Protecting Assets and Nursing Homes – Knowing The Issues

Protecting assets from the costs associated with a nursing home usually causes people to run into 6 major problems:

Problem 1: The 60 month Look Back: On February 8, 2006, President George W. Bush signed The Deficit Reduction Reconciliation Act of 2005. The changes make it more difficult than ever to qualify for Medicaid eligibility.

The look-back period for transfer of assets is now 5 years (instead of 3 years) prior to applying for Medicaid coverage.

Problem 2: Gifting: Giving money away can frequently be more expensive than keeping it and finding other ways to protect it. Though each person can gift $14,000 to a person per year, these gifts are disqualifying transfers for Medicaid. In addition, both federal and state gift tax laws (imposed in a number of states) must be considered.

Problem 3: Too much Income: Even if you do manage to effectively give away all of your assets (spousal impoverishment provisions allow the non-confined spouse to keep all financial assets up to a maximum of $119,220 in 2016 and a minimum monthly needs allowance of $1,991.25 and maximum of $2,980.50). The at-home spouse can keep the primary residence, a car, personal and household effects, and a small amount for burial. Many individuals have too much income to enable them to qualify for Medicaid. The income of the community spouse is not counted in determining Medicaid eligibility.

Problem 4: Loss of Independence: Most individuals who embark on Medicaid Planning use Income Only Trusts, which require the cooperation of the Trustee of the Trust when individuals seek to sell a property and change living arrangements or would like to access the Trust assets.

Problem 5: Ensuring Control of Assets: Once one gives money away, legally it is no longer his. Attorneys have numerous, sometimes heart wrenching, stories of parents who have given assets directly to children who have subsequently squandered those dollars through drug abuse, gambling, etc. Even the “best” and “most loving” children are still subject to bankruptcy, divorce, law suits, etc. Sometimes children die before their parents and the parent’s money sometimes does (and sometimes does not) return to the parents. When couples seek to protect their assets, they must transfer the assets to proper vehicles and trusts to ensure loss of control is avoided or minimized.

Problem 6: Choice of Nursing Facility: Many individuals have discovered all too late that “money talks.” Many nursing homes accept both private pay and Medicaid patients; the nursing homes however, are generally reimbursed at a far lower daily rate for a Medicaid patient than a private pay resident. As a nursing home owner or admissions officer, if you had two individuals requesting a bed in your home -one who could pay privately at the full daily amount and one who had (or claimed to have) no money and would need to depend on Medicaid, whom would you prefer (and give preference to)? Many of the finer nursing facilities require that the prospective resident be able to pay privately for six months, a year, two years, or even longer, before the application is even considered. A properly drafted and planned estate will anticipate this possibility and provide couples with the flexibility to address this situation.

Conclusion: After analyzing these six potential pitfalls of disposing of one’s assets (and being prepared to use Medicaid if long term care becomes a necessity) it becomes apparent that only through proper planning can these pitfalls be avoided. Many of these challenges can be avoided if discussed and planned in advance. The use of Income Only Trust are critical in the planning and execution of these goals. Couples will rely on the skill and experience of their attorney in planning and drafting a plan that can and will work for them.

Want to discuss a plan that is customized to you and your specific goals?  Contact our office for a no-cost consultation.