If a family member appears to have a care need on the horizon, the benefits of Medicaid planning and asset protection should be immediately investigated. Many steps can be taken to preserve funds and hasten the date of Medicaid eligibility to pay for nursing home costs if long term care planning is engaged in early enough before the actual care need arises.
Medicaid does provide financial assistance for long term care and nursing home care to pay for nursing home expenses, but only after the care recipient qualifies financially. Planning early for long-term care is imperative.
Many aging adults have income and assets above the Medicaid limits, but they don’t have enough money to pay for long term care out of pocket.
Families in this situation have to “spend down” their loved one’s assets and income on qualified medical expenses until they meet the Medicaid limits. Only then can they qualify for long term care benefits through Medicaid.
There are ways to avoid the Medicaid spend-down. But timing is everything. The most important thing to remember when taking action to protect income assets from Medicaid is that Medicaid has a five-year look-back period.
This means that Medicaid will look through all financial activity during the five year period prior to the day a person submits a Medicaid application. Any asset transfers—including those made by the applicant’s spouse—that violate look-back rules will result in a penalty period. During the penalty period, the applicant will not be eligible for Medicaid.
Medicaid determines the penalty period based on the value of the transferred assets and the cost of long term care in your area.
If the person you care for transfers assets worth $50,000 during the look-back period, and nursing home care in their area averages $100,000/year, their penalty period would be six months—the amount of time they could pay for nursing home care on their own with that $50,000.
If your loved one can recover transferred assets, Medicaid may reconsider the penalty period. For instance, if that $50,000 was given to you during the look-back period to help you make a downpayment on a house you purchased, and you give the $50,000 back to your loved one, the penalty period could be waived or reduced. And that $50,000 would then have to be spent down on healthcare.
Missouri state has a five-year look-back for Medicaid benefits covering care delivered in a nursing home.
For married couples, a special specific Medicaid planning asset protection tool, a Division of Assets, is provided by state law, as directed by federal law, to avoid spousal impoverishment of the community spouse and to pay long term care costs. A Division of Assets is an application to the Medicaid office to set aside a portion of couple’s assets that do not have to be spent down before the institutionalized spouse receives Medicaid eligibility. The Division of Assets is a vital tool for asset protection: every married couple should file a Division when one spouse enters long-term care.
Without filing a Division, all of BOTH spouse’s non-exempt assets are subject to spend down before the nursing home spouse receives Medicaid eligibility. When a Division of Assets is filed, a portion of the couple’s assets are allocated to the community spouse.
The Division of Assets is filed at the time that the institutionalized spouse enters nursing home care. When this Division is filed, the state will create what is referred to as a Community Spouse Resource Allowance (CSRA), exempting this CSRA from spend down, and giving the Community Spouse a portion of the couple’s assets to continue to live in the community at his or her current standard of living.
Under current Medicaid spousal impoverishment rules the following financial levels apply: The minimum CSRA in 2024 is $30,828, and the maximum is $154,140. The community spouse is always allowed to keep the minimum CSRA. The CSRA can increase, even up to the maximum if they have greater assets than the minimum. Typically, the couple’s assets are split in one-half, with the CSRA limited to the maximum amount of a $154,140 asset limit.
Example: Asset Division
Ralph and Alice were high school sweethearts who lived in St. Louis, Missouri, their entire adult lives. Two weeks ago, Ralph and Alice celebrated their 51st anniversary. Yesterday, Alice, who has Alzheimer’s, wandered away from home. Hours later she was found sitting on a street curb, talking incoherently. She was taken to a hospital and treated for dehydration. Ralph comes to see you after their family doctor tells him he needs to place Alice in nursing home care, and that Medicare pay will run out when she leaves the hospital. He tells you they both grew up during the early 1950s and have always tried to save something every month. Their countable assets/countable resources, totaling $130,000, not including their primary residence real estate, are as follows:
Savings Account; $15,000
CDs; $45,000
Money Market Account;$30,000
Annuity;$20,000
IRA/retirement accounts,
LIfe Insurance Policies,
Other;$10,000
Checking Bank Accounts;$10,000
Residence (no mortgage);$150,000
Ralph receives an amount of income totaling $1,800 each month; Alice’s check is $1,500 His eyes fill with tears as he says, “At $10,000 cost of care every month, our monthly income is insufficient, and life savings will be gone in about one year!” What’s more, he’s concerned he won’t be able to pay her monthly nursing home bill because a neighbor told him that nursing home will be entitled to all of their Social Security checks.
There is good news for Ralph and Alice. It’s possible he will get to keep his income and most of their assets… and still have the state Medicaid program pay Alice’s nursing home costs. While the process may take a little while, the end result will be worth it.
To apply for Medicaid, Ralph will go through the Missouri Family Support Division (FSD), with Alice as the Medicaid applicant, and he will be able to keep about 1/2 of their assets (or about $65,000 ($130,000 divided by 2)), plus he will keep the home; the home will not be subject to lien or estate recovery.
After the CSRA has been allocated to the community spouse, the institutionalized spouse may still have some of the family’s to spend down before Medicaid benefits begin. When eligibility does begin, the Division of Assets provides a further major benefit: a full allocation of the family’s monthly income to the healthy spouse to live on on a monthly basis, referred to as the Minimum Monthly Maintenance Needs Allowance (or the MMMNA). The maximum MMMNA income limit is currently $3,853. If the spouse’s income is insufficient to meet this assigned income limit, the healthy spouse may receive a portion of the income of the spouse living in the nursing facility to allow her to reach her assigned income amount. Additionally, Medicaid law allows a credit and exemption for any health care insurance or Medicare monthly premiums due, as well as small personal needs allowance, as reductions from income due to the nursing home.
For crisis planning, planning at the time of entry into care, Divisions of Assets can also be used as an asset protection strategy while the spouse in need receives Medicaid provided home care, called Home Community Based Care Services (Or HCBS). These community-based services and Medicaid benefits can keep a spouse in need in the community while also preserving assets and limiting private pay for such services.
Estate planning can be used to achieve a workable asset protection plan. In many situations, an irrevocable trust is the answer. Contact QMC today to get started.
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