One of the most unfortunate situations in my practice is when I hear that someone spent most, if not all, of their assets on the cost of a nursing home or home care aides because they believed they were ineligible for Medicaid as a result of having income and assets. Most often it is due to a misinterpretation of the applicability of the 5-year look-back period. There are many ways to become eligible for Medicaid when you have assets.
Many people don’t know that in a home care situation, there is no five-year look-back period. That means that you can transfer your assets, let’s say in January, and become eligible for Medicaid in February. In a Medicaid home care scenario, there is also an opportunity to protect your income so that you don’t need to spend it on your care, thereby preserving it for household expenses.
The five-year look-back period applies to Medicaid nursing home eligibility. There are several planning opportunities for Medicaid eligibility in a nursing home where there are assets. If you are married, you can transfer your assets to your spouse, who can then refuse to use those assets for your care. This is commonly referred to as spousal refusal.
Even in situations where there is no spouse, there is planning that can save approximately 40% of your assets. This is a complicated planning technique that must be implemented by an attorney. It is commonly referred to as a promissory note/gifting strategy.
Finally, it is worth noting that in New York, some assets are not considered available to Medicaid, like IRAs. Moreover, Medicaid allows you to make certain exempt transfers that are not subject to the five-year look-back period such as transferring your house to a caretaker child or transfers of any assets to a disabled child. You are also permitted to pre-plan and pre-pay your funeral.
You should never spend your income and assets towards the cost of home care or at a nursing home without consulting with an elder law attorney.