Last week, we discussed family-friendly Medicaid options if you are single and nursing home bound. In that instance and if you have the proper estate planning documents in place, the Medicaid rules allow you to save about half of your assets for your loved ones. This week we will discuss the protection of assets if you are married and one spouse enters the nursing home.
If your spouse is in a nursing home, you are probably paying the nursing home $7,500 or more per month for long-term care. You have been told that you can only keep one-half of your combined assets but no more than $119,220 and have to spend down the rest on your spouse’s nursing home expenses before you can apply for Medicaid to pay for those long-term care costs. Is there something else you can do so you protect more of your assets for your needs? Absolutely.
Firstly, we will look at assets that do not affect your spouse’s Medicaid qualification. These are called exempt assets. Subject to certain limits, these exempt assets 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. These 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 up to $2,000 of the countable assets. You, on the other hand, can generally keep more of those assets.
To determine how much of the countable assets that you can keep in your own name, you have to calculate the value of your and your spouse’s 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, any time after 1989.
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 Medicaid qualification. Not too long ago, we assisted clients to reconstruct a list of their assets in 1992, because that was the snapshot date.
Once you determine the amount of your combined countable assets on the snapshot date, you make a calculation. According to Michigan Department of Human Services (“MDHS”) rules, you as the stay-at-home spouse can keep one-half of those countable assets as of the snapshot date subject to a minimum and a maximum.
The minimum countable assets that you can keep in 2015 is $23,844. If your combined countable assets are less than that amount, you can keep all of the countable assets. On the other end of the spectrum, if your combined countable assets are more than $238,440, the most you can keep in your own name is $119,220 in 2015.
For example, let’s say you and your spouse had $342,000 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 $119,220 of those countable assets in your own name. Since you have done no planning, you would then have to spend down the remaining $222,780 for your spouse’s nursing home care before you could apply for Medicaid to pay for those nursing home expenses.
You have spent your entire life preparing and saving for your retirement. When you may be only earning 1%-2% per year or less at the bank, $119,220 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 $222,780 on nursing home care for your spouse. There are family friendly options for spending down those assets while still protecting them for you.
Both Federal and state Medicaid rules provide for special protections for you as the stay-at-home spouse. You can take the excess countable assets of $222,780 to buy yourself a pension. You then would be able to immediately qualify your spouse for Medicaid to pay for his or her nursing home care and probably also have the resources to be able to stay in your home.
There are special Medicaid rules for this pension. The pension has to be in a form of a Medicaid compliant annuity or note, has to start immediately and is required to make regular monthly distributions to you as the stay-at-home spouse over a period of time not to exceed your life expectancy according to published MDHS tables. For example if you are 75, the monthly payments could be made over a period of ten years.
Once you put the assets in the pension, they are no longer considered assets. In accordance with the Medicaid rules, the pension is your income, which you get to keep. Your income is not taken into consideration when qualifying your spouse for Medicaid to pay for nursing home care. So long as your spouse’s monthly income is below the monthly cost of care, you can still apply for Medicaid to pay for the nursing home expenses.
And if your monthly income, including your new pension, is below $1,966 in 2015, you as the stay-at-home spouse may also be able to keep a portion of your spouse’s income for your own living expenses. The $1,996 may be able to be increased up to $2,981 with certain other allowances.
So when can you do this type of planning? You really cannot pre-plan with these special pensions. 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. If you are married and your spouse is in a nursing home, it is usually never too late to protect your assets with a special spousal pension.
And if both you and your spouse are in a nursing home, you can still save some assets. When both of you are in a nursing home about one half of your assets can be protected using the family-friendly half-a-loaf plan that we discussed last week.
What we have talked about 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 may 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 19, 2015 in The Times Herald newspaper, Port Huron, Michigan as: Don’t fret if spouse in a nursing home