How estate planning can help people pay for nursing homes

On Behalf of | Jun 8, 2023 | Estate Administration & Probate |

Many adults in New York set aside a million dollars or more to fund their retirement years. Oftentimes, people burn through a significant portion of those resources in the early years of their retirement when they are still active. Travel, gifts for loved ones and even updates to their home to make it more accessible as age diminishes people’s mobility can consume a significant portion of what people set aside for retirement.

They may then find themselves worrying about how they will cover long-term care costs. Those who might eventually move into a nursing home may not have the personal resources to pay for their care directly. The New York Medicaid Program does offer long-term care benefits that cover the cost of a room in a nursing home and other expenses that Medicare does not cover. Older adults may have to plan carefully if they hope to qualify for Medicaid when moving into a nursing home. Otherwise, they may face delays in coverage, financial penalties or estate recovery efforts.

Advanced planning can prevent asset liquidation

To qualify for Medicaid, individuals need to demonstrate a relatively low income and have limited assets in their own name. The one exception to that rule is their primary residence. An individual can qualify for Medicaid benefits even when they have completely paid off their home which is worth a significant amount of money. Otherwise, the state will want them to use what resources they have to pay for nursing home costs before granting them Medicaid benefits.

Any attempt to transfer assets to friends or family prior to applying for Medicaid could trigger a penalty, which will force someone to cover their own care costs. The state can also make recovery claims against someone’s estate for the value of the services Medicaid covered. Advanced planning multiple years before someone applies is the best way to avoid those penalties. Those who have already made gifts to loved ones or who have moved assets into a trust can potentially preserve those resources for themselves or their children after they die without eliminating their option of getting Medicaid coverage for nursing home care.

The sooner someone begins planning, the easier it may be for them to avoid the Medicaid penalty triggered by any sizable gifts or transfers during that lookback period. Learning more about the rules that apply to the New York Medicaid program may benefit those who are worried about covering their long-term care costs later in their retirement.