5 Most Common Myths of Planning For Long-Term Care
Did you know that the cost of long-term care could be more than $13,000 a month? This is a cost that people often fail to prepare for when they plan for retirement. Without accounting for these astronomical long-term care costs, you may be able to afford care for one spouse while leaving the other with little to money to live on. Not only is this a major concern but it is most likely not your ultimate goal. This could mean you no longer have the financial ability to pay for your children’s wedding, birthday, bar mitzvah, and communion – things you have been saving for your entire life for.
This article will first address the widespread myths that lead people to believe the false narrative that it is too late to plan ( it’s not ), and they can’t do anything to protect their family and their assets ( you can ).
Some of the most common, but incorrect, things that I hear are:
• “The state is going to take my home so we’ll just figure it out later” • “I have way too much money to qualify for care, so I’m not going to do anything about it.” • “It is too late for planning, I will just pay what I have to” • “I read that I can give away a certain amount of money every year, and that’ll be okay.” • “Let me just give everything away and that’ll solve all my problems. I don’t need a lawyer”
www.sheryll-law.com 2
Lastly, I’ll cover the most common options that you have for planning for long-term care costs, whether you need the care today or in the future. Regardless of the time frame, it is important to know it is not too late. You most likely have more than one option available to you. As you read through this guide, I want you to ask yourself, “Do I really want to leave my family’s future and hard-earned assets up to chance?” Long-term care planning is absolutely filled with landmines that can really trip up a family because of the many myths and misinformation flying around. You should not base life- changing decisions on a casual conversation with a neighbor, friend or colleague. You need to get the advice of a trusted advisor, like an estate planning and elder law attorney, that can go into detail about your objectives and look at your particular family circumstances. Now, let’s dispel a few long-term care planning myths…
www.sheryll-law.com 3
Myth #1 The state is going to take your home.
We hear this time and time again, and I want to assure you that if you do nothing, this is certainly possible.
What could end up happening is that if you qualify for care such as Medicaid, the state could end up filing liens against your house to recover those liens when you pass away.
For many people, their home is their highest valued asset. Their home is an asset they are most proud of, so having their home at risk of being recovered is not the ideal scenario, nor should you settle for this outcome. New York is a favorable state that allows us to utilize some planning methods to protect your home instead of it being used to fund long-term care or pay back the state for long-term care that was provided.
www.sheryll-law.com 4
The cost of care is upwards of $13,000 a month on average while nursing homes can be upwards of $18,000 a month. With these astronomical prices your financial status can quickly turn from comfortable to low income and be at risk of outliving your life savings. For this reason, the state allows us a lot of strategic options to plan ahead and be able to get assets out of a person’s reach for Medicaid eligibility while also having control of it. This way, we’re not giving away our home and land on the chance that we might need this care in the future. Myth #2 You have too much money to qualify for a government program geared towards lower income families.
By knowing these options, a carefully tailored plan can be created that accomplishes objectives that you want and also leaves you in control of your family’s future.
Myth #3 It is too late to do any planning.
You may have heard that there are look-back periods for Medicaid Programs; for nursing homes, it’s 5 years, or you may have heard about a 2 ½ year look-back period for home health aides being proposed. There are some important things you need to know about these look-back periods. If you have a spouse, disabled child, or an adult child who’s been living with you for a period of time, there are many transfers that we can do within the look-back period that can protect assets.
www.sheryll-law.com 5
Even in those cases where there are no exempt transfers available, and time is of the essence, in some cases we’ve been able to save families approximately 50% of their assets. Families often believed they were out of options because they needed a nursing home placement within the week. Although it is possible to help save some assets in this scenario, you don’t want to be caught in that situation. However, if you do already find yourself in that scenario, you do not need to shut down. Seek advice regarding what options you have to save the assets you’ve worked your entire life for.
This myth may be one of the most important and frankly, it’s a landmine that people fall victim to all of the time. What you need to know is that gifting could present a huge problem. What people are referring to is the gift tax, specifically the gift tax exclusion. This means that you can give away a certain amount of money every year without having to incur a tax for that gift. In 2022, that exclusion is $16,000. If you gave away that $16,000, yes, you would not owe any gift Myth #4 You’re allowed to give away money every year up to a certain amount, despite the look-back period.
www.sheryll-law.com 6
tax for that. However, if that $16,000 gift was made within the five year look-back period and you planned on qualifying for Medicaid, it would become a huge problem. Even though the gift is tax free, it could cause penalties regarding Medicaid eligibility.
Myth #5 You want to keep things simple by giving away your assets or putting them in your kids’ names.
This is not effective planning because by putting the children on those accounts as well as yourself, you haven’t actually done anything to get those assets out of your name for the purposes of Medicaid planning. The other option is more deceiving because technically you could give everything to your kids today as long as you get past the five-year look-back period. In a perfect world it may work and be simple. However, typically this strategy often gets more complicated. There are hundreds of things that could go wrong with keeping it simple. For example, if your kids were to pass away while owning your assets, this could end up being your daughter-in-law’s house instead of your house. If you had money left in your kids’ names and they passed away, it could actually end up being your minor grandchildren’s assets now that you’re not going to be able to get back. By doing these types of transfers, while they may be simple, you lose the ability to control your assets.
www.sheryll-law.com 7
Knowing Your Options
There are many options that allow you to have the benefits of both worlds – get the assets out of your name while maintaining control over them. No matter what stage you are in your life, your health, or your planning, there are options available to you. The options are very different depending on what situation you are in. The key is knowing what options you have, getting advice and guidance on the best options to fit your particular circumstances, and then lastly, taking action.
What are my options when planning in advance of needing care?
When planning in advance you have a lot of options available to you. What I mean by “in advance’’ is that you, your spouse, or your parents won’t need home health aides or nursing homes for many years. Now, why are we talking about doing planning now if they don’t need it for the foreseeable future? This is because of Medicaid’s look-back periods. We need to plan this far in advance to have the opportunity to protect as much money as we can. The most common tool we use when we’re planning in advance is the Medicaid Asset Protection Trust. The Medicaid Asset Protection Trust is a tool that we use to avoid all the negative side effects of giving away our assets to our children while we’re still here.
www.sheryll-law.com 8
Outright transfers of property and life estates
Those are the things that we talked about earlier, like loss of control, inability to get money back, and if your kids die, your in-laws or your children’s spouses don’t end up with your assets and money.
The Medicaid Asset Protection Trust helps to mitigate all of the negative side effects of improper planning and instead –
• You can control the assets. • You can get the assets back if you want to by revoking the trust.
• You can change who’s in control. • You can change the beneficiaries. • You can have income. • You can maintain your right to live in the property.
Having an attorney who knows exactly how to draft provisions that accomplish these key things without making that trust ineligible for Medicaid purposes is key. Planning ahead is crucial because it provides you with options. As time goes on your options get more and more limited, and the percentage of your assets that we can save becomes less and less.
www.sheryll-law.com 9
What are my options when care is more imminent?
If this care is more imminent, you’re not out of options. There are strategies we can develop. For example, if you have a spouse, we may be able to shift money from the sick spouse’s name to the healthy spouse’s name. If done properly, this can be an exempt transfer that will not be penalized in the look-back period. However, you can’t stop there. There are some key planning tools that we still need to implement, like a spousal refusal, and a trust so that the state can’t come back after the surviving or the healthy spouse to collect on the Medicaid tab. Transferring to a spouse isn’t the only exempt transfer. If you don’t have a spouse, you’re still not out of options. There are options like transferring assets to a caregiver. This would be a child who has been taking care of you, living in the house for the required period of time, and fits all the requirements. If we make a transfer of allowable assets, it’s considered exempt, even when it’s made within the look-back period.
Another common transfer is to a disabled child. If you have a disabled child, you may be able to transfer certain assets in allowable amounts to that disabled child within the look-back period and you won’t be penalized. But here’s the thing – you can’t go into these options blindly because if you do, things can get complicated quickly. An elder law attorney can take a look at your individual circumstances and advise you on what the best option is for getting assets out of your name, saving the most amount of money, and putting you in the best position to move forward with the care you desire.
www.sheryll-law.com 10
What can I do if care is needed right away?
Now, if you need this care today, and you didn’t do the Medicaid Asset Protection Trust or any of the pre-planning options before care was on the horizon, and you don’t have any exempt transfers, don’t worry! You still have options. In these circumstances, we’ve helped people save about 50% of their money. Now, you might be thinking, that means I have to contribute 50%, right? Yes, but at the same time, if you don’t do anything, you may have to contribute the full 100%. In last-minute planning scenarios, an elder law attorney can help you to utilize what’s called Promissory Note Planning. Now, this type of planning is complicated to explain and even harder to implement. What you need to understand here is that by utilizing this strategy, the money does get out of your name. A certain portion of it is free and clear, transferred to your children or beneficiaries of your choice, and a certain portion of it then is paid over to the nursing home. The details of it are very, very specific, and even one slip-up in this type of planning can make the whole plan become a problem.
www.sheryll-law.com 11
How can I get started?
No matter how early or late you are in the planning process, I recommend that you speak with an elder law attorney to help develop the best strategy for your planning stage. More importantly, you will need assistance implementing and navigating the ever-changing laws. This is not a topic you should tackle alone. Through the years, we’ve helped hundreds of families just like yours do exactly what you’re looking to do—protect your family. An estate planning attorney, like the attorneys on my team at Sheryll Law, can help advise you and figure out a plan that actually saves you money, fits you comfortably, and leaves your family a desirable legacy.
Now, when you’re ready to take this next step, call our office at (631) 502-7906 to schedule your strategy session so that we can get you on the path to protecting your family and keeping your assets where they belong.
Meet Attorney Jay Sheryll
When Managing Attorney, Jay Sheryll of Sheryll Law, P.C. started his practice, he devoted it to estate planning. Why? Because “Having a family is all we leave behind.” In 2017, I established Sheryll Law, P.C. in Riverhead, New York. My staff and I provide estate planning services to clients on the East End of Long Island. And yes, estate planning is all we do.
At Sheryll Law, P.C. we guide people through the process of mapping out their wishes, protecting their assets, and
creating security, opportunity, and peace of mind.
At Sheryll Law, P.C. we know excellence doesn’t have to be stuffy or condescending. My staff and I are friendly, approachable, and down-to-earth. We treat you – our neighbors – with the respect you deserve. Without any pretense. My family and I live on the East End of Long Island. I’m only 15 minutes away from Sheryll Law’s Riverhead office. So, I can help you quickly when life changes arise…
Degrees, Affiliations, and Honors
• Touro College Jacob D. Fuchsberg Law Center – Juris Doctor, Summa Cum Laude • St. Joseph’s College B.A., Criminal Justice • National Academy of Elder Law Attorneys • Lecturer at the Suffolk Academy of Law • Suffolk County, Nassau County, New York State, and American Bar Associations • Riverhead Chamber of Commerce – 2nd Vice President
• Long Island Science Center Board • Rotary Club of Riverhead Board • Published by the Suffolk Lawyer • 2019 Long Island Business News Leadership in Law
Call our office at (631) 502-7906 to discuss what strategy is best for you in your stage of estate planning.
Page 1 Page 2 Page 3 Page 4 Page 5 Page 6 Page 7 Page 8 Page 9 Page 10 Page 11 Page 12 Page 13Made with FlippingBook Ebook Creator