According to the Administration of Community Living (ACL), almost 70% of Americans over 65 will need long-term care. That likelihood should be a wake-up call for you or any older adult in your life to explore options to fund recurring healthcare costs later in life while protecting assets tax-efficiently.

Why New York families are embracing long-term care planning

In 2020, the ACL found that 69% of 65-year-olds would need long-term care services for an average of three years, with women requiring care longer than men. Among those needing care, 42% would require paid assistance at home for less than a year, while 37% would need facility-based care for a year.

These figures underscore a significant financial risk. Without proper planning, chronic medical conditions and extended care needs can rapidly deplete retirement savings and reduce the wealth available to pass to heirs.

Healthcare costs in New York are particularly high, Medicaid eligibility requirements can be challenging to meet, and the rules governing asset protection are complex. These factors make early planning essential for people 65 and older in the state.

How to pass wealth to heirs tax-efficiently while managing long-term care

Funding long-term healthcare needs while preserving wealth as an inheritance can be challenging. Three practical strategies can help you minimise tax liability and maximise wealth preservation.

Engage in Medicaid planning early

Medicaid can fund long-term care costs indefinitely. People aged 65 or older are among the groups Medicaid can serve, and the program has no lifetime or annual dollar limit on covered medical care.

Medicaid generally has a look-back period, a rule that prohibits applicants from giving away or selling assets below fair market value to meet the program’s threshold and qualify for coverage. Transferring assets to other persons or entities within five years of applying for coverage will result in a penalty.

Elder law firms and long-term care professionals use a properly structured Medicaid asset protection trust (MAPT) to maximise tax efficiency in this jointly funded federal and state health insurance programme. A MAPT may reduce tax liability on capital gains and income generated within the trust and may help maintain property tax exemptions.

Medicaid rules vary by jurisdiction. You should consult local elder law and long-term care experts for advice on structuring a MAPT correctly and employing strategies to mitigate the financial impact of inadvertently violating the look-back period.

Invest in a hybrid insurance policy

A life insurance policy that covers long-term care is a reliable source of funds for recurring medical expenses. This hybrid financial product typically provides a death benefit to your beneficiaries, pays for all or some of the healthcare costs you may need, and offers you or your heirs income or a tax-free life insurance benefit if the care coverage goes unused.

Depending on the policy, this coverage may be available to both older and younger applicants, and some policies may include return-of-premium, nonforfeiture or cancellation options. This type of insurance has important limitations to consider.

For married couples, the higher-income spouse benefits most since that person may not immediately qualify for Medicaid, and the policy works best as a supplement to an asset protection trust rather than a substitute.

You should evaluate whether you have sufficient discretionary income to sustain premium payments, as purchasing excessive coverage can diminish the product’s value relative to its cost.

Explore crisis planning options for immediate care

Urgent medical needs can jeopardize an asset protection strategy and force you to tap personal resources to cover long-term healthcare costs. Several crisis-driven planning tools address different aspects of this challenge.

Medicaid-compliant annuities for spouse protection convert countable assets into income streams, helping married couples qualify for Medicaid nursing home benefits while protecting the healthy spouse’s savings.

Family caregiver agreements enable patients to compensate family members who provide care at home, preventing funds from being counted as gifts and increasing the likelihood of Medicaid eligibility when a move to a nursing facility becomes necessary.

Asset conversion restructures holdings to reduce the amount Medicaid counts toward eligibility verification, while strategic spending on allowable expenses legally reduces excess income or resources without causing transfer penalties.

The viability of these tools varies by situation. Crisis planning serves as damage control rather than optimization, though it remains worthwhile to minimize out-of-pocket costs, maximise wealth transfer to heirs, and reduce tax liability.

How elder law firms help older adults navigate long-term care planning

These elder law firms demonstrate how to properly develop long-term care plans for older adults in the United States.

Case Study 1

Ettinger Law Firm provides long-term care planning services in New York. The firm encourages individuals to consider planning sooner rather than later because one study found there is a 66% chance that adults over 65 will eventually need long-term care.

The firm offers comprehensive support services that integrate Medicaid planning into broader long-term care strategies. Ettinger Law Firm begins by identifying which assets require protection and which are already exempt from Medicaid, then explains New York’s income and asset limits. The firm drafts customized MAPT plans tailored to individual needs and goals, helps clients select capable trustees, and coordinates with financial institutions to transfer assets into the trust.

Ongoing support includes free legal reviews every three years to ensure the plan continues to meet client needs. Elder law firms and long-term care planning professionals nationwide can learn how to integrate Medicaid planning and asset protection from Ettinger Law Firm’s approach to helping families reduce stress during a difficult time.

Case Study 2 

Farr Law Firm specializes in elder-focused financial planning that helps clients explore hybrid financial products to fund long-term care in Virginia, Maryland, and Washington, D.C. When developing comprehensive life care plans, the practice balances the legal, medical, and financial needs of older adults, which goes beyond what traditional estate planning provides.

By analysing individual clients’ needs and circumstances, the firm recommends practical life insurance policies that cover healthcare costs and provide a death benefit. Farr Law Firm also brings expertise in advanced planning strategies to cover ongoing healthcare costs while preserving wealth tax-efficiently.

Case Study 3

Berg Bryant Elder Law Group offers crisis care planning services in Florida for people concerned about nursing home costs, which range from $9,000 to $13,000 per month.

While the practice emphasises early planning, it also offers strategies to help preserve personal assets after a health change or once care is already needed, while accounting for potential tax implications.

Services include immediate qualification strategies, spousal protection planning, converting countable assets to exempt assets, Medicaid-compliant annuities, and accessing special exceptions to the look-back period, with the firm identifying which options best fit each client’s situation.

FAQs

Older American adults and their families often ask these questions about long-term care.

• What is the five-year look-back period for Medicaid? The five-year look-back period for Medicaid is a rule that prohibits applicants from giving away or selling assets below fair market value to meet the program’s threshold and qualify for coverage.
• What happens if you buy asset-based long-term care insurance but never need care? The outcome depends on the policy. Some policies may provide income or include unused benefits in the death benefit that goes to your heirs.
• Will a standard revocable living trust protect your savings from nursing home costs? No, a standard revocable living trust will not protect your savings from nursing home costs because the authorities will still view the trust money as yours. An irrevocable trust can protect your savings if you set it up correctly and in advance because this legal arrangement means you give up ownership of the assets inside.

Securing your financial legacy before long-term care need arises

Prioritising long-term care planning as soon as possible is essential, as time is a critical factor in getting covered by Medicaid while preserving the value of assets for heirs. Nobody is too old to start, since some tools to preserve resources may still be available after receiving a diagnosis or while undergoing medical care. Consulting a local expert in elder law and long-term care planning is key to receiving practical advice and making informed decisions.

Amelia Hart, a psychology graduate from the University of Hertfordshire, has a keen interest in the fields of mental health, wellness, and lifestyle.