Frequently Asked Questions
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About Immediate Long Term Care
Who qualifies for Medicaid?
Medicaid coverage is available for long term care, both at home, some assisted living facilities, and nursing homes, assuming you medically need such care, and financially you have less than $15,450 (as of 2019) in “countable resources”. Generally, that means bank accounts, retirement accounts*, cash value of life insurance, investment accounts, and any real estate that’s not a primary residence*. There are also limits on income. As of 2019, the monthly limits are $50 if the applicant is in a nursing home, $867 if they are in the community, and $1,444 if they are in an assisted living facility that accepts Medicaid. If an applicant has more income than this, it does not mean that they are not eligible for Medicaid. They are eligible, but their excess income must be spent on their care, and then they can keep the income below the limit. In community and assisted living settings, a special type of trust (a pooled income trust) can be established to preserve most of a person’s income, and still qualify for Medicaid. *Primary residence and retirement accounts are NOT entirely exempt--there are special rules, covered in the FAQs related to each.
Can they take my home?
No, Medicaid (more accurately, the county administering the Medicaid) cannot take your home away from you--you will always be allowed to live there or return to live there, assuming it is safe. However, the county can take all the equity in your home. Unless you or your spouse are living in the home, Medicaid can put a lien on the house to recoup any benefits it has paid out for you. So, if you are in a nursing home, the lien will grow at the rate of many thousands of dollars per month*. So while you may at some point be able to go back and live in the house, if you or your family ever sells it, Medicaid gets their money back before you or your family do. That is why the rumor that your house is “protected” is dangerously incorrect. *Medicaid pays the nursing home approximately 60-70% of the nursing home’s private pay rate, which averages $12,426 per month for the Hudson Valley in 2019. So, the lien will grow at whatever amount Medicaid pays the nursing home where the applicant resides.
Aren’t retirement accounts “protected”?
No! This is another dangerous rumor, perpetuated, sadly, by some attorneys that purport to be knowledgeable in this area. Retirement accounts are not protected. They are treated differently--but they are still a countable resource for Medicaid purposes. Retirement accounts are counted one of two ways, either (1) the entire balance of the account counts against the applicable Medicaid resource limit ($15,450 as of 2019), or (2) if they are in “pay out” status, the balance does not count (which is what most people confuse with being “protected”), however, the amounts that are taken out of the account are counted toward Medicaid’s income limits. This would not necessarily be a terrible result, if an applicant could only take out the RMDs required by the IRS. Unfortunately, Medicaid requires that the applicant take withdrawals out on a monthly basis, at a much higher rate than the IRS requires. Those withdrawals are included in the income calculation, and may need to be spent down on nursing home or other long term care costs. There is no quick fix for protecting retirement accounts in a Medicaid context. It requires a detailed and focused calculation involving other income, cost of care, tax rates, and other assets. At DuBois Law Group, PLLC, we have created our own in-house customized calculators to help our clients make the most informed decision about what course of action is best, to save the most money possible.
About Proactive Wills & Trusts
What is a trust?
A trust is a type of legal entity which is helpful to think of as a bucket that holds your assets. In most cases, the person or people putting the assets into the trust is also the person or people that are in charge of managing the trust (the “trustees”).
What’s the difference between a revocable trust and an irrevocable trust?
A revocable trust can be canceled, dissolved, scrapped--whatever term you like--at any time. It can be revoked, the assets can be taken back, or more commonly, it can be amended in any way you like. This might seem like the clear option, except that a revocable trust does not protect assets from long term care or anything else. Its primary benefit is avoiding probate and otherwise making administration upon death easier. This makes it a reasonably option for people with enough assets to pay privately for long term care, or perhaps people with very good long term care insurance policies that would cover long term care costs. An irrevocable trust cannot be revoked simply upon a whim. It is set in place permanently, and usually restricts access to the assets you put in it. Those two aspects: that it is irrevocable and that you cannot “spend” its assets (though you still can control them), are primarily what cause those assets to be protected from long term care costs. It is comforting that in New York, the law does permit the trust to be revoked under certain circumstances. That means that people can enjoy the protective benefits of an irrevocable Medicaid trust, but if they really need to, they can revoke it. This is not something we expect when we set up the plan, but it’s nice to know that it’s an option.
What can I put in a trust?
A trust can take title to almost anything a person can. A house, other real estate, bank accounts, investment accounts, stocks, bonds, life insurance, business interests, some annuities, personal property, etc. The most notable asset that you cannot put in a trust is a retirement account (401(k) or IRA). Changing the title on a retirement account counts as a full distribution which would cause the entire amount to be taxed as regular income.
Can I still use the assets I put into a trust?
If it is a revocable trust, then yes, absolutely--but remember, revocable trusts offer no protection against long term care costs. If it is an irrevocable trust, for the most part, you cannot spend the assets in it. That is, you cannot use them to pay for your daily expenses, care costs, any typical cost of living. If your irrevocable trust is set up to permit access to income, and it holds assets that generate income (stock dividends, investment real estate, interest on investments), you can freely spend that income, but not the principal. However, it is often the case that you can be your own trustee and manage those assets, such as how they are invested. When setting up an irrevocable trust, it is important to have a thorough discussion about what assets you should put in it, since you cannot use those assets for normal spending. You should never put all your assets in an irrevocable trust--only those that you do not plan on spending. The biggest asset people usually don’t intend on spending is their house, and often some savings or investments. A well-done plan takes into consideration a family’s income and expenses to help guide us on what assets should be protected, and which should be left outside of the trust, in case they are needed to support your lifestyle.
If I put my house in a trust, can I sell it?
Yes. A house in a trust can absolutely be sold. If the trust is an irrevocable trust, such as a Medicaid trust, the proceeds of the sale must be paid to the trust. However, the trust could then purchase another home, such as in the case of someone that wants to downsize into a smaller house.
If I put my house in a trust, will I still get my STAR, Veteran’s, Enhanced STAR or other property tax exemptions?
Yes. As long as the trust is drafted properly, a house in a trust qualifies for all the property tax exemptions it would qualify for if it were owned personally. This counts for almost all tax considerations, including capital gains tax.
What is probate?
Probate is the court process that determines the validity of a Last Will & Testament, and oversees the management and distribution of assets that pass through the Will.
Does a trust avoid probate?
If a trust is properly drafted, the assets that were properly put into the trust should not be subject to the probate process. Rather, they can be managed and distributed by the Trustee however the terms of the trust provide. Trust administration is typically much quicker and easier than administrations involving probate.