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What to know about long-term care and protecting your assets

On Behalf of | Sep 25, 2023 | Estate Planning |

As you grow older, you, your spouse or your parents will likely have to confront the prospect of long-term care. As you do so, you might discover that the financial implications are overwhelming.

For example, the New York State Partnership for Long-Term Care estimates that the annual rate for nursing home residents in New York City is nearly $170,000, far outpacing the national average. To keep your family’s financial legacy intact, consider various strategies available for asset protection.

Understanding Medicaid’s five-year look-back rule

You or a loved one might be able to qualify for assistance from Medicaid if your assets fall below the predetermined limit. However, Medicaid reviews your previous five years of financial transactions to determine if you gave away assets to gain eligibility.

If Medicaid rules against you, you or your loved one will have to wait until the completion of a penalty period before being able to obtain benefits. Early planning to disburse assets can prevent this difficulty.

Creating a life estate

You may be able to safeguard real estate by creating a life estate. This arrangement allows you to retain full rights to live in your property until your passing.

You can also prevent state claims from affecting the property’s value. This strategy bolsters protection against specific financial penalties if nursing home care becomes necessary within five years after the transfer.

Harnessing the power of annuities and trusts

Annuities and trusts can also help you or a loved one to maintain Medicaid eligibility. By transferring assets into one of these vehicles, you may qualify for nursing home care while guarding your liquid assets from depletion.

Note that these methods come under the five-year look-back rule, making timing a factor. Also, you must weigh the impact of periodic annuity payouts on your eligibility before determining the right course.

Using the law to protect a spouse’s financial security

The Federal Spousal Impoverishment Act offers financial protection for when only one spouse enters the nursing home. Though Medicaid assesses shared assets, the healthy spouse can elect to keep a portion of assets and income for comfortable living. However, Medicaid may later seek repayment in certain instances.

Estate planning quickly becomes complex, especially when you have various types of assets. Remember to prepare for the impact that long-term care can have on your family’s resources to preserve more of your hard-earned funds for your estate.



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