It is no secret that being an Alzheimer’s caregiver is overwhelming. Not only is providing 24/7 care for your loved one emotionally, mentally, and physically draining, but wrapping your brain around every law, all the proper estate planning strategies, financial costs, and potential resources can feel like a full-time job. As an attorney who works with people in your situation every day, there are always questions that come up repeatedly, especially when it comes to Medicaid.
In Chapter 4 of my book, You’re not Alone: Living as an Alzheimer’s Caregiver, I talk about the ups and downs of Medicaid and answer a few frequently asked questions that hopefully will ease some of your concerns.
First things first: What is Medicaid?
Medicaid helps cover medical costs for people with limited income and resources, many times offering benefits such as long-term nursing home care and personal care services that are not covered by Medicare. This is likely music to your ears, as these services can cost more than $120,000 a year out-of-pocket. The problem is that the Medicaid program has specific eligibility requirements, and understanding that process feels like it requires a degree in rocket science.
Federal law imposes restrictions on when and if you will qualify for benefits to cover long-term care expenses. For example, if you transfer assets, it may make you and/or your loved one ineligible for Medicaid for a period during what is known as the “look back period.” The larger the sum of the assets given away, the larger the potential ineligibility period.
The good news is that despite these numerous restrictions the law has placed on Medicaid eligibility, it is often possible to develop a plan to put you and your family in the best possible position to qualify and protect your assets at the same time. This is true even if your loved one is already in a nursing home.
Medicaid planning is very fact-specific, though, and not all planning techniques work in every situation.
Medicaid frequently asked questions
Q: Is a married couple always required to spend down one-half of their assets before qualifying for Medicaid?
A: Not always. Although there are income and asset criteria a couple must meet before one of them qualifies for benefits, federal and state laws were written to protect individuals from becoming impoverished if their spouse needs care. Think of them like “safe harbor” laws. And with proper planning for your unique situation, you can save thousands of dollars.
Q: Will I lose my home?
A: Under Medicaid regulations, the home is generally an unavailable asset. That means it is not taken into account when calculating Medicaid eligibility. With that said, Congress passed a law in 1993 that allows states to try to recover the value of Medicaid payments made to recipients. This is called Estate Recovery, and it does not take place until the recipient of the benefits dies. In the case of a married couple, it occurs after the death of both spouses. You will need assistance from someone who is knowledgable about the rules and regulations to see if estate recovery can be avoided in your situation.
Q: Is it true that parents cannot make gifts to their children under current Medicaid laws once they are contemplating Medicaid or have entered a nursing home?
A: No. In fact, a proper gifting program can be a great Medicaid planning technique. At the time an applicant applies for Medicaid, the state will “look back” five years to see if any gifts have been made. Anything that was for less than fair market value during that period may cause a delay in an applicant’s eligibility. But that does not mean that all those gifts will be considered. The gifting rules have become complicated, and we can help you determine if gifting is appropriate for you.
Q: Is it true that $15,000 is the most an individual can give away if he or she is going to apply for Medicaid?
A: No. The $15,000 figure is a federal gift tax figure and is not relevant with respect to Medicaid’s specific asset transfer rules. The maximum monetary figure you need to concern yourself with is the penalty divisor, a state-assessed average cost for nursing home care by which the state assesses Medicaid penalties.
Q: A Medicaid applicant’s home is considered exempt under Medicaid laws. Can an applicant give away his or her house without incurring penalties?
A: No. Any assets that are given away are considered transfers for less than fair market value. If an applicant gives his or her house away, the state assesses a penalty based on the home’s fair market value when it was transferred.
Suffice it to say, Medicaid laws are complicated, and they are constantly changing. So the advice given today may not apply in the near future. The good news is that families can take a number of steps to preserve their assets and qualify for all the benefits the law allows.
An attorney with expert knowledge of these rules can develop a plan that will allow you to protect your assets from long-term care costs through a defined gifting plan. Often, this gifting plan is done with the use of an irrevocable trust.
Call Leigh Hilton PLLC today!!
At Leigh Hilton PLLC, our goal is to protect and preserve your most valuable assets while also educating you and your family every step of the way so that you feel empowered and can confidently embrace your estate planning strategy — even in the face of a devastating disease such as Alzheimer’s.
Leigh Hilton PLLC wants to be your first call every time for any estate planning need. We look forward to serving you.
Thanks for reading!