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Understanding Medicaid Planning in New Jersey

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Long-term care is not a pleasant subject for anyone to consider, but it’s important to put a plan in place today because the future is uncertain. Statistically, most Americans will need some form of long-term care in the final chapter of their lives. Putting a plan in place can provide peace of mind by providing for your future medical needs and protecting the legacy you have worked so hard to build throughout your life.

For most people, this means Medicaid planning is critical. This guide examines Medicaid planning in New Jersey: what it is, why you need to start now, and why having an experienced attorney is important. For more specific advice on your individual situation, talk to an attorney with experience in Medicaid and long-term care planning matters.

What is Medicaid?

Medicaid is a government program designed to provide medical insurance for children and adults with limited income and resources. In particular, Medicaid pays for types of elder care not usually covered by Medicare, including nursing homes and personal care services.

While Medicaid is a federally funded program, it is managed at the state level, and states have significant authority to determine eligibility and benefits. New Jersey’s Medicaid program is called NJ FamilyCare, and the portion that covers long-term care for elderly residents is called NJ FamilyCare Aged, Blind, Disabled (ABD) Programs.

What types of elder care does New Jersey Medicaid cover?

There are several levels of care that Medicaid pays for in New Jersey. From the highest to lowest level of care (and cost), these include:

  1. Skilled nursing facility (nursing home)
  2. Assisted living (personal care)
  3. In-home care (visiting nurses, home health aides)
  4. Adult day care

In New Jersey, nearly all nursing homes and most assisted living facilities accept Medicaid. However, eligibility requirements for each level of care may vary, so it’s important to have a plan that covers all possible contingencies.

Who is eligible for Medicaid for long-term care?

There are several eligibility tests to receive Medicaid coverage for long-term care in New Jersey. First, you must be a resident of the State of New Jersey and either a United States citizen or an eligible alien. Second, you must meet the clinical eligibility standards (that is, you must have a medical need for care), which include inability to perform at least three activities of daily living (ADL) or severe mental impairment.

Income Limits

Second, you must have limited income. The income limit for New Jersey Medicaid is based on the federal poverty level and changes each year. As of 2023, the income limit for a single person is $2,742 per month, or twice that for married couples if both spouses are applying. New Jersey uses the “name on the check” rule to determine who income belongs to; if the check is payable to you, it’s your income. It’s also important to note that if you are in a nursing home or assisted living facility, you may be required to put your income toward the cost of care before Medicaid pays the rest.

Asset Limits

Finally, you must have limited assets. For nursing home care for a single applicant, the asset limit is just $2,000; if you have any assets in excess of this amount, you must spend them down before you can be eligible for Medicaid. For spouses applying together, the limit is $3,000. If one spouse is applying and the other is not, the asset limits are more complicated; the government allows the other spouse to keep some assets, but how much depends on how many assets you have.

Certain assets can be excluded for Medicaid purposes, including life insurance policies if the face value is $1,500 or less, burial spaces, irrevocable pre-paid funeral expenses, one automobile, and sometimes your residence. In addition – and importantly for Medicaid planning purposes – assets in an irrevocable trust are not included.

Medicaid applies a penalty for any transfers of assets for less than market value made within the previous five years before you apply for Medicaid or receive institutional care, whichever comes first. In other words, you can’t just give away all your assets to a family member when you become disabled and need Medicaid. You must plan ahead to get out in front of this five-year lookback period.

What is Medicaid planning?

The purpose of Medicaid planning is to ensure that you can meet the Medicaid income and asset requirements in the event that you become disabled and need Medicaid to pay down long-term care in the future without spending down your assets. A Medicaid plan protects the assets you have spent your life building, securing your legacy while ensuring you receive the care you may need.

Components of a Medicaid plan may include:

  • Irrevocable Funeral Trust (IFT), which is set up to pay for your funeral and burial expenses in advance. Note that it’s the irrevocable nature of an IFT that makes it exempt from Medicaid’s asset limits; other types of pre-paid funerals are not exempt.
  • Medicaid Compliant Annuities, which essentially turn the applicant spouse’s assets into income for the healthy spouse. This is also possible for single applicants, but since the income from the annuity is counted toward the Medicaid income limit, it may not be the best option.
  • Medicaid Asset Protection Trust (MAPT), an irrevocable trust that preserves assets for family members as an inheritance. An MAPT must be established before the five-year lookback period, so you need to start planning early for this to be a viable option.
  • Transferring assets to a spouse, child, or sibling, which must usually be done outside the five-year lookback period, but exceptions can apply in some circumstances.

What is Medicaid crisis planning?

A Medicaid crisis plan is a plan to help someone reach Medicaid eligibility when they are likely to need long-term care very soon, usually due to an unexpected injury or illness. Because of the five-year lookback period, many long-term Medicaid planning strategies are not available in such a situation.

While a Medicaid crisis plan can still protect some of your assets in this scenario, it is neither as powerful nor as flexible as a non-crisis Medicaid plan. For instance, in a Medicaid crisis, you may need to spend down some assets instead of putting them in a trust. To most effectively protect your legacy, you need to start early.

Why do I need to start planning now?

While we all hope for long, healthy lives, the reality is that we are all just one unexpected illness or injury away from needing long-term care. The five-year lookback period is a long time. The most powerful and flexible Medicaid planning strategies require anticipating long-term care needs before they exist. And the difference between planning ahead and scrambling in a crisis can be hundreds of thousands of dollars.

In short, it’s critical that seniors start planning for future Medicaid eligibility now while they are still healthy and in advance of long-term care needs. Advance Medicaid planning isn’t just about the future; it’s about securing peace of mind in the present, knowing that your legacy is safe and that your needs will be provided for.

Why do I need a Medicaid planning lawyer?

Medicaid planning is a complex process. Even an inadvertent mistake can jeopardize your Medicaid eligibility – and you may not find out about that mistake until it’s too late.

An experienced New Jersey elder law attorney can review your Medicaid planning options and develop a plan that complies with the law and serves your best interests. Again, an effective plan can make a difference of tens or even hundreds of thousands of dollars for your spouse and your family. Your attorney will listen attentively to your story and help you create a plan that meets your family’s unique needs and your final wishes. Plus, you cannot put a price on the peace of mind that comes from knowing an experienced attorney has reviewed your plan and considered all contingencies to secure your future.

Don’t wait to start the process of securing your legacy. Contact an experienced New Jersey elder law attorney today to discuss Medicaid planning.

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