We have many folks who contact us about financing long term care. Sometimes there has been a diagnosis of Alzheimer’s or another long term debilitating disease, and sometimes there has been a fall or a sudden illness that puts the family in crisis mode. In either case, it is not unusual for us to have to either undo some preliminary Medicaid planning that another lawyer or the family has done. And this can make it harder, not easier, to access long term care benefits available through Medicaid. So let’s review the basic planning rules of Medicaid.
To begin with, the threshold for Medicaid eligibility is that the applicant must be sick or disabled and in need of services. After that, the applicant must also be indigent. What that means this year in 2011 is that the applicant, if single, must have countable resources of no more than $2,000, and monthly income of no more than $2,044. If the applicant is married, then we can blend the income and resources with the spouse, but the applicant is still limited to the numbers above, while the spouse may retain $109,560 in resources and can retain all of his or her income no matter how much it is. If the applicant spouse has more income than the threshold, sometimes it works for us to add the two incomes together and then divide by two, and if the result is less than the threshold, we can use that number.
Some resources are not countable. If the home has less than $750,000 in equity, it is not countable. The value of one car, and any other recreational vehicles such as boats, RVs or trailers are not counted. Household contents are not counted. Prepaid funeral contracts are not counted as long as they are irrevocable. Annuities that are “actuarially sound” are not counted, but most annuities that are purchased commercially are not actuarially sound according to the Medicaid rules. Ongoing businesses that are supporting the family are not counted.
What are counted are real estate other than the home no matter where located, all cash accounts, securities accounts, retirement accounts and the cash value of life insurance.
If the income is too high, we can prepare an Income Diversion Trust, which effectively brings the income to zero for the applicant.
If the resources are too high for eligibility, the applicant must do a “spend down.” If the applicant is already a resident of a nursing home, we suggest applying for Medicaid at the end of the first month of residency so as to establish what needs to be spent down. The spend down can be accomplished by paying off debt, converting countable resources to non countable resources, and by transfers. We strongly recommend that you obtain legal advice when planning for the spend down.