How to save $8,000 qualifying for Medicaid

asset-protectAccording to USA Today, about two-thirds of nursing home residents spend down to qualify for Medicaid. Many of them could spend down less, and save more in assets, if they would do just one thing differently.

To understand my point, you need some background.

A nursing home resident in Pennsylvania qualifies for Medicaid after meeting certain requirements, such as citizenship, residency, level of care needed, and (most importantly) financial need.

To meet the financial need requirement, an applicant in Pennsylvania can own certain exempt assets, but can have no more than $8,000 (sometimes as little as $2,400) in non-exempt assets. If the applicant is married, the spouse at home can own much more in non-exempt assets. To understand how, read our post about the community spouse resource allowance.

Because of these rules, many people end up spending down to the point where Medicaid pays for the applicant’s nursing home stay (in return for the applicant’s income, minus certain deductions). But they don’t know how to do that in the most effective way, so they spend down more than they need to.

I’ll make up a simple example. Suppose George and Harriet own a house, car, and $200,000 in checking and savings accounts. George receives nursing care and meets all the Medicaid requirements except for (at the moment) financial need. He receives $2,000 in income each month, but pays $10,000 a month ($329 per day) for nursing care.

Medicaid rules allow Harriet to keep $100,000 and we’ll assume George is allowed to keep $8,000 in non-exempt assets. (To keep the example simple, I won’t go into how I arrived at these calculations, but you can learn more in our blog archives.) Bottom line for now: the couple must spend down $92,000 to qualify for Medicaid.

Let’s also suppose that, unlike many people, they know of some allowable ways to spend down. We’ll say that they plan to spend down their excess $92,000 as follows: $31,000 for irrevocable burial reserves, $18,000 to replace Harriet’s 1992 Chevy, and $43,000 to a special needs trust for the couple’s disabled daughter.

Now I can get to the point of this blog post. George will qualify for benefits, and stop spending $329 a day, once the couple’s bank records show their checking and savings accounts total no more than $108,000.

But here is where they go wrong and lose money. They write checks to pay for the spend-down items (including $18,000 to a used car dealership to buy Harriet a newer model Ford) but it takes 30 days for the last check (to Honest Joe’s Auto Emporium) to get deposited and clear the account.

Once simple change would have saved them $8,000. They should have gone to the bank and asked for three cashier’s checks to pay for the spend-down items. The bank deducts funds for cashier’s checks from a customer’s account immediately. Bank statements would show George and Harriet’s assets at or below $108,000 on the day of the transaction, instead of 30 days later.

As it is, George must pay another $10,000 for 30 more days of care. He saves the $2,000 he would have had to pay if he qualified for Medicaid, but he has still incurred $8,000 in costs ($10,000 for care minus $2,000 of income) unnecessarily that will have to come from the $108,000 George and Harriet were allowed to keep.

This example shows why working with a certified elder law attorney can be so cost-effective. Even one small change can mean thousands in savings.

To learn more, call us at (412) 531-7123 to discuss the details of your situation.

 

When is it too late to protect assets when qualifying for Medicaid?

asset-protectQuick answer: when all (or almost all) of your assets are spent down and you’re qualified for Medicaid benefits.

Until that time, there are usually opportunities for some savings.

Most people are aware that Medicaid provides benefits for long term stays in skilled nursing, and that the Medicaid rules require applicants to spend down assets to a certain level before qualifying for benefits. Many are also aware that an applicant can keep some assets, like a house and a car, and still get benefits.

Fewer people know that some assets can be transferred away without incurring any type of penalty. These “exempt transfers” (you can read more about them here) include transfers such as establishing a special needs trust for the benefit of a disabled son or daughter, or deeding a house to a caregiver child.

Another way to protect assets is to transfer them to the spouse of the applicant (in Medicaid parlance, called a “community spouse”). Medicaid law contains a number of provisions allowing the community spouse to keep assets, but people often need the advice of an experienced elder law attorney to know how to take advantage of those opportunities.

In addition, an applicant may also have the opportunity to purchase exempt assets. That is, an applicant may be able to use funds that would otherwise be spent down and use them to benefit the applicant or someone else in the family.

In short, you may have many opportunities to protect assets, even when someone has already entered a nursing home. We can help you to devise a plan tailored to getting the best result possible in your situation.

Savings bonds and Medicaid – what should I do when Dad applies for benefits?

sav-bondsFor generations, savings bonds have been purchased for newborns and retirees alike as an investment in the future. While savings bonds aren’t a complex investment vehicle, bonds that aren’t properly handled can cause Medicaid ineligibility.

Here’s a common scenario:

“My dad owns savings bonds; he bought them years ago and added my name to them when his health started declining, so they are payable to me or him. He is now in a nursing home and needs to apply for Medicaid – do these savings bonds count against him? Since I’m a joint-owner, can I cash them so they aren’t an available resource?”

First, it is important to note that savings bonds are a countable resource – the Pennsylvania Medicaid application explicitly names U.S. Savings Bonds as a resource to report. Additionally, savings bonds list the owner’s social security number, which means savings bonds can be tracked through the Treasury department and linked to a Medicaid applicant.

Although the savings bonds are payable to either you or your father, the state may consider the bonds an available resource for your father, because he can redeem them himself. In Pennsylvania, if a Medicaid applicant can sell a jointly-owned resource without the other owner’s consent, the applicant’s share of the resource is presumed available to the applicant. An applicant’s share of a jointly-owned liquid resource is determined by the applicant’s contribution to the resource; this is a very fact-specific determination, but because your father purchased the bonds, the entire value will likely be considered available to him.

If you cash the savings bonds now, the state may consider the action a gift from your father to you, and he will incur a period of Medicaid ineligibility. The determination of whether this will be considered a gift depends on the circumstances, so it is important to proceed with caution.

Given the complex nature of these resources when it comes to Medicaid eligibility, it is important to seek expert advice. By consulting with a certified elder law attorney, you can learn how your resources are characterized and develop a Medicaid Planning arrangement that best serves your needs.

Protecting the Family Home: Part 2. Can the state take my home after I die to recover Medicaid benefits I received?

When you bought your family home years ago, you didn’t just see an asset with equity value – you saw a legacy you could pass to your children. When the time came for you to move into a nursing home, you were relieved to learn that you didn’t have to sell your home to apply for Medicaid. However, did you know that, without proper advance planning, the state can take your home after you die to recover Medicaid benefits you received?

In Part 2 of our series “Protecting the Family Home,” we discuss what happens to a Medicaid recipient’s home after death and the importance of advanced Medicaid planning.

Although your home is generally an excluded resource for Medicaid eligibility and does not have to be sold while you collect benefits, this protection may be lost after you die. Under a process known as “estate recovery,” the Department of Public Welfare can make a claim against your probate estate after your death to recover Medicaid payments made for your benefit.  Your “probate estate” generally includes all of your property that does not pass through a beneficiary designation. If your home is part of your probate estate, your family may have to sell your house to repay the claim.

Complex planning techniques may be used to protect your family home from estate recovery, but the most effective Medicaid planning takes place well in advance of a crisis situation.  By working with a certified elder law attorney before applying for Medicaid, you may be able to preserve your family home for your children.

At Sykes Elder Law, we have experience with a variety of complex Medicaid Planning techniques – give us a call today to discuss how we can help you achieve your estate planning goals.

Protecting the Family Home: Part 1

Do I have to sell my home to be eligible for Medicaid benefits?

This is the first post in a series discussing what happens to your home when you apply for Medicaid benefits.

When you enter a nursing home and need to apply for Medicaid, the issue of whether your home must be sold can be a concern. People often misunderstand Medicaid’s rules regarding homes, which can make emotional conversations about a loved one’s care even more complex.

Generally, you do not need to sell your home to be eligible for Medicaid. In Pennsylvania, a Medicaid applicant’s principal place of residence, up to $543,000 equity value in 2014, is an “excluded resource.” This means the state will not count the home against you, the applicant, when determining your eligibility for benefits. For the home to earn “excluded” status, you must state in writing that you intend to return to the home.

The home may also be an excluded resource, with no limit on equity value, based on who is still living there. If the Medicaid applicant’s spouse is still living in the home, the home is excluded; this is also true if the applicant’s child — under age 21, blind, or permanently disabled – is living in the home.

Any additional residences, other than the primary residence, are protected if another exclusion applies (for example: the property is income producing) or if the property can be preserved as part of the Community Spouse Resource Allowance (CSRA).

With assistance from a certified elder law attorney, a number of strategies may be used to help protect the family home. At Sykes Elder Law, we have years of experience in Medicaid Planning and can help you find the plan that best suits your needs.