Andrew J. Chamberlain Attorney at Law

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What is Medicaid Planning?

AJC Law offers medicaid planning services
Over the decades, the quality of our healthcare and life-saving medical interventions have improved. Lifespans have extended. And, consequently, people are discovering that they are outliving their financial resources.

The Expense of Long Term Care Costs

According to the State of New Jersey Department of Banking and Insurance, a national study has shown that “of the approximately 2.2 million persons reaching the age of 65 each year, more than 900,000 are expected to enter a nursing home at least once before they die.” With this understanding, many of us will require some form of assistance with our daily living requirements, including the placement in a nursing facility.

Many people have the false notion that Medicare will cover this kind of care, but Medicare’s coverage of nursing home care is minimal. In short, you can’t rely on Medicare to pay for long-term care.

Medicaid Planning in New Jersey and New York

Consequently, your long-term care will be reliant on your own assets or any long-term care insurance you have put into place. But those who have not put long-term care insurance into place early typically cannot afford the premiums. Even if you have amassed a substantial nest egg, nursing home care can quickly deplete your savings. New York and New Jersey rank as two of the most expensive states in the country.  New York ranks 6th most expensive in the country for private and semi-private nursing home rooms, with the average annual cost of these two rooms being $151,475. New Jersey is the second most expensive state at $79,800 annually for an assisted living facility.   Please see the Genworth Cost of Care Survey – Ranked State Data Tables, for more information. This is why many people have turned to public assistance such as Medicaid as part of their long-term options.

How Medicaid Planning Can Help

For aging adults looking at options to live out a quality life, Medicaid is the primary public program that can help pay for long-term care. Medicaid will pay some or all of the associated costs for nursing home care, assisted living, home care, or other long-term support for eligible individuals. But Medicaid assistance is only available to those who meet their financial needs guidelines. 

Qualifying for Medicaid When You Don't Initially Qualify

For aging adults looking at options to live out a quality life, Medicaid is the primary public program that can help pay for long-term care. Medicaid will pay some or all of the associated costs for nursing home care, assisted living, home care, or other long-term support for eligible individuals. But Medicaid assistance is only available to those who meet their financial needs guidelines.

Medicaid Spend Down and Look Back Constraints

If your current income and assets exceed Medicaid’s limits, you may still be able to qualify for benefits by “spending down” your income if you have substantial medical costs.

You may also be able to transfer or sell assets, providing you do so 5 years before you apply for Medicaid. Although it may be tempting to give away assets to family or friends as “gifts” to reduce countable assets, Medicaid imposes penalties for assets that have been hastily given away or sold for less than their market value in order to qualify for benefits. Consequently, they have implemented what is called the “look-back period.” In New Jersey, this is a 5-year waiting period between asset transfers and application for benefits. Another option for Medicaid qualification is creating a Medicaid Asset Protection Trust. This is a legal device that allows individuals the ability to meet Medicaid qualification standards while still protecting their assets. Because of the complexity of Medicaid, getting the assistance of an experienced New Jersey Medicaid lawyer is critical to make sure you are staying strictly within Medicaid’s qualification criteria.

Why Pre-Plan for Medicaid?

Considering the financial alternatives, proactive Medicaid planning is crucial for a comprehensive long-term care plan. Because of Medicaid’s stringent eligibility guidelines and timelines, it’s essential to consider these strategies well in advance of need. This makes planning for Medicaid with the assistance of a Medicaid attorney all the more critical. 

What is a Medicaid Asset Protection Trust, and Why Should You Create One When Planning for Medicaid?

A Medicaid Asset Protection Trust, or MAPT, is a valuable tool for individuals who have excess assets and can’t meet Medicaid’s limits. A Medicaid Asset Protection Trust does this by preventing assets from being considered “countable” under Medicaid guidelines. With a MAPT, an individual who would usually not be eligible for benefits can transfer assets into the trust to protect them from being counted by Medicaid. This allows them to get the care they need while also protecting their assets for their heirs. For most families, creating a Medicaid Asset Protection Trust is an excellent option.

How Medicaid Planning Works With a MAPT

A trust is a separate legal entity that can own assets and pay debts of its own. It is managed by a trustee who controls the trust on behalf of its (2020 figures) medica. When an individual forms a MAPT, that person or their spouse cannot act as the trustee but other family members such as adult children may.
There are specific rules that must be followed by the trust regarding how the money can be used and who may be named beneficiaries. To comply with Medicaid, the trust maker cannot be the trustee or principal beneficiary of the trust. This ensures that the funds are not accessible to the trust maker to pay for their care but must be properly managed by the trustee.
Additionally, a MAPT must be irrevocable for its assets to be exempt from Medicaid’s assets limits. An irrevocable trust cannot be changed or cancelled, ensuring that the trust maker will not be able to regain ownership of them.

The Beauty of a Medicaid Asset Planning Trust

With a Medicaid Asset Planning Trust, the trustmaker can meet Medicaid’s eligibility requirements while maintaining some control of their assets. Assets are also protected for the beneficiaries of the trust. In some cases, Medicaid tries to collect the remaining assets left in a trust to reimburse them for money that has benefitted the individual. In the case of a Medicaid Asset Planning Trust, these assets are safe from any Medicaid payback requirements.

There are many benefits of planning for Medicaid long-term care benefits with a Medicaid Asset Planning Trust. If you or a family member is looking for advice concerning estate planning and long-term care, it is important to get the skilled legal advice of a Medicaid lawyer to understand the options available. Contact Us at AJC Law Office to schedule an appointment to discuss how Medicaid planning may be a practical solution for you.