An issue we are seeing more and more frequently in our office is the struggle many families experience paying for the medical needs of older family members. When it comes to paying for long-term care, such as in-home nursing care or an assisted living facility, families have three choices: 1. Pay out-of-pocket, 2. Pay with long-term care insurance, or 3. Have the government pay using the Medicaid program. Contrary to popular belief, Medicare does not pay for long-term care expenses.
The government’s plan for you is the Medicaid program, and it has very specific rules about how much a married couple or an individual may own prior to applying for services. In many cases, people simply are advised that they first must use whatever assets they have saved to pay for care, and only after such assets are spent will Medicaid begin to “pick up the tab.”
The thought of exhausting the nest egg and spending a lifetime of accumulated wealth on nursing home care rather than leaving it to loved ones is simply too much for many people to bear. It makes the decision to accept assisted living as a necessity much more difficult.
The truth is that there are smarter ways to arrange an estate so that many assets can be passed on to loved ones or held in trust while still allowing for an elderly person to maintain Medicaid eligibility. The rules differ drastically depending on whether one or both spouses need assistance, and there are completely different rules for unmarried people.
One rule is that the Medicaid program penalizes applicants who exceed the asset limit at the time of application. Sometimes applicants give away their assets to loved ones prior to requiring Medicaid assistance for nursing home care, but there is five-year “look back.” That means that if the applicant has gifted assets within five years of needing Medicaid assistance, he or she might not qualify.
There are a couple exceptions to this rule. A penalty period will not be assessed when an applicant transfers a home to a child under age 21, a child with a disability, a sibling on the title to the home who lived in the home for one year before the application, or (this is the exception we see most often) an adult child who has lived in the home as a caregiver to the applicant for two years. Once the State of Hawaii determines the applicant will no longer return to the home, it can place a lien on the home. However, the state can’t collect on the lien until that sibling or that adult child caregiver is no longer continuously living on the property.
Exhausted yet? This is just the tip of the iceberg when it comes to Medicaid. There are ways to reduce or eliminate the penalty period through the use of very specific types of trusts designed just for Medicaid planning. Nobody wants to think about putting their loved ones into a nursing home or about possibly ending up in one personally, but it’s a possibility that can’t be ignored, especially given the cost of care in assisted living facilities.
We are here to help families make the best decisions regarding their health and assets. Careful planning can help achieve quality care and a generous estate. Call our office today to schedule your Family Wealth Planning Session.
Image Credit: Obenauf Law Group