Medicaid Planning


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Planning for Medicaid is not really something any of us have in the forefront of our minds when planning for our future and eventual retirement, and while many of us will never need it, it’s always good to know your options when it comes to Medicaid planning.

The following are the most frequently asked questions I receive regarding Medicaid and Medicaid planning.

What is a “Miller Trust” or “Qualified Income Trust”?

Medicaid has income eligibility requirements (in addition to resource limits and other requirements). The income cap for year 2020 is $2382 per month. If an individual, who is applying for Medicaid, has income over the cap, then a “Miller Trust” can be created to hold the income to pass such eligibility requirement. “Miller Trusts” are also known as “qualified income trusts” or as “QITs.”

Will I, as the spouse who lives at home be allowed to keep any of my spouse’s income if my spouse lives in a nursing home and is on Medicaid?

It depends on the income of each of you and what strategy is employed. If the income of the community spouse is greater than what is called the minimum monthly maintenance needs allowance (“MMMNA” is $3259.50 for 2020), then there are limited situations when we can divert income from the institutionalized spouse so that this income is above the MMMNA. Also, There can be a diversion of income to the community spouse so that the community spouse has income up to the MMMNA. However, it is best to not “spend down,” so this situation must be carefully reviewed with your experienced elder law attorney.

If we get my loved one on Medicaid, are we going to lose the family home?
Under the Texas Medicaid Estate Recovery Program, the state has a right to make a claim against the probate estate of the Medicaid recipient to the extent that benefits have been advanced if the recipient applied for Medicaid on or after March 1, 2005. There are several exceptions to the rule. Presently, there are also several planning methods to avoid the claim of the state against the home.
Can I transfer or give away my assets to obtain Medicaid?
A transfer of assets can result in a penalty causing ineligibility for Medicaid. Transfers for less than fair market value on or after February 8, 2006 are subject to a 5 year look-back period. The transfer penalty is determined by dividing the average daily cost of a nursing home in Texas into the amount of the uncompensated transfer from the month of the transfer. The transfer penalty period resulting in ineligibility for Medicaid starts from the date of application or from when one is otherwise eligible for Medicaid.
Can’t I always transfer $15,000 per year to my children without a penalty?
The annual exclusion for gift tax purposes is still subject to the Medicaid rules. So, the transfer could result in a transfer penalty, depending on when the uncompensated transfer was made, and if there was an existing transfer penalty and if the transfer was to a disabled child.
What are countable resources and non-countable resources?
Most assets that can be converted to cash are considered countable (such as the cash surrender value of life insurance policies, stocks, IRAs, mutual funds, bank accounts, etc.) and can be used for your support. They are considered in determining Medicaid eligibility. Excluded resources, such as the homestead, a burial space, term life insurance, etc. are considered non-countable for Medicaid eligibility purposes.
Do the accounts that I own jointly with someone else count toward my Medicaid eligibility?
It is assumed that the account belongs to the applicant unless it could be proven otherwise.
Do the assets of the community spouse count even if there is a prenuptial or postnuptial agreement?
Is buying an annuity the best way to protect all of my resources?

It depends on the factual situation. With the rule change that became effective as of September 1, 2004, “Medicaid annuities” became more popular when there is an institutionalized spouse and a community spouse, and their total non-countable resource income exceeds or is close to the MMMNA ($3259.50 for 2020). Before you make a decision, an elder law attorney should be consulted to consider all of the options. Be wary of anyone who advises this is the only option.

If a Medicaid recipient inherits, can he or she lose his or her Medicaid benefits?
Yes, so there should be planning to prevent this a possibility, such as setting up Supplemental Needs Trusts.
Can the community spouse keep several hundred thousand dollars and still get Medicaid eligibility for his or her spouse without having to change the nature of resources of the community spouse?
Depending on the income of the community spouse and other factors, often the answer is “Yes.”

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