UNDERSTANDING MEDICAID MYTHS:
HOW EARLY PLANNING CAN PROTECT YOUR ASSETS
When it comes to long-term care planning, one of the most important steps is understanding Medicaid eligibility and how to protect your assets. Unfortunately, many families mistakenly believe that planning for Medicaid benefits is only possible before the need for long-term care arises. Too often, we meet with families who have waited until a crisis, assuming it’s too late to take advantage of Medicaid planning. The reality is that it’s almost NEVER TOO LATE to protect assets, and there are common misconceptions that can prevent families from seeking the help they need.
Here, we address some of the most widely held myths about Medicaid and asset protection to help you make informed decisions about your future.
Myth #1: The Five-Year Look-Back Period Disqualifies Home Care Applicants
Many families are aware of Medicaid’s five-year “look-back” period, during which transfers of assets are reviewed. If your loved one needs assistance with daily activities but can remain at home, Medicaid’s community-based program can cover home care expenses. Currently, the transfer of assets has no impact on eligibility for this program. However, we anticipate that, in 2025, a two-and-a-half-year (30-month) look-back period will be instituted. We are awaiting guidance from the State regarding when it will implement this look-back.
Myth #2: My Income is Too High to be Eligible for Medicaid
We have heard innumerable instances of families forgoing Medicaid benefits because they incorrectly believed that income would disqualify them. In fact, in New York, there are income shelters, known as pooled-income trusts that allow for the utilization of what would otherwise be counted as “excess” income. This is particularly beneficial for individuals who wish to maintain their community residence and secure community-based Medicaid benefits.
Myth #3: It’s Too Late to Plan for Medicaid Once a Crisis Hits
Medicaid planning remains possible as long as there are assets to protect. At present, when one applies for home care, there is no penalty for transferring assets, regardless of when the transfer occurred. Even after placement in a nursing home, a portion of your assets can often be protected. The earlier you begin planning, the better the protection, but it is still possible to safeguard assets even after a loved one enters a nursing facility.
Myth #4: Revocable Trusts Protect Assets for Medicaid
Medicaid considers assets in a revocable trust as “available” because the creator of the trust can access the funds at any time. For assets to be protected, the trust must be irrevocable, meaning the creator cannot benefit from the principal. Establishing an irrevocable trust that complies with Medicaid’s complex rules requires the expertise of a qualified attorney.
Myth #5: Retirement Accounts Will Disqualify Me
It’s a common misconception that retirement accounts, such as IRAs or 401(k)s, will disqualify an applicant from receiving Medicaid benefits. In fact, these accounts are generally exempt from Medicaid eligibility if the account is in “pay-out” status, meaning that the applicant is withdrawing the required minimum distribution each year. However, while the account’s value is exempt, the income it generates is still considered. Before making any decisions, we strongly advise consulting with an attorney experienced in Medicaid planning to ensure your retirement account does not unintentionally impact your eligibility.
Myth #6: The Family Home Is Always an Exempt Resource
Many people believe that their home is automatically exempt from Medicaid eligibility determinations. While this is true in certain circumstances, there are important exceptions. First, homes valued at over $1,040,000 are considered countable resources, meaning that Medicaid can consider the full value of the home in determining Medicaid eligibility. Additionally, if the applicant is in a nursing home, the home is only exempt if there is an expressed intention to return to it. If returning home is not possible, or the house is sold, its value counts. Finally, once a Medicaid recipient passes away, Medicaid may seek reimbursement through estate recovery, potentially using the value of the home to recover the funds spent on care.
Medicaid Planning is Critical
Medicaid rules are complicated and often contradictory, which is why early planning is beneficial. The sooner you start, the more you can protect. However, even if you’re facing a crisis, it’s not too late to act. If you have assets to protect, we can help you explore your options and create a strategy that preserves your estate.
At Abrams Fensterman, LLP, we specialize in helping families navigate the complex world of Medicaid planning. Contact us today to schedule an appointment. We’ll work with you to ensure that your loved ones are taken care of now and in the future.
Contact Abrams Fensterman’s Elder Law, Estate Planning & Administration Department at 516-328-2300
