The most recent estimates on long-term care needs suggest that your odds of spending time in a nursing home at some point in the future may as well be decided by a coin-flip. In fact, about half of us will find ourselves in need of that care before we die. Since nursing home costs continue to rise with each passing year, paying for that care is something that should concern each of us. Medicaid can help, but many people often neglect the planning needed to ensure that they’re eligible for those benefits. That can leave them scrambling in search of emergency Medicaid strategies to get the help they need.
When Are Emergency Medicaid Strategies Necessary?
Medicaid will pay for long-term care, but you need to meet the program’s strict income and asset guidelines to obtain those benefits. Of course, if you plan well in advance of your long-term care needs, that shouldn’t pose much of a problem. There are simple Medicaid planning strategies that an estate planning and elder law attorney can use to help you arrange your assets so that you can comply with those limitations – using tools like asset protection trusts or gifting.
The problem is that few people take advantage of those long-term strategies to the extent that they should. Many take no action until they know that they need to enter a nursing home – and by then, it’s too late to use normal planning options. Once the need for nursing home care is upon you, options like trusts, gifting, or other transfers of assets are out of the question. In fact, if you attempt to simply give away your assets or transfer them into a trust to protect them from the Medicaid program in an emergency, you will likely end up being penalized by the program.
That’s because Congress enacted legislation designed to prevent people from sheltering assets from the Medicaid program within the five years right before any application for program benefits. That law empowers the government to examine your asset transfers for that five-year period. Assets transferred within that five-year look-back window may trigger penalties that leave you ineligible for the program’s benefits for months or even years. The exact length of that penalty will depend on the total value of the transfers in question and the average cost for nursing home care in the state.
Since you cannot use the most common Medicaid planning strategies in an emergency, other strategies must be employed. While these options are never as effective at protecting your assets from nursing home costs, they can help you to obtain access to the benefits you need without spending all your wealth on care.
Dealing with Excess Income
When it comes to the Medicaid income limits for long-term care applicants, the solution is relatively simple. The applicant just needs to create a Qualified Income Trust – otherwise known as a Miller Trust. Under the terms of this type of trust, any monthly income that the applicant receives in excess of the allowable limit goes into the trust. Those trust assets are then used to pay a portion of the senior’s nursing home bills, with the Medicaid program covering the remaining expense each month. That enables the applicant to effectively reduce his monthly income to meet the designated limits needed to qualify for program benefits.
Using Annuities for Assets
Assets can be more problematic. To meet the $2,000 countable asset limit, seniors often spend down their wealth on things like new vehicles, home repairs or additions, or even a new home. In many instances, those seniors see no other option. Unfortunately, that can result in an estate that is completely consumed by the spend down process, leaving those elderly Americans with nothing to show for a lifetime of work and nothing to pass on to their heirs.
Annuities can be one way to ensure that at least some portion of those assets can be preserved. For example, if you have $100,000 in savings and want to avoid spending that money on home repairs and other allowable spend-down options, you can choose to transfer half of it to your loved ones. Your Medicaid application will then trigger a penalty, and you’ll be ineligible for program benefits for a certain number of months. You then use the remaining $50,000 of your estate assets to buy an annuity that pays you a monthly income stretched out over the length of your penalty period.
You can then find placement in a nursing home and use your regular retirement income and annuity income to pay for the costs of your care during the penalty period. At the end of the ineligibility period, you go on Medicaid. Meanwhile, your loved ones keep the $50,000 gift that triggered the penalty. In that way, you can preserve assets for your heirs, reduce the size of your estate, and ultimately qualify for the program benefits you need. Obviously, it doesn’t preserve all your assets, but it does salvage a portion of the estate.
Using Spousal Transfers
Another option is to make full use of the community spouse rules regarding both income and assets. Your spouse is entitled to keep half of all non-exempt assets up to $119,220, as well as half of all income that is jointly-owned. Moreover, if your spouse’s income falls below a certain level each month, he or she may be able to retain some of your income to reach the allowable limit – and in some cases even more.
Make Sense of It All with Professional Assistance
If any of that sounds like it might be more than most people should try to deal with on their own, you’re right. Medicaid planning is complicated enough when you have years to prepare. In emergency situations, you need the type of help that a law firm like Frank & Kraft, Attorneys at Law can offer. We can help you create the emergency Medicaid strategies you need to deal with potential program penalties and get the benefits you need for your nursing home care. To learn more about how we can help you, call us today at (317) 684-1100, or contact us at our website.
Paul A. Kraft, Estate Planning Attorney
Mr. Kraft assists clients primarily in the areas of estate planning and administration, Medicaid planning, federal and state taxation, real estate and corporate law, bringing the added perspective of an accounting background to his work.
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