Common Questions about Nursing Home Medicaid Eligibility

You have spent an entire life accumulating your assets. Nursing home admission is imminent or already has happened. You do not know what to do. The nursing home said that because you are single, you only can keep a home, car and $2,000 and have to spend the rest on nursing home care before you can apply for Medicaid to pay the nursing home. The nursing home costs $9,000 or more per month. It is not going to take long to use up your excess assets. You are not sure what to do.

Oftentimes, you may seek the advice of trusted family members or friends. Unfortunately, you may rely upon this advice from trusted, but untrained individuals, and decide to take action with incomplete information and inaccurate advice. We see many clients who come to us after following the advice of their family or the morning coffee klatch, to their detriment. These plans blow up and backfire all the time. We regularly see a single misstep result in tens of thousands and occasionally hundreds of thousands of dollars unnecessarily spent on nursing home care, when it was the nursing home resident’s intent to protect their assets for loved ones.

If you went into the nursing home, would you want your assets to go to loved ones or the nursing home?

Since we started doing Medicaid applications in 1999, we have asked this question to all of our estate planning clients. In nearly twenty years, every single one of my clients, except one, have said that they would rather have their stuff go to loved ones. That one client, who had no children, didn’t care if his siblings, nieces or nephews received anything, and did not even have a favorite charity he wanted to benefit.

I am already in the nursing home, isn’t it too late to plan?

It’s almost never too late to take planning steps, even after you have moved into a nursing home. It does not matter whether you are single or married, have $40,000 in assets or $200,000 or more. There are often other options available to you and your loved ones other than spending those assets down on nursing home care. With some planning, you can still qualify for Medicaid to pay for long-term care costs. These options are often still available even if you have been in a nursing home for years.

One example is the case of a wife who had spent about $270,000, nearly half of the marital estate, over the last four years to pay for her husband’s nursing home care. In such instance, we were able to protect all of the remaining family assets, which allowed the wife to stay in the family home while immediately qualifying her husband for Medicaid to pay the nursing home.

Can’t I just give my assets away, and then qualify for Medicaid to pay for my nursing home care?

It’s your money or your home, or both. You can do anything that you want with it. However, if you go into a nursing home within five years of giving away your assets, it can create a penalty period during which Medicaid will not pay for your nursing home care. Even if you have used all of your other assets on nursing home care and the gifts are all spent, you still would not qualify for Medicaid to pay for the nursing home until after that penalty period has run. What are you to do? Someone has to come up with the money to private pay the nursing home during the penalty period.

Make sure you take care of yourself and your spouse first. Do not put your security at risk by putting it in the hands of your children or others. Your assets that you have worked hard to accumulate during your lifetime, may not be available to you when you most need them.

What can I spend my money on without creating a Medicaid penalty situation?

There are many important safe harbors created by Congress. Certain transfers are allowable without jeopardizing Medicaid eligibility. These include certain transfers to a spouse, disabled children, caretaker children, a trust for certain disabled individuals, or a Medicaid “pay-back” trust. For example, with married couples, we have assisted with transfers of hundreds of thousands of dollars to the non-nursing home spouse, and immediately qualified the nursing home spouse for Medicaid to pay for nursing home care.

Certain assets do not disqualify an applicant from Medicaid qualification. You can keep a home with an equity value of $572,000 or less (in 2018), not more $12,540 (in the first-half of 2018) in certain pre-paid funeral expenses, one vehicle, life insurance with $1,500 or less in cash value, and still qualify for Medicaid to pay for your nursing home care.

Congress has also provided that you can make certain expenditures which do not create a penalty situation such as home improvements, purchase of a pre-paid funeral of $12,540 or less, purchase of a vehicle and payments for services rendered, such as legal fees. We had one case in which a husband used $70,000 in excess assets to purchase a specially equipped van to transport his wheelchair-bound disabled spouse: we were then able to immediately qualify her for Medicaid to pay for her nursing home care.

Doesn’t Michigan have estate recovery to pay back Medicaid after a nursing home resident’s death?

The current Medicaid recovery law in Michigan applies to only certain assets. As it is currently written, only probate assets are subject to Medicaid payment estate recovery after the nursing home patient’s death. In many instances, properly re-titling assets during your lifetime or designating a beneficiary on the asset may avoid probate and also exempt the property from estate recovery.

How much of my assets can I protect for my loved ones if I went into a nursing home?

Under current rules provided by Congress, if you are married and you have done proper planning, you can protect 100% of your family assets for the well spouse. None of the family assets need to be used for the care of the nursing home spouse and the nursing home spouse would be able to immediately qualify for Medicaid to pay for nursing home care.

If you are single in a nursing home or married and both of you are in the nursing home, under current rules and with proper planning, Congress has provided protections for you and your loved ones. You can protect the home (up to $572,000), pre-paid funeral (up to $12,540), cash value of life insurance (up to $1,500), one vehicle, $2,000 for each nursing home resident and about one-half of everything else and qualify for Medicaid to pay for nursing home care.

Can’ I just take this column and make my own do-it-yourself Medicaid qualification asset protection plan?

ABSOLUTELY NOT! This is a complicated field that most people deal with only once in their lifetimes. In today’s column, we have over-simplified it for understandability. Tens of thousands, and sometimes hundreds of thousands of dollars, are at stake. It is penny-wise and pound-foolish not to hire a legal expert who makes their living guiding clients through the Medicaid qualification process. Often times it actually costs the family nothing, since the amount paid to the attorney would have otherwise been spent on nursing home expenses. In addition, there are tools that can be put in place while you are alive and well, that can be used after your incapacity and nursing home admission to qualify you for Medicaid, while protecting family assets for your loved ones.

Ask your legal expert how many Medicaid applications they have filed and for how long. For example, in our office, if we only averaged one Medicaid application per month since we started doing Medicaid applications in 1999, we would have filed over 200 of them. In actuality, in some months, we have filed four or five Medicaid applications.

Ask your legal expert what their batting average is for Medicaid approvals. For example, in our office, since we started filing Medicaid applications in 1999, our batting average is 1000. As a write this on the Thursday before this column’s Sunday publishing date, 100%, every single one, of the Medicaid applications our office has filed since 1999 has been ultimately approved. A few may have been initially denied, but we appealed and/or refiled those and received eventual approval.

What should I do?

Consult with a qualified legal expert with Medicaid qualification experience long before you need to apply for Medicaid. There are tools that can be put in place now while you are alive and well, to make asset protection planning and nursing home Medicaid qualification easier for you and your loved ones, if or when the time comes. In many instances, it is financially beneficial for the family to plan and apply for Medicaid upon nursing home admission or when the nursing home admission is imminent. However, many of these options are often still available even if you or a loved one has been have been in a nursing home for years.

By Matthew M. Wallace, CPA, JD

Published edited February 25, 2018 in The Times Herald newspaper Port Huron, Michigan as: Answering common questions about nursing home Medicaid eligibility

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