For more than two decades, the Elder Law Section and Bar has made significant strides in educating the public and the legal profession of the importance that seniors engage in advance planning to protect their life savings from the costs of long-term care. While it appears that both seniors and the profession have become more knowledgeable about the costs of long-term care, and virtually every senior has heard of the "five year rule," there are still a significant number of seniors who have not implemented any advance planning strategies.
Costs and Planning Strategies
If a senior does not have sufficient long-term care insurance, and is not wealthy enough to be self insured and has resources greater than the amounts permitted by Medicaid, he or she will need to privately pay for care in a nursing home or at home. The cost of care in a nursing home can be financially devastating. The average cost of nursing home care downstate is approximately $130,000 to $180,000 per year. Additionally, the cost of care at home downstate averages anywhere between $60,000 to $90,000 per year for 24/7 care at home. These costs are less upstate, but nonetheless financially significant. Unfortunately, it is unlikely Medicaid in the future will continue to be as generous with benefits and eligibility as it has in the past.
These costs highlight the critical importance of seniors and their attorneys focusing on implementing advance planning strategies prior to their clients actually needing long-term care. A last will, revocable trust or estate tax plan is not sufficient for long-term care planning purposes.
One of the most popular advance planning strategies utilized by elder law attorneys is creating and funding an Irrevocable Medicaid Asset Protection Trust, also known as an Irrevocable Income Only Trust. This is an irrevocable trust which can be funded with the senior's home and part or all of his or her savings. For tax purposes the trust is structured so that the senior (a) is taxed as the owner of the assets in the trust; (b) has the right to reside in the home for the rest of his or her life; (c) can have the right to receive all of the income generated by the trust assets; and (d) has the right to change his or her mind as to the ultimate beneficiaries of the trust. The trustee(s) cannot make payment of the trust principal to or for the benefit of the senior/grantor of the trust; however, the trust can permit invasion of principal for persons other than the grantor/senior.
The funding of this trust creates the five year look back period, and thus, allows for the assets held in the trust to be non-available for Medicaid eligibility purposes once the five year period has expired. However, the transfer of assets to this trust will not effect one's eligibility for Medicaid Home Care, as the transfer of asset rules and look back period do not apply to Medicaid Home Care.
Obviously other forms of gifting assets remain a viable option as well as purchasing long-term care insurance.
The rules and regulations relevant to Medicaid eligibility and the transfer of assets are complex and frequently changing. Navigating these regulations requires the skills and experience of a seasoned elder law attorney. The Elder Law Section has aggressively pursued educating and providing our members with the tools necessary to be effective advocates for the needs of seniors. However, in order to properly protect seniors from the costs of long-term care, it is imperative that seniors and the public be constantly educated and reminded of the benefits of advance planning. This is an endeavor that goes beyond what can be done by the Elder Law Section and Bar and requires the attention and cooperation of the legal profession at large.
Anthony J. Enea, Chair of the Elder Law Section, is the managing member of Enea, Scanlan & Sirignano in White Plains.