How Can I Protect My Life Savings If I Need Long-Term Care In New York?

It’s no secret that long-term care is costly. The cost of a nursing home, assisted living facility or in-home care can quickly wipe out your life savings if you haven’t planned ahead.

The best time to prepare for the possibility of long-term care is before you develop health problems. The sooner you start preparing, the more options you will have to safeguard your assets. One of the most valuable tools for protecting your assets – a Medicaid asset protection trust – requires planning well in advance.

The Challenge Of Qualifying For Medicaid

Medicaid is a financial and income-based program that provides coverage for long-term care. If you are not eligible for Medicaid, you must either pay privately for your long-term care or have long-term care insurance.

To qualify for Medicaid, your income and assets must be below a certain threshold. This poses a dilemma if you have savings: How can you become eligible for Medicaid without having to spend down your life savings and income for the cost of long-term care?

The Answer: Utilizing A Medicaid Asset Protection Trust

When properly prepared, a Medicaid asset protection trust (MAPT) offers a way to protect your life savings if you need long-term care once any lookback period has expired (60 months for nursing home care and 30 months for home care in New York). Presently the lookback period for Medicaid home care is scheduled to become effective on April 1, 2022.

The upside is that, for Medicaid eligibility purposes, the trust itself is regarded as the legal owner of the property. In other words, the property in the trust won’t impact your eligibility once the lookback period has expired. After your death, the government won’t have a lien or claim against the trust to recoup your long-term care expenses. The assets in the trust can then pass to your beneficiaries free of any liens or claims by Medicaid, without needing to Probate your will.

The Benefits Of A MAPT

As the trust’s founder (or settlor, in legal terms), if you wish, you can receive the income from the trust. You also have the right to continue to reside in your home even though it’s technically owned by the trust. No one can sell or rent the home without your permission. As part of the trust drafting process, you can designate the trustees who will manage the trust and make distributions according to its terms.

You will also select the beneficiaries of the trust who will receive its property after you pass away. MAPTs also provide tax advantages for the beneficiary or beneficiaries of the trust, as under current tax laws, they will receive the assets in the trust at their fair market value as of the settlor’s date of death.

One Major Catch: Lookback Periods

Unfortunately, because of the previously mentioned lookback period, you can’t simply create a MAPT and then be immediately eligible for Medicaid. For this reason, advance planning is critical for protecting your life savings and Medicaid eligibility.

If you wait until you urgently need long-term care, you may still be able to formulate a Medicaid crisis plan and eventually get Medicaid, but you likely won’t be able to protect all of your assets as the lookback period will not have expired before you need nursing home or in-home care. Don’t jeopardize your eligibility – and the legacy you have worked so hard to build – by waiting too long.

Choose An Attorney Who Understands This Nuanced Area Of Law

MAPTs are a specialized aspect of estate planning and elder law that involve numerous complex considerations involving both federal and state laws. To ensure that you are receiving trustworthy guidance, consider working with a lawyer who is certified in elder law through the National Elder Law Foundation, which is accredited by the American Bar Association and has significant experience in this area of the law. You deserve the peace of mind that comes with knowing your preparations for the future are well planned.