Published on July 6, 2009
Cohen & Oalican, LLP Medicaid Rules Protecting Your Assets Legal Services for Older and Disabled Clients and their Families Elder Law, Boston, Raynham and Andover, Massachusetts
PROTECTING YOUR ASSETS FROM THE COST OF NURSING HOME CARE Many fail to plan for the possibility of entering a nursing home, their spouse’s financial security, life savings, home and children’s inheritance at risk Nursing homes in Massachusetts cost approximately $10,000 a month Traditional health insurance policies and Medicare provide little or no long term care coverage Medicaid rules are complicated and include many traps for the unwary
The Asset Rules Nursing home Medicaid specifies that an applicant, single or married, may have no more than $2,000 in "countable" assets "Countable" assets include everything you own, except for the applicant's home (if it is located in Massachusetts and it has equity less than $750,000) Everything else, second homes, retirement savings, life insurance, is counted and may have to be spent down before you can obtain eligibility
The Home Homes with equity of less than $750,000 are not considered a noncountable asset However this does not mean that the house is protected Without proper planning, at death the State will have a lien against your house and at death Medicaid will seek reimbursement for benefits provided With proper legal planning you can avoid a Medicaid lien and protect your home saving hundreds of thousands of dollars Giving your home to your children might be the worst choice Transferring a home outright to children can result in large capital gains taxes. Things can happen to children that can place the house at risk. What happens if a child gets divorced, is sued or has creditor problems Seniors have been literally forced out of their own home as a result of ‘gifting’ their house to their children. One strategy our office uses to protect homes from the Medicaid lien is an irrevocable trust. An irrevocable trust can protect your home from a Medicaid lien and avoid the risks of outright gifts.
The Transfer Penalty and the Look-Back - 1 If you give away your assets it will make you and your spouse ineligible for Medicaid benefits for up to five years. When you apply for benefits, Medicaid reviews five years of bank statements in order to identify any disqualifying transfers. This is known as the “look-back period.” Any transfers that happened before the five year period are protected and do not have to be reported to Medicaid. However, if you apply for benefits during the look-back period, Medicaid imposes one month of ineligibility for approximately every $8,000 you give away. In addition, the clock does not start “ticking” on the ineligibility period until you are in a nursing and have spent down your assets.
The Transfer Penalty and the Look-Back - 2 The easiest way to explain the transfer rules is by way of an example. Mrs. Smith transfers $24,000 to her grandson on March 15, 2008. On April 15, 2009, Mrs. Smith suffers a stroke and is admitted to a nursing home. Assume she spends down her assets below $2,000 as of August 2009. Because she would be applying during the look-back period, Medicaid would impose three months of ineligibility ($24,000 ÷ $8,000 = 3 months). The transfer penalty would not start until August 1, 2009 and would end in November 2009.
Protecting Your Spouse/Assets Medicaid law provides for special protections for the spouse of a nursing home resident, known in the law as the "community" spouse. The spouse of a Medicaid applicant is entitled to keep a portion of the couple’s assets. The community spouse is entitled to keep a maximum of $109,560 (2009 figures). This assessment is not affected whether the assets are jointly held by the couple or they are all in the name of the nursing home spouse. For example, if a couple owns $75,000 in countable assets on the date the applicant enters a hospital, the community spouse will be entitled to a resource allowance of $75,000. If they have $250,000, the community spouse can keep the maximum of $109,560.
Protecting Your Spouse / Annuities One means of protecting assets for the community spouse is through the purchase of an annuity. The purchase of an annuity transforms excess assets that would otherwise make the nursing home spouse ineligible for Medicaid into a non-countable stream of income for the community spouse. In other words, we can typically protect all of a couple’s savings for the at-home spouse and obtain Medicaid eligibility for the nursing home spouse, even at the last minute through the purchase of a Medicaid qualified annuity. However, the annuity does not need to be purchased ahead of time. In fact, the annuity should not be purchased until the spouse enters a nursing home.
Conclusion The possibility for a spouse or parent to need nursing home care is the greatest financial risk facing most seniors. Given the State’s tightening budget, it has become even more difficult to obtain Medicaid eligibility and protect your assets. For your own peace of mind, it’s more important than ever to hire an experienced Elder Law Attorney to create a comprehensive Asset Protection Plan to preserve all that you have worked for.
Cohen & Oalican, LLP, Metro Boston Office 18 Tremont Street Suite 903 Boston, MA 02108 (617) 263-1035 Southeastern Office 108 North Main Street Raynham, MA 02768 (508) 821-5599 North Suburban Office 15 Railroad Street Andover, MA 01810 (978) 749-0008
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