest that Medicaid planning be performed as early as age 60 and certainly by age 65.
Please feel free to contact us about your Medicaid planning needs by clicking here.
*You can read the The Kaiser Commission on Medicaid and the Uninsured report entitled “Medicaid and Long-Term Services and Supports: A Primer”, by Erica L. Reaves and MaryBeth Musumeci by clicking here.