Article Treasure Cove

Nobody wants to think of the possibility of entering a nursing home. But the truth is, if you ignore this issue you are putting your spouse’s financial security, your life savings, your home and your children’s inheritance at risk. Nursing homes in Massachusetts cost approximately $10,000 a month. Most people don’t realize that traditional health insurance policies and Medicare provide little or no long term care coverage, but Medicaid coverage is very different. With proper Preparation for Long Term Care and the right medicaid legal specialist, most married middle-class seniors, who have accumulated savings and a house, could be eligible for Medicaid to help pay some or all of their long term care costs. Unfortunately many seniors, who pay privately for nursing home care, spend their life savings until they have nothing left – and only then do they believe they are eligible for Medicaid (the program is called MassHealth in Massachusetts).

Medicaid planning is complicated and include many traps for the unwary. An experienced lawyer specializing in protecting the elderly can help you navigate through the Medicaid maze protecting your family’s savings and home.

The Asset Rules

The first basic rule of nursing home Medicaid planning is that an applicant, whether single or married, may have no more than $2,000 in “countable” assets in his or her name. “Countable” assets generally 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 Financial Planning for Medicaid, 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. Many people think the best way to protect their home is to give it outright to their children. Although this may sound like the simplest solution — it may be the worst choice. Transferring a home outright to children can result in large capital gains taxes. Secondly, 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 lawyer specializing in protecting the elderly 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

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. Proper Medicaid planning and the support of a lawyer specializing in protecting the elderly is essential.

The easiest way to explain the transfer rules is by way of an example. Let’s assume 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

Preparation for Long Term Care requires 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. Be sure to discuss this with your lawyer specializing in the elderly.

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, a good lawyer specializing in protecting the elderly 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, with proper Preparation for Long Term Care 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 lawyer specializing in the elderly for Financial Planning for Medicaid and create a comprehensive Asset Protection Plan to preserve all that you have worked for.

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Tags: Boston Medicaid Attorney