If you are eligible to receive Medicaid, not only does the government pay for your costs of the nursing home facility, but the government pays for practically all of your medical bills, including impatient hospital services, outpatient hospital services, laboratory and X-ray services, physician services, and medical and surgical services of a dentist. Considering the costs of a nursing home alone can range anywhere from $8,000.00 to $12,000. per month, if not more, the benefits from receiving Medicaid can not be overstated. Simply put, without Medicaid benefits, many seniors will get wiped out financially if they ever need to be placed into a nursing home.
How do you qualify for Medicaid benefits if you can only have $2,000, in countable assets and $2,225 per month in income? The wrong answer is to give it away. This needs to be repeated. DO NOT GIFT YOUR MONEY OR YOUR ASSETS. If you give away your assets, Medicaid takes the position that it should not have to provide you support for a certain period of time. Specifically, Medicaid will look back over the previous five years to see what gifts were made. A gift is considered any transfer of assets for less than fair market value. Thus, any gifts or transfers you make within this 5 year look back period could disqualify you for Medicaid coverage. Rather, the right answer is that because the Medicaid rules allow that certain assets are not countable or are exempt, you want to make sure that your assets are assets that are protected, not countable or are exempt.
Thus, it comes down to a matter of strategic planning within the framework of the rules to meet the eligibility requirements. Our firm can assist you with this strategic planning so that you can obtain the benefits of the Medicaid program, instead of losing your entire nest egg to nursing home costs. Here are some examples of planning tools:
A person’s gross monthly income must be below $2,225.00 in order for the person
to be eligible for Medicaid. Income can come from many sources, including but not limited to employment, Social Security, pensions, alimony, regular distributions from trusts, and annuity or mortgage payments. If a person’s gross monthly income exceeds the $2,225.00 gross monthly income cap, Medicaid’s rules provide that the person will not be eligible for Medicaid unless they execute and properly fund a qualified income trust, also known as an irrevocable-income trust or Miller Trust. Once that is done, the patient’s income less $105 per month go toward the cost of care as the “patient responsibility” amount. The rest of the bill is covered by Medicaid.
In addition to having a monthly income below $2,225.00, in order to be eligible for Medicaid an applicant’s countable assets must be below $2,000.00. To reduce assets below $2,000.00, the assets must either be spent or protected, or must otherwise be considered exempt and non-countable.
- Personal Residence: Medicaid does not count a person’s home as an asset so long as it is their homestead and they have an intent to return to it. There is also a maximum equity value for the home, which is currently $572,000.
- Lady Bird Deed: A Lady Bird Deed is an “enhanced life estate deed.” It is roughly the real property equivalent of a “pay on death” bank account. Life estate deeds allow the owners of real property to retain title for the rest of their lives, and to transfer property to named beneficiaries, called “remaindermen” upon the lifetime owner’s death without a probate proceeding. One of the factors that makes a Lady Bird Deed “enhanced” is that unlike with a traditional life estate deed, (where the remaindermen become owners upon being named) remaindermen under a Lady Bird Deed do not have any ownership interest in the real property until the death of the lifetime owner(s). This is significant because for any transaction involving the real property, all owners have to consent. However, the Lady Bird deed provides that the real property remains in the lifetime owner’s name as long as they are living, and that during his or her life, the owner will continue to enjoy unrestricted ownership, without any liability for waste. If there is more than one lifetime owner, the property does not pass to the remaindermen until the death of all lifetime owners. This means that the lifetime owners can sell, mortgage, leave vacant, change remaindermen, and take any other action with respect to the real property without the remaindermen’s permission. If something remains of the property upon the last remaining lifetime owner’s death, the Lady Bird deed allows the real property to pass outside of probate to the remaindermen named on the deed.Significantly, because the interest of the remaindermen is so limited and uncertain, and indeed can be taken away at any time, Medicaid takes the position that there is no giftpenalty to naming such a beneficiary on the deed. On the other hand, if the owner just quitclaims the property outright, or adds someone to his or her deed as a co-owner, Medicaid would treat this as a gift and would attach penalties accordingly.
- Rental Property: Pursuant to the Medicaid rules, any real estate owned by the individual that is being rented to a separate entity at a fair market value is excluded as an available asset to the individual. Any residential or commercial property, anywhere in the world, could be suitable.
- Personal Service Contract: The personal service contract is a legally binding and enforceable agreement between a trusted care provider and the future applicant. Through a personal service contract, a person hires someone, often a family care giver. There is no legal obligation that any family member provide care. As a result, the law places real value on a contractual commitment for these services and therefore, it is permissible to charge and transfer a calculated sum of money from a parent to the child or other provider for fair market value. By doing this, the assets will not be counted by Medicaid. However, there are disadvantages, such as the money is no longer in the parent’s control and this may be a taxable event to the care giver.
- Pooled Special Needs Trust: The law provides that a pooled trust account may be created for a disabled person by a court, a guardian, a parent, a grandparent, or by the disabled individual himself. The assets in the pooled trust cannot be counted as assets for purposes of Medicaid. The pooled trust, by law, must be managed by a non-profit organization. The trustee maintains trust participants’ assets in individual sub-accounts but “pools” them with the assets of other trust participants for purposes of investment. None of the other participants would have access to another person’s money. Upon death, if there is any money remaining in the pooled trust sub-account, the remaining money would be absorbed into the pooled trust or the government can be repaid for Medicaid expenditures and any monies that remain can be distributed to the person’s heirs.Because of these special restrictions on pooled trusts, the government does not count money in the pooled trust when determining how much money an individual has. The pooled trustee would distribute money for the account holder upon request, but only for things not otherwise covered by public benefits being received. Because it is one of the purposes of the trust to make sure that the account holder does not lose any government benefits, the trust will not make distributions if the account holder has a government benefit that already covers the requested distribution. In this way, the trust supplements public benefits without replacing them.