The past three months I’ve discussed the role Medicare and Medicaid play in paying the cost of nursing home care. It is crucial that all of us (at or nearing our retirement years) appreciate the magnitude of long-term care costs, the potential financial impact (to us and our families) and contemplate how we can best address this issue. Of people turning 65 today, 69 percent will need some form of long-term care and Women are more at risk (79 percent). In the April edition I discussed the limited role of Medicare has in paying for long-term care. Then in the May edition I presented an overview of the Medicaid program and the countable resources (or assets) limitation.
Since the Medicaid program limits the amount of countable resources (or assets) an applicant can have in order to qualify for long-term care assistance, it should come as no surprise that there are rules that limit the ability to give assets away in order to qualify. As a follow-up to last month’s article, here are some frequently asked questions about Medicaid and the countable resources limitation.
I’ve added my children’s’ names to my bank account(s), will they still count for Medicaid?
Yes. The entire amount of the joint account is treated as a countable resource for Medicaid except to the extent you can prove the money in the account was actually contributed by the children.
Will putting my home in joint tenancy with my children, or transferring the home to my children keeping a life estate protect it from Medicaid?
Generally, adding names to the title of assets or transferring a future interest and retaining a life estate will be deemed a transfer and may cause a transfer penalty under Medicaid laws.
Can’t I Just Give My Assets Away?
The answer is, maybe, but only if it’s done with an understanding of how to structure the gift. The law has severe penalties for people who simply give away their assets to create Medicaid eligibility. Gifts made within five years of the Medicaid application date will be subject to the five-year look back rules. The state won’t let you just give away your money or your property to qualify for Medicaid. Any gifts or transfers for less than fair market value that are uncovered in the five-year look back period will cause a delay in eligibility for Medicaid.
In addition, the “penalty period” on asset transfers will not begin until the Medicaid applicant is in the nursing home and already spent down (or otherwise eligible) for Medicaid. This will frustrate the gifting plans of most people.
In Nebraska, if the private-pay cost for nursing home care is $7,000, then every $7,000 given away during the five (5) years prior to a Medicaid application creates a one-month period of ineligibility. So even though the Federal Gift Tax laws allow you to give away up to $14,000 per year without gift tax consequences, that same $14,000 gift could result in a period of 2 months of ineligibility for Medicaid in Nebraska.
Will I Lose My Home?
Many people who apply for medical assistance benefits to pay for nursing home care ask this question. Under the Medicaid regulations, the home is an exempt asset (so long as equity is less than $536,000). This means that it is not taken into account when determining Medicaid eligibility. But Congress passed a law that requires all states to try to recover the value of Medicaid payments made to nursing home residents.
Generally, estate recovery does not take place until the recipient of the Medicaid benefits dies (or until both spouses are deceased if it is a married couple). Then, the state will attempt to recover the Medicaid benefits paid from the recipient’s probate and potentially non-probate estate.
Just remember, the rules surrounding Medicaid are complex and continuously changing. However, when it comes to Medicaid assistance, there are planning opportunities available if you know where to find them.