Planning for Long-Term Care in New Jersey: How Does Medicaid’s “Spend Down” Requirement Work?
Long term care costs are almost unfathomably high. According to data from Caring.com, a private room in a nursing home costs an average of more than $11,000 per month in New Jersey. Medicaid is a government program that provides support for long-term care. However, it is a strictly means-tested program. You may be required to “spend down” assets to qualify. Here, our New Jersey estate planning attorney explains the key points that people and families should know about Medicaid’s “spend down” requirements for long term care eligibility.
Background: Medicaid is Strictly Means-Tested
Here is a myth that must be cleared up: Medicare does not provide much nursing home care insurance coverage. Instead, the key government program for this type of coverage is Medicaid. It is a distinction that matters. Medicaid enforces a strict means-testing to determine eligibility. In New Jersey, Medicaid is designed to assist those with the greatest financial need. To qualify for long-term care through Medicaid, an applicant must prove that they have limited income and assets.
Understanding the Medicaid Spend Down Requirement
The “spend down” process in Medicaid refers to the method by which people can become eligible for Medicaid by reducing their countable assets through permitted expenditures. In New Jersey, people whose assets exceed the eligibility thresholds must “spend down” or legally spend their excess assets before they can qualify for Medicaid. In other words, a person may be required to pay for their own nursing home care—thereby spending down their assets—before they can qualify.
Plan Ahead: Estate Planning Strategies for Long-Term Care
Even a relatively short period of nursing home care needs in New Jersey can quickly eat away at a person’s life savings. There is some good news: You can plan ahead. Here are three estate planning strategies to use for long-term care planning:
- Private Insurance: You may be able to get private insurance for long-term care needs. Coverage often comes from an employer. However, for many, this coverage is unavailable or prohibitively expensive.
- Early Gifting: One common strategy to meet Medicaid’s asset limits is early gifting or transferring assets to family members or into trusts well before applying for Medicaid.
- Irrevocable Trust: Setting up an irrevocable trust can be an effective estate planning tool. Assets placed in an irrevocable trust are no longer considered owned by the grantor, thus not counted towards Medicaid’s asset limit.
Note: Medicaid has a five-year lookback period. To meet Medicaid standards, early gifting or trusts must be done five years before a long term care need arises.
Get Help From a Long Term Care Planning Lawyer in New Jersey Today
At Poulos LoPiccolo PC, our New Jersey long term care planning attorney has the professional experience that you can trust. If you have any questions about Medicaid and long term care planning, please do not hesitate to contact us today for a strictly confidential initial consultation. Our firm provides solutions-focused estate planning support throughout all of New Jersey.
