Grant and loan strategy can protect half of seniors’ assets
The donation and loan strategy for singles (including widows and widowers) asking Medicaid to pay the costs of the retirement home saves substantial sums for the family instead of paying it at the retirement home. retirement.
It is much better to plan ahead by purchasing long-term care insurance or, if there is no long-term care insurance, creating a Medicaid asset protection trust that protects your assets. the retirement home costs trust once the assets are in trust for five years.
Unfortunately, many people do not plan to protect their assets against the costs of retirement homes because the idea of living in a retirement home is unappealing. The reality is that we live longer and the older we get, the more likely we are to need a retirement home in the later years of life.
Fortunately, New York City allows for the gift and loan strategy when a single person who has never planned in advance needs a retirement home that can cost anywhere from $ 12,000 to $ 20,000 per month.
A typical example is an adult child who comes to the office saying that Mom needs a nursing home now. Dad passed away years ago. Mom has savings of $ 500,000 that she always promised she would go to the child when she died, never dreaming that her money would go to her nursing home instead. At this point, Medicaid law determines what she can keep and what goes to the nursing home.
A single person who applies for Medicaid in a nursing home can only keep $ 15,750 in total assets.
Instead of having to ‘spend’ your money on paying the nursing home bills until there is only $ 15,750 or less left in your bank account, the donation and loan strategy works as follows and should only be done under the direction of a qualified elder law lawyer.
Mom signs a Power of Attorney under Elder Law that includes unlimited gifting powers. The mother gives the child $ 250,000 and lends the child $ 250,000 under a written promissory note that provides for payments to the mother, with interest, during the term of the loan. The five-year look-back rule means that any gift mom makes in the past five years carries a penalty period.
Her gift to the child carries a penalty period of 19.5 months, a calculation based on Medicaid regional tariffs for nursing home fees. Mom has to pay the nursing home bill on her own from her own assets during the penalty period. Over the next 19.5 months, the child pays the nursing home bill from mom’s bank account with the monthly loan payment plus her income. With the last payment, the penalty period expires and Mom is entitled to Medicaid to pay for her nursing home expenses for the rest of her life. The child keeps the donation amount of $ 250,000.
The numbers assume Mom was able to keep $ 15,750 and otherwise complied with various other Medicaid requirements. The $ 500,000 is her next egg available for nursing home fees. The donation and loan strategy, sometimes called “half-bread” planning, saved half for her child even at the eleventh hour when Mom needed a retirement home.
Bonnie Kraham is a lawyer practicing elder law estate planning with the Ettinger Law Firm, 75 Crystal Run Road, Middletown. She can be reached at 845-692-8700, ext. 119 or [email protected] This column is intended to provide general information