Medicaid is a means-based program, which means that the government looks at your income and assets to determine eligibility. Many seniors give away their money to qualify for care. If you gift away your assets, you cannot qualify for Medicaid covering nursing home care for up to 5 years (different rules apply for community Medicaid program). Gifting away your money or assets may result in a penalty period which will delay coverage. Instead, speak with a Medicaid planning attorney to determine which gifts, if any, can be made without invoking a penalty.
In this article we will address a few common strategies for New York over-resourced seniors to qualify for nursing home care, such as legally spending their assets down. It is also important to remember that it is far better to plan at least five years before you may need nursing care, and that these techniques are only last minute solutions which may not work in every situation. It is highly advisable to speak to an elder care attorney before undertaking any steps on your own.
- If you have credit card debts, taxes, rent, utilities, a home equity loan, or a mortgage on your house, you can pay them off using your assets without incurring a penalty. Keep in mind that you will still need to protect your home from Medicaid liens and Medicaid estate recovery after your mortgage is paid off.
- A person’s individual belongings, including clothing, jewelry, and the contents of his or her apartment or home are also exempt resources for purposes of Medicaid eligibility. Exempt home contents include all tangible personal property such as furniture, paintings, silverware and china. There is no valuation made of a person’s individual belongings or home contents for Medicaid eligibility purposes. You can purchase these assets that will not be counted as your resources for example a new refrigerator, home furnishings, new clothes, repairs to the house, such as a new roof.
- You can also spend money on your vacation.
- Additional resources that are exempt for purposes of Medicaid eligibility are:
- One automobile, regardless of value;
- Nazi Persecution Accounts;
- German and Austrian reparation payment accounts;
- New York Medicaid allows you to spend money on your care without incurring a penalty. Payments made by the individual to the caregiver pursuant to a valid contract are not uncompensated transfers and therefore do not result in a penalty period. This includes paying a child to provide care for you, thereby depleting your funds and helping you qualify. There are, however, a few important requirements. First, the agreement should be in writing and signed by both parties. The agreement must define the scope and cost of the services provided. The cost of the care must be reasonable. The local Medicaid agency is authorized to refer to the U.S. Department of Labor occupational outlook handbook to determine the appropriate pay scale for various duties, and compare that with the rate being paid under the caregiver agreement. It is recommended to keep daily time logs by the caretaker. If a lump-sum prepayment is made to the caretaker, the amount must be calculated using your reasonable life expectancy, and the contract should provide that any unearned funds shall be paid back to Medicaid when you pass away. All payments should be made with check or credit card, since cash payments are hard to prove. The money that you pay to the caretaker will be treated as income to them, subject to their paying income taxes on it. It is best to engage the services of an elder care attorney to prepare and oversee the caretaker agreement.
- Medicaid allows you to use your funds to prepay your funeral, as long as the prepayment is irrevocable. You can to pre-pay funeral and burial expenses with a funeral director using an Irrevocable Trust Fund. This Trust, which is limited to Medicaid and SSI applicants/recipients, is the only irrevocable agreement with a funeral director permitted in New York State. In addition, you are allowed to pay for the funerals of your spouse, children, siblings, parents, and spouses of any of those individuals. This can be a very effective way to make “gifts” to your family members while not having them count as a penalized transfer of assets.