Medicaid: Nursing Home / Long Term Care Benefits
Medicaid: Nursing Home / Long Term Care Benefits
By Mark T. Coulter, Esquire
Estate Planning Attorney
For individuals requiring long term care in a nursing home environment, Medicaid is the dominant payer. Medicaid is provided for people with low incomes, and very low levels of available assets, as well as to the blind, disabled workers, or orphans. To qualify for Medicaid coverage, you will need to demonstrate that your income and asset levels are sufficiently low that the government has to step in to cover your bills. This rescue, however, may come at the expense of a lien against remaining assets which you hold onto, which will have to be used to repay the government after your death. For some, these restrictions can be worked around, but the earlier planning is done in this regard, the better. Nevertheless, it is never to late to plan to protect as many assets as possible for the long term care patient, spouse and family.
Medicaid will only provide payments if your income is below a certain level, which changes annually. Pennsylvania, for example, states that all of your monthly income, minus a $65 allowance you can keep, has to be paid towards your nursing home care. You must also have assets, called countable resources, of less than around $2,400. The secret to being on Medicaid, and not being impoverished, is to have your assets fit within the exclusions to what are considered countable resources, and get as much of the rest out of your hands using methods which Medicaid won’t penalize, or won’t penalize much, well before you may reasonably need the nursing home benefits. Examples of excluded resources include term life insurance policies, modest whole life insurance policies, an automobile (even a very nice one!), prepaid funeral/burial accounts, and your home (equity limited to 500,000 to 750,00).
Other exclusions can be found in the value of personal effects and furnishings, jewelry, business property, some (few) trusts, spousal retirement accounts, and a spousal resource allowance (a moderate sum, usually less than 110,000 of joint assets, which the spouse of the applicant can set aside to avoid spousal impoverishment). Joint property is considered as the asset of the Medicaid applicant, unless you can establish the contribution of the other owner, so just listing your child on your deed isn’t going to shelter property from Medicaid.
When you are the beneficiary of a trust established by someone else, the issue of whether your trust fund will count as an asset precluding Medicaid eligibility gets tricky. In a nutshell, if the trust makes it clear that (1) you are not entitled to demand such benefits as you desire, and (2) the benefits are intended by the settlor to supplement, not duplicate or replace, any government assistance benefits, your chances of successfully arguing that the assets are not a countable resource is greatly improved. Otherwise, Medicaid can argue that you can and should use the trust assets before government assistance is sought.
Without good advice from an estate planner who understands Medicaid well, you can easily get yourself disqualified from Medicaid nursing home benefits for quite a long time. As an oversimplified example, if you gave $120,000 to your son as a ‘gift’, or to ‘hold onto for you’, and nursing home care costs around $6,000 per month in your state, the state agency can disqualify you for benefits for a period of 20 months (120,000 / 6,000 = 20 ). In days of old, the penalty months started to expire when the gift was made.
More recent changes have made the penalties more burdensome, and often start the months of ineligibility from the date when you apply for and need the benefits. Under this newest approach, your ‘penalty months’ do not start to expire until you are in a nursing home and eligible for Medicaid otherwise (i.e. impoverished), so you don’t serve your penalty time until you desperately need the benefits. There is a ‘look back’ period, which specifies how far back Medicaid will look to see if assets were disposed of by you for less than fair market value (gifts, or discounted transfers). As of 2006, the look-back period was extended to 5 years! If you dispose of assets for less than fair market value less than 5 years before you need to go into a nursing home, you are in danger of being assessed penalty months by Medicaid. Professional guidance is most highly suggested.
Medicaid agencies will seek repayment from any legally available assets in a nursing home benefits recipient’s estate following their death. Substantial limitations and exclusions to this right are contained in the laws of many states, and vary based upon the timing, title and transfer method of the assets in question. For example, Pennsylvania limits its estate recovery efforts to the assets in the probate estate, so proper planning can get assets outside the reach of the estate recovery program.
- Planning can increase your Medicaid eligibility
So, is planning for Medicaid nursing home benefits a useless gesture? Not by any means. Quite to the contrary, it can be an effective way to secure the family fortune stays in the family. It does, however, call for creative, but not crazy, planning techniques. Examples which have been successful include:
- Making gifts or discounted transfers years before nursing care may reasonably be required.
- Timing the taking out of a loan shortly before applying for benefits, to increase assets set aside for a spouse not in a nursing home
- Paying down mortgage debt,
- Investing in needed home repairs at the proper time
- Funding trusts for blind or disabled children
- Properly timed and drafted ‘income only’ discretionary trusts
- Annuity purchases which provide income to you within permitted levels
- Annuity purchases which provide spousal support income within permitted levels
Medicaid planning is a classic example of an area where your planning lawyer can provide crucially valuable advice to help you maximize the value of your life’s savings, while at the same time maximizing your eligibility for these valuable government benefits. Do not try to engage in Medicaid planning on your own. Instead, consult an attorney who practices in this area. All of us will continue to experience highs and lows as we journey through our lives. The assistance of an effective planning attorney can help to smooth out the roughest spots for you, taking advance steps to minimize the harmful effects on you, your family, your business, and your assets.
About Our Law Office
At the Estate Planning Centers at Coulter & May, P.C., we devote our practice to estate planning and assisting families through such transition times with estate and trust administration counseling. We offer guidance and advice to our clients in every area of estate planning, and offer comprehensive and personalized estate planning consultations. For more information or to attend an upcoming seminar or to book a consultation directly, please contact us at (412) 253-7526 or visit us online at www.estateplanningcenters.com.
Disclaimer: The information presented in this article is a conversational summary of a complex area of law and should not be construed to constitute legal advice. No person should rely upon the content of this article for making any decisions, and should instead consult with appropriate legal and tax professionals.