By Jamie Dietz
Medicaid is a medical welfare program administered by the state through combined federal and state funding. Specific income and asset thresholds must be met in order to qualify for Medicaid. This program should not be confused with Medicare, which is essentially health insurance, regardless of income or wealth, for those who have reached age 65.
In order to be eligible for Medicaid benefits, an individual must meet specific minimum income requirements and may not have more than $1,500 in “countable resources” (assets). Certain property may be excluded as a countable resource, such as a home or car. Special spousal rules also allow the community spouse to keep assets and income, while nursing home costs are covered for the spouse living in the nursing home.
With the concern of life-long savings being dissipated by the rising costs of nursing home care, Medicaid planning has become an extremely prevalent subject as individuals age beyond their retirement years.
Various factors must be considered when contemplating Medicaid planning. But for limited exceptions, Medicaid eligibility will be defeated if a person has transferred assets within sixty (60) months from the time his or her Medicaid application is submitted AND he or she enters into the nursing facility. This five year time frame is often referred to as the “look back” period, and all dispositions of property are scrutinized regardless of the gift tax annual exclusion ($13,000.00). The ineligibility period is determined by dividing the value of the transfers during the look-back period by the average Ohio private pay rate for nursing facilities ($6,027.00). So, by way of example, the transfer of $60,000 within the last five years will result in the individual’s inability to receive Medicaid benefits for 10 months ($60,000/$6,027 = 10 months).
Even if someone is willing to transfer property and start the look-back clock, other important considerations must be identified. For example, the gifting of a home to a child can create negative tax and insurance implications, eliminate the homestead exemption, and possibly expose the equity of the home to the child’s creditors. Transfers of other assets, such as bank accounts, CD’s or securities, may also be subjected to the child’s creditors, even though the funds are intended to be maintained for specials needs of the institutionalized parent. Property deposited into a trust will almost always be counted as a resource for Medicaid purposes as well.
For married couples, special rules allow a spouse to keep a minimum amount of assets, $21,912, but not more than $109,560, while his or her spouse receives Medicaid benefits. The spouse may also keep the home and an automobile, regardless of their value. Notwithstanding these exceptions, all of the assets of the couple will be aggregated and counted, regardless of ownership or institutionalization, when considering Medicaid eligibility.
If an individual has limited assets, but does not yet qualify for Medicaid, he or she can “spend down” his or her resources by purchasing an irrevocable pre-need funeral and burial contract, and then privately paying for his or her care until the eligibility thresholds are met.
Medicaid planning should not be considered without analyzing all of the benefits and pitfalls, and should certainly include consultation with your financial and legal advisors.
For more information, please contact Attorney James Dietz at firstname.lastname@example.org.