Bad information can sometimes circulate because people misconstrue half-truths that they hear from others. This phenomenon definitely applies to elder law and estate planning matters, and in this post, we will look at a misunderstanding about Medicaid planning for homeowners.
Before we focus on the subject at hand, we should explain why Medicaid should be on your radar, even if you will qualify for Medicare as a senior citizen.
Seven out of 10 seniors will need some type of living assistance, and 35 percent of elders will ultimately reside in nursing homes. You can expect to pay over $100,000 for a year in a nursing home in Staten Island, and the average length of stay is one year.
A married couple could face two different rounds of nursing home costs, so the expenses could consume a significant portion of your legacy if you have to pay out-of-pocket.
Medicare is not the solution, because it does not cover the custodial care you would receive in a nursing home, and it will not pay for in-home care.
Medicaid does cover long-term care, and elder law attorneys help clients gain eligibility without losing a lot in the process.
Countable vs. Non-Countable Assets
In New York, there is a $15,900 Medicaid limit on countable assets in 2021. This may not sound like a lot of money, but the limit is just $2000 in most other states.
The qualifier “countable” is quite operative, because some of your possessions are exempt for Medicaid eligibility purposes. You can maintain possession of one motor vehicle, your household items, personal effects, wedding rings, engagement rings, and heirloom jewelry.
A prepaid burial plot is not counted, and you can have $1500 saved for funeral or cremation expenses and the same amount of whole life insurance. Unlimited term life is allowed because it has no cash value.
The most significant asset that is not counted is your home, but there is an equity limit that stands at $903,000 this year. If a healthy spouse is remaining in the home, there is no equity limit at all.
Home Ownership and Medicaid Estate Recovery
Medicaid is required to seek reimbursement from the estates of people that were enrolled in the program when they were living. The only non-countable asset that is truly valuable is a home, and Medicaid can put a lien on a home during recovery efforts.
The good news is that there are some exceptions to the rule. When an independent spouse is still living in the home, it would be protected. This also applies to a minor child, a blind or disabled child, and a sibling with an equity interest that is residing in the home.
Five-Year Look-Back Period and the Child Caregiver Exemption
You could give the home to a loved one to protect it from Medicaid recovery, but all divestitures must be completed at least five years before you apply for coverage. However, there is a way that you can potentially get around the five-year look back period.
If one of your adult children has been caring for you in the home for at least two years before you enter a nursing home, you can give the home to the child. The look-back would not apply, and it would be protected during the recovery phase.
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