Medicaid Planning And The Look-Back Period
Author: Bernard Krooks
While the subject may be difficult to think about, it remains a fact that most people will spend some portion of their lifetimes in an assisted care facility. The possibility also exists that individuals may run up large medical bills both before and during placement in such a facility. It is therefore important to be prepared for these events by consulting with an estate planning and elder law attorney about proper Medicaid planning.
Since Medicaid is a joint State-Federal program, eligibility rules determining who qualifies for Medicaid vary from state to state. To qualify for Medicaid in New York, individuals must be eligible for Supplementary Security Income (SSI) and meet income and age restrictions. New York also has a Medicaid Surplus Income Program. Under this program individuals who have incomes that are too high can qualify for Medicaid if they spend down their excess income on medical bills.
In 2005, Congress passed the Deficit Reduction Act. This Act made several changes to Medicaid law, the most notable of which were the changes to the Medicaid Transfer of Asset rules. The new law, which took effect on February 8, 2006, created a five-year look-back period and established a waiting, or penalty, period for individuals in institutional care who would otherwise be able to receive Medicaid.
Transferring money and property to trusts or other family members in order reduce individual assets and qualify for Medicaid has long been an estate planning practice. Under the new rules this type of Medicaid planning is still possible, but due to the longer look-back period and increased penalty, it must be done farther in advance of the time one wishes to be able to qualify for Medicaid.
The difference between the look-back period and the penalty period is one of cause and effect. The look-back period is the amount of time after an individual receives or applies for Medicaid-covered services during which Medicaid reviews finances. The penalty period is the amount of time you must wait to receive Medicaid after which you would otherwise have been qualified. For example, if you gave a child $50,000 two years ago, that amount would be used to calculate your penalty period.
Penalty periods are determined on a community by community rather than a state by state basis. The penalty period is calculated by dividing the value of the transferred asset by the average cost of nursing facility services. In New York City the average cost of nursing facility services for 2009 is estimated to be $9,838 per month. To return to our $50,000 transfer example, the penalty period in New York would be 50,000 divided by 9,838, or approximately 5.1 months. On Long Island, the average cost of care is set at $10,852. In Westchester, Orange, Putnam and Rockland, it is $9,439.
Medicaid planning is an effective way to keep your assets in the possession of your family and prevent them from being spent on costly medical care. Good Medicaid planning also ensures your medical expenses will be covered when the time comes. Your estate planning lawyer can advise you on the best way to handle your Medicaid planning.
About the author: Bernard Krooks is a New York Elder Law and New York Estate Planning lawyer with offices in White Plains, Fishkill, and New York, New York. To learn more, visit Littmankrooks.com.
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