How to Protect Your Assets from Future Long-term Care Needs

How to Protect Your Assets from Future Long-term Care Needs

Last updated on May 3rd, 2024

In truth, none of us know what type of medical care we’re going to need in the future. Some may need none and some may need care for years. We just don’t know. What we do know is that future healthcare costs can wipe out lifetime savings, assets, and financial legacies, unless you plan in advance.

According to the NYS Partnership for Long-Term Care, the average cost of a nursing home in the Northern Metropolitan area (covering Dutchess, Orange, Putnam, Rockland, Sullivan, Ulster and Westchester counties) is $466 daily, $14,165 monthly, or $169,980 annually! People with significant assets (over $6 million) may be in a position to cover those costs, even for a long period of time. People with low to no assets will likely be eligible for Medicaid. What about those in between?

For those 65 and up, Medicare does not cover long-term care (LTC); it does cover short-term nursing home expenses for rehab for eligible individuals. Medicaid does cover LTC, if you’re eligible. Eligibility is based on income and total assets, with limits varying by state. For example, in New York, for Medicaid LTC coverage to kick in, the following limits apply:

  • Single: a maximum of $1,732/monthly income and $31,175/total assets.
  • Married with both spouses requiring LTC: a maximum of $2,351/monthly income and $42,312/total assets.

(The American Council on Aging provides a free test to determine Medicaid eligibility for the elderly. To learn more, click here.)

There is a way to protect your assets and still benefit from Medicaid – a Medicaid Asset Protect Trust or MAPT.  A MAPT is an irrevocable trust. You’ll basically shift assets to a trustee. This allows you to protect a portion of your assets for loved ones while still allowing you to qualify for Medicaid. There are a couple of caveats that are important to know.

First, states have a lookback period for Medicaid eligibility. In most states, including New York, the current lookback period is 5 years  If money or assets are transferred to a trust inside of the lookback period or simply given away, gifted, or sold for below market value, it will delay Medicaid benefits. The delay or penalty period equals the value of the funds transferred/gifted/given away/sold by Medicaid’s regional rate for nursing home care. (The regional rate varies by county and is updated annually.  Click here to see the 2024 New York regional rates.)

In basic terms, if you transfer $100,000 to an irrevocable trust two years before needing a nursing home and assume the regional rate is $10,000/month (just for simplicity’s sake), you would not be eligible for Medicaid assistance for 10 months ($100,000/$10,000) and you’d end up spending the full $100,000 you put in the trust.

On the other hand, if you establish the trust early enough and the lookback period has passed by the time you need LTC, the assets in your MAPT will not count toward your Medicaid eligibility. So, you can get LTC and protect your assets.

Second, there is a trade-off. When you establish an irrevocable trust, you designate someone else as trustee, giving them full control of your assets. You cannot change or cancel the trust in any manner. While the trustee can distribute income to you if authorized by the trust agreement, he/she will not distribute principal to you. That means you are putting 100% trust in that person.

Those are the biggest considerations. There are others. For example, when you die, Medicaid can recover funds paid on your behalf by going after assets like a house. On the other hand, assets placed in an irrevocable trust will not be included in your estate for the calculation of estate taxes or probate.

Interested in learning more about how to protect your assets and ensure you can get the medical care you may need in the future?  RBT CPAs professionals in our Estate, Trust, and Gift Practice can help.

While RBT is not a law firm, RBT CPA professionals in our Estate, Trust and Gift Practice can help you plan for future healthcare needs as part of an overall estate plan. We can help you understand your options and define a course of action; refer you to an attorney who can create related legal documents (or work with your attorney if you already have one); review legal documents to ensure they accurately reflect your wishes; and review and update your plan annually so they continue to reflect your wishes and are adapted due to any tax law changes.

Please don’t hesitate to give us a call and find out how we can be Remarkably Better Together.


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