FREQUENTLY ASKED LONG TERM CARE & MEDICAID PLANNING QUESTIONS
- SHOULD I TRANSFER MY HOME TO MY CHILDREN TO PRESERVE IT IF I NEED TO GO INTO A NURSING HOME?
This is usually NOT the best way to protect your home for several reasons. One reason is that you may incur a large Medicaid transfer penalty should you need nursing home care and apply for Medicaid within five (5) years from transferring your home to your children. The transfer penalty will be based upon the full value of the Home. During the transfer penalty period you will have to privately pay the monthly nursing home bill. Additional risks are involved when you transfer home ownership to your children. The children now own your home. As the owners of the home, they can sell it, borrow against it and it becomes part of their estate. If the child dies, the house might now be owned by your daughter-in-law (depending on marital status and terms of your child’s Will) whom you don’t really get a long with and she might ask you to vacate the home or worse, decide to move in with you. The same concept applies if your child were to be involved in a lawsuit or have creditors who can attach judgments to the Home. By gifting the house to your children, they will receive the house with a “carry-over” basis. There are also negative tax implications to gifting the house to your children.
- ARE THERE WAYS TO PROTECT MY PARENTS HOME IF ONE OF THEM SHALL NEED A SKILLED NURSING FACILITY FOR CARE?
Yes sometimes there are better ways. If both spouses are living and one remains in the home, then that spouse will remain in the home. The ownership of the home will not prevent the other spouse from qualifying for Medicaid because a house is an exempt asset. Once the spouse enters the nursing home, the other spouse should consider transferring the Deed to the house to the community spouse. If the person entering the nursing home is an individual, then there are certain exempt individuals to whom the house could be transferred without incurring a transfer penalty. These exemptions though are limited and specific. There is also the option of creating a life estate in your home and gifting the remainder interest to your children
- IF ONE SPOUSE NEEDS TO TRANSITION TO A SKILLED NURSING HOME AND APPLIES FOR MEDICAID, WHAT ASSETS CAN THE OTHER SPOUSE (THE COMMUNITY SPOUSE) KEEP?
As discussed above, the community spouse may keep and live in the house. Due to the rules against spousal impoverishment, the community spouse will also be able to keep a maximum of the couples’ countable assets up to $115,920 (not including the value of the house up to a certain amount of equity) and a minimum of $23,184. The actual amount of the couples’ countable assets that the community spouse is permitted to keep is calculated based upon the “snap-shot” date. The “snap-shot” date is the first day of the month during which the other spouse entered a nursing home. On this date all of the couples’ assets, regardless of whose name they are titled, are added together and then divided in half. The community spouse gets to keep their half up to a maximum of $115,920 and no more or more than their half if their half is below $23,184, in which case the community spouse could keep $23,184 of the couple’s countable assets (resources). The spouse entering the nursing home can own no more than $2000/$4000 in resources in their name (depending upon the Medicaid program for which they are eligible to apply).
When a couple’s countable resources exceed numbers above, this is when the couple would engage in a “spend-down” prior to applying for Medicaid for the spouse who needs the nursing home. “Spend-downs” are complicated and there are many mistakes that can be made. It is best to seek counsel from an Elder Law attorney.
- WILL MEDICARE PAY FOR MY SPOUSE’S LONG TERM CARE EXPENSES?
Medicare will not pay for chronic long term care expenses. Medicare will pay the first 20 days for a medically ordered short term stay at a nursing facility following a three day hospital stay. Then in the next 80 days the patient will be required to pay a daily co-pay for his/her stay in the nursing home. After that if the patient needs to remain in a nursing facility, Medicare will stop paying for the nursing home care
- WHAT IS THE MEDICAID 5 YEAR LOOK BACK RULE?
The Medicaid five (5) year look back period applies when a person applies for Medicaid for long term care reasons. It is the period of time that Medicaid will evaluate all of a couples’ or individual’s assets, bank accounts, investments, purchases and transactions to determine if they have gifted any of your assets in the five years preceding submission of a Medicaid application that would require the imposition of a transfer penalty. Gifting of the family home, selling the family home for below fair market value, Christmas gifts, graduation gifts, house warming gifts to children and even loans to children will add up in those five years and may result in Medicaid imposing a transfer penalty.
A transfer penalty is not imposed until you are actually eligible for Medicaid. That is when you only have $2000 or $4000 left to your name. The penalty is computed by adding all of the gifts up and then dividing them by a multiplier ($7757.00 which Medicaid has determined is the average monthly cost of a nursing home in NJ). The resulting number is the transfer penalty. It means for those months equal to the transfer penalty, the Medicaid applicant will have to self pay the monthly nursing home bill which can be as high as $10,000-$12,000 a month, at a time when the applicant may only have $2000 or $4000 left.
If there has been any gifting or any transactions with the family home, you should consult an Elder Law attorney prior to applying for Medicaid to assist with nursing home care expenses.
- ARE THERE OTHER WAYS TO PLAN FOR LONG TERM CARE EXPENSES OTHER THAN RELYING ON MEDICAID?
YES. If you are wealthy you can self pay for your long term care expenses instead of relying on the hopes of obtaining Medicaid to pay these bills. However, a better way would be to purchase either a long term care insurance policy, a partnership long term care policy or purchase permanent life insurance policy that has coverage for living benefits that can be used during your life to pay for expenses associated with a chronic illness. Additionally, there may be trust planning that could be done.
- SHOULD MY WILL, ESTATE PLANNING DOCUMENTS AND BENEFICIARY DESIGNATIONS BE REVISED IF MY SPOUSE ENTERS A NURSING HOME?
Generally, yes. If your spouse needs to be cared for in a skilled nursing facility and is not likely to return home, then the community spouse (the spouse that does not need nursing home care) should have their Will and estate planning reviewed. Making changes to the estate plan at this time could help preserve an inheritance for your children and grandchildren instead of all of your hard earned savings going to pay the cost of the nursing home.
It may be wise to leave more of your assets to your children or other loved ones upon your death instead of your spouse. The reason is that if the spouse in the nursing home receives your assets pursuant to the terms of your Will, then they will need to spend your assets down to $2000/$4000 (depending on the Medicaid program applying for) before they could qualify for Medicaid or the inheritance will cause them to lose their Medicaid benefit until they spend down to that asset level. Such a “spend down” would normally be spent on the private payment for the skilled nursing facility. Whereas, if you re-draft your will and/or change your beneficiary designation leaving your assets to other family members such as children, then they will receive the inherited assets and they won’t effect the other surviving spouse in the nursing home’s chances of obtaining or retaining Medicaid benefits to assist with the payment of the monthly nursing home bill.
Please note that you should not rely upon these answers as legal advice. Rather, these are general answers to frequently asked questions. Everyone’s situation is different. To obtain legal advice for your situation you should consult with an Elder Law Attorney to discuss your family’s specific circumstances. Laura L. Ergood, Esq. is an Elder Law Attorney who would be glad to meet with you. Please feel free to call our office 856-266-9525.
 (Please note that you should not rely upon these answers as legal advice. Rather, these are general answers to frequently asked questions. Everyone’s situation is different. To obtain legal advice please feel free to contact my office.)