Medicaid Estate Planning
As the population ages, we see more and more people who, because of debilitating illness or injury or deteriorating mental facility, must go into nursing home care. In fact, current statistics indicate that approximately 70% of Americans over the age of 65 will need long term care services in their lifetime, and 40% will require nursing home care. Such long term care may be the best choice for the safety and medical care for a loved one. However, with costs of long term care as high as $70,000 per year or more, a family’s assets would soon be depleted. When that happens, Medicaid is frequently the source for funding ongoing care.
Medicaid is a joint federal and state program, with the states setting the benefits they will offer and the eligibility criteria for those benefits. Medicaid requires that people seeking Medicaid funded care have minimum financial resources. Therefore, for a nursing home resident’s care to be funded by Medicaid, it is often necessary to deplete the person’s assets, a process referred to as “spending down.” Some assets are protected for the nursing home resident and his or her spouse, and some would disqualify the resident for Medicaid.
Because the Medicaid rules vary somewhat from state to state and are fairly strict and complicated, working with an elder law attorney will help people gain maximum value from their assets while still qualifying for Medicaid assistance
Qualifying for Medicaid Assistance
If your health requires that you should be in a nursing home to receive appropriate care, you should evaluate your eligibility to receive Medicaid. Generally, an individual should have countable assets of no more than about $2,000 per person or $3,000 per married couple if both are receiving care. Some assets, such as the home and one vehicle would be exempt. However, most financial assets and non-residential property would be considered “countable” for purposes of Medicaid eligibility.
If you have assets that put you over the Medicaid resource limit, you will not be eligible for Medicaid until your resources are spent down below the defined value. One option is to enter the nursing home as a private pay resident until your assets fall below the income guidelines.
Another option is to spend down your assets. You can spend on anything you choose, and some people will buy a new vehicle, pay for repairs or remodeling on their home, or purchase pre-planned funeral arrangements. It is important to note, however, that you cannot just give away your assets – for instance, giving large amounts of cash, investments, or property to your children. Medicaid will look back five years to see whether you gave away anything for less than fair market value during that time.
If your state Medicaid agency finds that you did transfer something for less than fair market value, then it will impose a penalty on you by making you ineligible for Medicaid for a certain period of time.
Expenses Usually Covered by Medicaid
Federal law requires the states to provide certain services to Medicaid recipients. States must pay for nursing facilities for Medicaid recipients, and they must pay for home health care services for recipients who would qualify for nursing home care. Not all nursing homes accept Medicaid payment, so it is up to you, working with social services if necessary, to determine which home would provide the care appropriate to your needs and determine whether they would accept Medicaid funding.
Also, Medicaid funding may sometimes be used to provide additional long-term care services for those who might not qualify for a nursing home. Those services might include assisted living facilities, adult foster homes, senior day care, and in-home services like help with housekeeping and medication management.
Income Medicaid Allows You to Keep
Although Medicaid requires that most of your income be contributed toward the cost of your nursing home care, you would receive a small allowance for non-medical purchases such as snacks, subscriptions, and other personal items. If you are receiving care in your home, you would receive an allowance that would provide for non-covered medical expenses, food, clothing and personal items. In addition, if your spouse will remain in your home, some of your income can be set aside for costs related to the home, such as mortgage, taxes, insurance, and related expenses.
If your income is above the required Medicaid maximum, you may qualify for coverage if you have a Qualified Income Trust, also known as a “Miller trust.” Part or all of your income can be directed into a Miller trust which would designate payment to your personal care, your spouse’s care, and to your medical care in such a way that you would not be disqualified for Medicaid. Upon your death, any assets remaining in the Miller trust would go first to reimbursing Medicaid for any amounts spent for your care. If further value remains in the trust, it would be paid out to your designated beneficiary.
Spousal Impoverishment Protection
If only one member of a married couple needs long-term care services, Medicaid will not require the other spouse, the community spouse, to give up all assets and income so that the spouse needing care can qualify for it. Any income earned by the community spouse is not considered in determining Medicaid eligibility for the spouse in a nursing home. Also, the community spouse is entitled to remain in the couple’s home and receive financial support for expenses related to the home. In most cases, we are able to protect nearly 100% of the assets for the community spouse.
The rules governing Medicaid eligibility are complicated, and consulting with your Medicaid planning attorney, Glenn A. Deig, will assure you meet the reduced income requirements to receive Medicaid and still retain as much of your assets as possible.