Medicaid Planning

The costs of nursing home care is astronomical: in Massachusetts, the average cost per month is around $8,000.  At that rate, it is not long before a person’s or a married couple’s life savings are gone.  You do not have to end up this way.  Medicaid is a federal/state program that pays for nursing home care, provided you do not have too many assets or too much income when you enter a nursing home. If you start planning now — while you are relatively healthy and before you need nursing home care — you can protect your hard-earned assets from being gobbled up by nursing home costs, and leave them instead to your loved ones.  This is the time to consult an elder law attorney.

Medicaid planning can help you meet Medicaid eligibility requirements

Medicaid will measure your assets and income at the time you apply for nursing home benefits, looking to see if you have access or control over the assets and income.  If you do, Medicaid will expect you to use them for your nursing home care before Medicaid starts to pick up the nursing home tab.  So Medicaid planning means, taking steps now to make your assets inaccessible, while still protecting yourself (and if you are married, your spouse if he or she remains living in your home after you enter the nursing home.  Medicaid eligibility rules are incredibly complicated, but elder law attorneys have numerous strategies at their disposal to make your assets “disappear” from Medicaid’s radar.

Strategy 1: Exchanging countable assets for non-countable assets

Medicaid does not count all of your assets.  Some are considered exempt.  For example, your family home, your car, term life insurance, and prepaid funeral/burial arrangement are not countable.  So if you have lots of countable assets — such as a large sum of cash sitting in a savings account — you can become eligible for Medicaid by converting that countable asset into a non-countable asset.  How?   You could use the cash to pay off your mortgage, or make much needed improvements to the family home.  Once spent, the countable cash is converted and merged into a non-countable asset — your family home.  In the same way, you could use your cash to buy prepaid funeral arrangement, purchase a newer car, etc.  An elder care attorney can help you maximize this conversion process.

Strategy 2: Using irrevocable trusts to shelter assets for your family

When we have spent our lives working to acquire assets, we want to be sure they are around to give us a comfortable living, and we want whatever is left to go to our loved ones after we die.  How can you pre-plan to achieve that result.  If you think you have at least five years before you will need nursing home care, you can create an irrevocable trust and place your assets in the trust.  Once the assets are in the trust, you can never regain ownership, but you can add several provisions to the trust that will protect your interests.  For example, if you put your home in a trust, you can retain the right to live in the home for the rest of your life.   At the end of the five years, Medicaid will no longer consider the home your asset, and will never seek to recoup Medicaid benefits from its eventual sale.

Strategy 3:  Using annuities to provide for the spouse who remains at home

If you are married, and one spouse needs to go into a nursing home, how will the spouse who remains living at home (called the “community spouse”) if all their assets and income go to pay nursing home costs?  Medicaid rules recognize that the community spouse needs adequate assets and income to live on.  So after Medicaid determines the couple’s total assets, it allows the community to keep a certain amount of them, called her asset allowance.  The community spouse is also allowed to keep her income, plus as much of her spouse’s income to bring her total income up to a predetermined minimum maintenance level.  So one planning technique for a couple with excess countable assets is to convert those countable assets into a non-countable income stream by using the cash to purchase an annuity, which will give the community spouse the right to receive income over a term.  The only downside is that medicaid must be designated as the beneficiary of the annuity upon the death of the annuitant.

Strategy 4:  Avoid the five-year look-back penalty

When you apply for Medicaid nursing home benefits, Medicaid will scrutinize your financial transaction dating back five years to see if you gave away any countable assets during that time, i.e., whetherr you transferred ownership without getting fair market value in return.  This is know as the five-year look-back period.  If you did, you will be considered ineligible for Medicaid for a penalty period, the length of which depends on how much you gave away.  A simple example.  Suppose at the time you enter a nursing home, the average monthly cost of a nursing home in your State is $8,000.  Suppose three years earlier, you gave away $80,000 to your children.  To determine the length of the penalty period:  the amount of the gift (80,000) divided by the average nursing home cost (8,000) = 10.  You would not be eligible to receive Medicaid benefits for the first 10 months of your stay, and would have to private-pay.  It is crucial that you know about this penalty in advance, and that you consult an elder law attorney well in advance of your need for nursing home entry to minimize any penalty periods.

The best time to do medicaid planning is five years before you (or if married, your spouse) needs to enter a nursing home.  If you consult an elder law attorney now, you can maximize the amount of assets you can shelter and pass along to your loves ones.  Call us today at 508-316-3853 to start your Medicaid planning NOW!