This article explains how an irrevocable trust, with proper planning, can protect assets and allow an person to qualify for Medicaid for long-term health care. This is a serious concern for anyone who is aware of the potentially catastrophic expenses of home health care and nursing homes.

Unfortunately, most health insurance plans and Medicare do not cover long-term home health care or lengthy stays in rehabilitation facilities and nursing homes. Medicare will pay for a few months after a hospitalization, but then patients will be forced to private pay for care if they do not have long term care insurance - which is becoming increasingly rare and expensive.

Why is this a concern? Someone turning age 65 today has close to a 70% chance of needing some type of long term care services. Twenty percent of those individuals will need long term care for longer than 5 years. Institutional Care (i.e. a nursing home) can cost over $155,000 per year. Fortunately, New York manages a robust Medicaid program for those in need of long-term care. However, qualifying for Medicaid can be problematic because of asset and income limits. For 2020, if you apply for Medicaid for home health care, to qualify you will need assets of approximately $15,000 and income of less than $900 per month.

Many people are under the mistaken belief that simply gifting assets or transferring them to a revocable trust will help them qualify for Medicaid. Giving away assets could result in Medicaid transfer penalties and could prevent applicants from qualifying for Medicaid eligibility for a period of time. Moreover, assets held in a revocable trust are always treated as being owned by the grantor for purposes of Medicaid eligibility. This is because the individual still controls the assets in a revocable trust, including the right to revoke the trust.

However, Medicaid rules permit irrevocable trusts, referred to as “special purpose trusts” to own assets that will not be counted as available resources for Medicaid eligibility purposes. In New York, transfers of assets to a Medicaid Trust are subject to the five year “look-back” if the grantor seeks Medicaid Nursing Home benefits, so advanced planning is important.

Using an irrevocable trust in Medicaid planning can provide significant benefits in addition to qualifying for Medicaid - including avoiding probate in Surrogate’s Court . When done correctly, the Medicaid Trust will give you access to Medicaid benefits for long-term care, protect your home and your assets, and provide you with an effective estate plan.

If you are interested in an irrevocable trust and/or applying for Medicaid to pay for long-term care, please contact Raimond & Staines, LLC. Out of office consultations are available.

305 Broadway, 7th Floor, New York, New York 10007

(212) 884-9636

tim@raimondstaines.com
frank@raimondstaines.com

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