Planning for long-term care and applying for Medicaid coverage can be complicated matters. Having the correct information is essential. I have found that there is more misunderstanding about these areas of law than any other I have encountered. So, in an effort to shed some light:
MYTHS AND TRUTHS
MYTH: “I am not eligible for Medicaid because I have more than $2,000 in assets.”
TRUTH: Although that is the limit in almost all states, including California, Florida, Texas and Massachusetts, the limit in New York in 2017 is $14,850.
MYTH: “Assets in a revocable trust are not counted in determining Medicaid eligibility.”
TRUTH: Not true. Since a revocable trust can be revoked or amended, all property in such a trust is considered “available” in determining Medicaid eligibility.
MYTH: “An applicant for Medicaid will be penalized if he or she gifted away any assets within the past five years.”
TRUTH: Unlike in most other states, in New York the five year “look back” and penalty only apply to Medicaid coverage in a nursing home. Applications for Medicaid coverage at home are not penalized for any gifts made before the month of application.
MYTH: “Money in an IRA is counted in determining Medicaid eligibility.”
TRUTH: Although this is true in most states, in New York money in an IRA or other retirement account from which maximum required distributions are being taken is not a countable asset. However, the money that is taken out is countable income.
MYTH: “I am not eligible for Medicaid at home because I have too much income.”
TRUTH: The Medicaid program in New York allows the recipient to keep $845.00 of monthly income. However, New York has a rather generous program under which a Medicaid recipient is permitted to contribute excess monthly income to a charitable “pooled trust” from which account the recipient’s legitimate living expenses can be paid. In higher income areas, this program is instrumental in allowing people to have Medicaid pay for the cost of their care at home.
MYTH: “I am on Medicare, so I should also be eligible for Medicaid.”
TRUTH: The federal Medicare program is an entitlement for all persons who have worked the required number of quarters and paid taxes into the system. This is true no matter how much the person owns or earns. However, the Medicaid program is “needs-based”, that is, asset and income levels are reviewed in determining eligibility.
MYTH: “An irrevocable trust cannot be revoked.”
TRUTH: Not true in all cases. In New York, if all beneficiaries are competent adults and agree in a properly notarized writing, the creator of an irrevocable trust can revoke it and receive back the assets from the trust.
MYTH: “I am permitted to gift $14,000 per person each year and not be penalized by Medicaid.”
TRUTH: Definitely not true. Apples and oranges. The $14,000 per person annual exclusion only applies in computing federal gift tax and whether a gift tax return must be filed. This law has no relevance to Medicaid eligibility. In a nursing home Medicaid application, where five years of financial records must be submitted, all gifts, no matter what size, will cause a penalty/period of ineligibility unless the applicant can prove that gifts were made exclusively for a purpose other than to qualify for Medicaid. However, if it makes you feel any better, you may give $14,000 each to an unlimited number of persons each year, plus give away 5.49 million dollars in your lifetime before any gift tax is due.
MYTH: “My parent will not be admitted to the nursing home unless I sign the admission agreement promising to be financially responsible for the nursing home expenses.”
TRUTH: Only a legally responsible person, such as a spouse, can be required to be financially responsible as a condition to admission. It is illegal for a nursing home to require anyone else to sign an admission agreement and be responsible for payment. If a nursing home will not admit an applicant without someone’s signature on the agreement, it should be clear in writing that the person is not responsible for the debt and is only signing as agent.
The Medicaid system was designed by the federal government. States have been given the authority under the law to vary the requirements for Medicaid eligibility, so long as those requirements are not more restrictive than the federal requirements. As you can see from the above examples, Medicaid eligibility laws vary considerably among the states.
The rules regarding nursing home Medicaid eligibility are extremely complex, and many alternatives exist. Since each particular case has its own unique facts, the reader is cautioned that the above summary can not be considered legal advice and should consult with an appropriate legal advisor.