Like most people, you undoubtedly hoped that you and your spouse could live out your retirement years in your own home without the need for long-term care. If, however, one of you reaches a point at which the type of care provided by a nursing home is necessary, you will also have to face the reality of the high cost of that care. One option may be to turn to Medicaid for help paying the bill; however, qualifying for Medicaid comes with its own set of obstacles and concerns. One of those concerns will be the potential loss of assets. Knowing what assets one spouse can keep when the other spouse needs to qualify for Medicaid in Indiana will be a crucial piece of the puzzle.
Aging in America and the High Cost of Long-Term Care
If you are close to retirement age right now (age 65), you stand close to a 70 percent chance of needing some type of long-term care (LTC) services before the end of your lifetime. If you are married, the same applies to your spouse. If either of you ends up in nursing home care, the cost of that care could put your retirement nest egg at substantial risk unless you planned ahead by including long-term care and Medicaid planning in your comprehensive estate plan. The problem is twofold. First, is the high cost of LTC across the nation. For 2018, the average cost of a year in LTC nationwide was over $100,000 for a private room. Nursing home costs in Indiana kept pace with the nation, averaging just under $100,000. Second, neither Medicare nor most health insurance policies will cover LTC expenses. For most seniors needing LTC that leaves paying out of pocket or relying on Medicaid as the only viable options.
Qualifying for Medicaid in Indiana
While Medicaid does cover long-term care costs, you will need to meet Medicaid’s eligibility requirements for seniors, meaning you must meet the income and asset tests. The income limit is tied to the Federal Poverty Level and will change depending on which Medicaid category you apply under, your geographic location, and household size. The asset limit is where most seniors who failed to plan ahead run into problems. It is precisely these “countable resources” and income eligibility guidelines that cause many people to fear that their spouse will be left destitute if they need to qualify for Medicaid. Fortunately, the Medicaid Spousal Impoverishment Rules prohibit that from happening.
The Medicaid Spousal Impoverishment Rules
There was a time when one spouse was subject to being left without income or resources as a result of the other spouse’s need for assistance paying for the high cost of nursing home care. This happened because the couples’ income and assets were combined for the purpose of determining Medicaid eligibility. If a couple’s assets exceeded the program limit, those assets had to be “spent-down” (sold or transferred) until their value dropped below the limit. This left the community spouse with virtually no resources. Fortunately, the Medicaid spousal impoverishment rules now prevent that from occurring.
Fortunately, those rules have changed and the current Medicaid rules call for a “division of assets.” All assets belonging to either spouse are added together, except for exempt assets. One-half of the total (but not less than $25,284.00 nor more than $126,420 as of 2019) is considered as the “spousal share” for the community spouse. The spousal share is protected from the Medicaid spend-down requirements, ensuring that those assets remain available for the community spouse to use. By way of illustration, imagine that you and your spouse have non-exempt assets valued at $100,000. Your spouse could keep half of those assets ($50,000) but you would need to “spend-down” your half before being eligible for Medicaid.
A similar provision also allows the community spouse to keep some of the nursing home spouse’s monthly income if the community spouse’s income is below the Minimum Monthly Maintenance Needs Allowance (MMMNA). The amount of the MMMNA is set by law and will vary each year depending on factors such as geographic area and household size. For a community spouse with no dependents, the MMMNA can vary between $2,057.50 and $3,160.50 as of 2019. For the community spouse, this means that if he/she has income below that limit, it may be possible to keep some of the institutionalized spouse’s income each month.
Together, the division of assets rule and the MMMNA ensure that a spouse remaining in the community is not left without sufficient assets to pay for basic living expenses. Nevertheless, by incorporating Medicaid planning into your estate plan early on you may be able to keep significantly more assets and still qualify for Medicaid when you need it.
Contact Indianapolis Medicaid Planning Attorneys
For more information, please join us for one of our FREE seminars. If you have specific questions or concerns related to Medicaid planning, contact the experienced Indianapolis Medicaid planning attorneys at Frank & Kraft by calling (317) 684-1100 to schedule an appointment.
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.