Your spouse is in a nursing home. You are paying out $6,000 or more per month for his or her care. You have been told that you can only keep ½ of your combined assets and have to spend down the rest on the nursing home before you can apply for Medicaid to pay for your spouse’s nursing home care. Is there something else you can do? Absolutely.
Firstly, we look at the exempt assets you can keep. Subject to certain limits, these include your home, prepaid funeral expenses, burial plot, one automobile and life insurance with a cash value less than $1,500. Next we look at your countable assets. Assets that are not exempt assets are considered countable assets.
Countable assets must be “spent down” to certain levels before you can apply for Medicaid to pay for nursing home care. Your spouse who is in the nursing home can keep $2,000 of the countable assets. You, on the other hand, can generally keep more of those countable assets.
To determine how much of the countable assets that you can keep, you have to calculate the value of your combined assets as of a “snapshot date”. This snapshot date is the date upon which your spouse first received custodial care for a continuous period of 30 days or more. That 30 days of custodial care does not mean just in a nursing home. The 30 days may include stays in a hospital or rehabilitation facility. The 30 days of custodial care also need not have happened this year or be part of the current nursing home stay. The 30 day period could have happened years before.
It is important that you keep detailed financial records. Do not throw out or shred bank, brokerage, life insurance, annuity and other statements from the snapshot date or later. You may need the documentation for the Michigan Department of Human Services (“MDHS”).
Once you determine what your combined countable assets are on the snapshot date, you make a calculation. According to MDHS rules, the stay-at-home spouse can keep ½ of the countable assets subject to a minimum and a maximum. The minimum countable assets that you can keep in 2012 is $22,728. If your combined countable assets are less than that amount, you can keep all of your countable assets.
On the other end of the spectrum, if your combined countable assets are more than $227,280, you could not keep any more than $113,640 in 2012. For example, let’s say you and your spouse had $315,000 in countable assets as of the snapshot date, your spouse is now in the nursing home and you did no planning. Your spouse could keep $2,000. You could only keep $113,640 of those countable assets. You would then have to spend down the remaining $201,360 for your spouse’s nursing home care before you could apply for Medicaid to pay for the nursing home care.
You have spent your entire life preparing and saving for your retirement. When you may be only earning 0.5% per year or less at the bank, $113,640 is not a lot of money. Your home expenses may use up those funds fairly quickly. You then may not be able to afford to stay in your own home.
You do not have to spend down that $201,360 on nursing home care for your spouse. There are other options for spending down those assets while still protecting them for you.
Both Federal and state Medicaid rules provide for special protections for the stay-at-home spouse who is also called the community spouse. The community spouse can have a special trust called a solely for benefit of spouse trust. In our example above, you can put all of the excess countable assets of $201,360 into the solely for benefit of spouse trust and immediately qualify your spouse for Medicaid to pay for their nursing home costs. You then may have the resources to be able to stay in your home.
What are the requirements of this special trust? First of all, it has to be an irrevocable trust, which means that once you set it up you cannot change it except with a court order. Also, you cannot be the trustee of the trust. Most people name one of their adult children as the trustee.
In addition, you as the community spouse and sole beneficiary must receive distributions out of the trust within your MDHS published life expectancy. Typically the trust makes distributions once per year beginning at the end of the first year of the trust.
So when can you do this type of planning? You really cannot pre-plan with a solely for benefit of spouse trust. You would only do this planning if your spouse is already in the nursing home or your spouse’s nursing home admission is imminent. It does not matter if your spouse has already been in the nursing home 1 month, 1 year or longer. It is usually never too late to protect your assets with a solely for benefit of spouse trust.
In addition to the countable assets you can keep, as the community spouse you are generally entitled to keep all of your own income. Even if your income is $3,500 a month or more, so long as your spouse’s monthly income is below their monthly cost of care, you can still apply for Medicaid to pay for their nursing home care. If your monthly income is below $1,838 in 2012, you may also be able to keep a portion of your spouse’s income for your own living expenses. The $1,838 can be increased to $2,841 with certain other allowances.
What we have discussed today are just some simplified examples of what can be done to protect your assets if your spouse is in a nursing home. I do not recommend that you attempt this type of planning on your own. The Medicaid laws are extremely complex and if you try this on your own, it can result in months of Medicaid ineligibility and substantial private pay nursing home bills for you and your family. You should seek expert advice from a knowledgeable legal specialist with experience in elder law and Medicaid applications.
By: Matthew M. Wallace, CPA, JD
Published edited April 29, 2012 in The Times Herald newspaper, Port Huron, Michigan as: Caring for the both of you