Growing older brings a variety of possible infirmities, and it is possible you or your spouse might need to go into a nursing home someday. While some people put aside enough money for future care, you realize you might exhaust your assets in long-term care costs.
Fortunately, the Medicaid program provides continuing care coverage for individuals on a low income. To ensure that your finances meet Medicaid qualifications, now is a good time to consider Medicaid planning.
How Medicaid planning works
Medicaid planning refers to organizing your finances and assets so that you can eventually qualify for Medicaid coverage. The program has strict eligibility rules regarding income and asset limits.
If your assets exceed these thresholds, you will be ineligible when you need long-term care. Medicaid planning aims to reduce your countable assets to make eligibility possible in the future.
The Medicaid look-back period
A challenge with Medicaid planning is the look-back period. This is the period of time that Medicaid checks past financial records and asset transfers to determine eligibility.
In New York, the look-back period is five years. Any gifts or transfers of assets you make to other people within five years of applying for Medicaid may trigger a penalty period delaying eligibility. The penalty period depends on the amount transferred.
Ways to prepare your assets for Medicaid
Because direct gifts can create problems during the look-back period, there are options to structure your finances and assets to legally become eligible for Medicaid. You can purchase exempt assets like prepaid irrevocable funeral plans. Another option is to put funds in an irrevocable income-only trust that pays out income over time.
If you or a loved one needs care, it is also possible to transfer Medicaid-countable assets to a family member who offers care service in exchange. This transfer avoids the classification of a gift under Medicaid.
Medicaid asset limits and look-back rules mean advance planning is necessary to pay for long-term care costs while protecting assets for loved ones. This can be a hard road to navigate, but options are available to prevent you and your family from unnecessary loss.