Medicaid and Saving Assets
Can you "protect" your assets and still qualify for Medicaid in a nursing home?
Joy Franklin* has been caring for her father, Don, at home for quite some time. As his illness progresses she and her other family members believe that within about six months Don will probably need more care. They are beginning to investigate their nursing home options, and they are wondering about applying for Medicaid help while at the same time hoping they can preserve the few assets he has left.
Don worked hard all his life. Although the amount he was able to save is not much by today's standards, he still has his home and about $30,000 that he always planned to leave for his children. Joy hopes this will still be possible.
Medicaid is the joint state and federal program that was instituted, among other things, to make nursing home care for seniors and the disabled affordable when there are no other financial resources to pay for care. Medicaid is a financial "last resort."
As such, there are some strict income and asset guidelines that people applying for Medicaid have to meet.
The first, of course, is to have a monthly income below a threshold set by each individual state. In this case, Don's income is below the limit. Those who have an income above the limit are permitted to take certain legal measures in order to qualify for Medicaid. These can be explained and implemented by an elder law attorney.
Most states limit the assets an individual can keep while qualifying for Medicaid to under $2,000. In some states this limit is higher. Because he is a widower, the $30,000 that Joy's father has invested in CDs will disqualify him from receiving Medicaid assistance in all states. If his wife were still living, she would be permitted to keep some or all of the $30,000 for her own needs. However, without a wife at home, Don is expected to spend his own financial resources before tax dollars are tapped to assist.
So, what are Joy's and Don's options? Following are a few things that families have done with financial assets while waiting to qualify for Medicaid in a nursing home. Keep in mind that these are not legal suggestions or advice. For that you need to consult with a qualified attorney:
1. Use the Money to Pay for Nursing Home Care
Nursing homes usually charge their private-pay residents more than they receive from Medicaid for the same kind of care. Because of this discrepancy, many nursing homes limit the number of Medicaid patients they admit. Many reserve their Medicaid slots for residents who entered as private patients and "spent down" their assets while in residence. If Joy's father wants to enter as a Medicaid patient on Day #1, many of the "better" nursing homes will refuse to accept him. Entering as a private patient and qualifying for Medicaid after several months will give him a wider selection of the "better" nursing homes.
2. Create a Special Trust
Some people have created special Trusts, funded by the patient's money. Because the money now legally belongs to the Trust, and not to the patient, the patient has no assets and will qualify for Medicaid. Under very specific guidelines the money in the Trust remains available to pay for things that Medicaid does not cover. When the patient dies, the state will then seek to recover from the Trust what Medicaid has spent on the patient's care. Any money remaining after the state has been repaid is then distributed to the patient's survivors according to the terms of the Trust. This kind of trust must be set up with the advice of an attorney who is very experienced with the laws pertaining to Medicaid in your state. It will not be appropriate for everyone.
3. Pay For Private Care
Use the some or all of the remaining $30,000 to pay for care at home. Some seniors choose to pay one or more family members or a professional caregiver to provide care so that their time at home can be extended. If a family member or a private individual is hired to provide care, there should be a very specific contract in place which details the kind of care to be provided, the number of hours per day or per week, and the rate of pay. In order that no unanswerable questions are raised by Medicaid reviewers, attorneys suggest that payment should always be by check, and that the appropriate FICA and other required taxes be withheld. Consult with a CPA about tax and payroll questions, and with a qualified attorney who can assist by drawing up a family care contract that should withstand scrutiny.
4. Spend the Money on the Patient
Once a patient is qualified for Medicaid in a nursing home there will be few assets left to pay for the extras of life (unless there is a special Trust). If the patient needs clothing, a new television, dental work, a hearing aid, a really nice wheelchair, a pre-paid funeral plan, or even a van to transport his wheelchair so he can leave the nursing home, this is the time to use his money for these things. Once it has been "spent down" it will no longer be available. The patient's money must be spent only on the patient. Just in case questions are asked later, all receipts and careful records should be available to show where every penny went. Of course, if all the money is spent, he will not be able to pay a nursing home privately before applying for Medicaid. This could reduce his nursing home options.
These are some of the more common steps many families have taken when an elderly loved one has had some assets and yet needed to begin thinking about qualifying for Medicaid and moving to a nursing home.
You may be tempted to "hide" a senior's cash assets in order to protect them while qualifying for Medicaid. All I can advise is...don't do it. It is a federal offense to lie on a Medicaid application. Hiding assets or giving them away can disqualify the patient for as long as five years from the time of the Medicaid application (not from the time the assets were given away). Paying for 24-hour care at home for as long as five years could cost a whole lot more than whatever amount was originally "protected."
If you have any questions about a loved one's finances and planning for long-term care, your first and best action would be to consult with a well-qualified attorney. An attorney who is knowledgeable about Medicaid law in your state may have several more options to offer you, depending on your special circumstances. Some of your options may take time to implement, and time is not always on our side.
If you do not know an attorney, the National Academy of Elder Law Attorneys membership list is available online.
*Name changed by "Joy's" request