- Medicaid Planning: Don't Forget About It
- October 9, 2012 | Author: Allan P. Sweet
- Law Firm: Buckingham, Doolittle & Burroughs, LLP - Cleveland Office
Let’s face it, every day we get a little bit older. For many, it is one day closer to retirement. For others, it is one day closer to skilled nursing or other kinds of elder care. It is not hard to think of somebody in this situation: It might be you, a spouse, a parent or another family member.
Often, the immediate question is: How do I pay for nursing home care? Everyone knows it is expensive. Sustaining monthly care costs of $6,000 to $9,000 will quickly drain a family’s financial resources. There are a variety of elder care benefits, but the primary source of payments is the Medicaid program.
Most know that there are asset level limits to Medicaid eligibility and penalties associated with making gifts. For 2012, the “simple” maximum available resources that a well spouse can retain while securing Medicaid benefits for the other spouse is $111,060. For an unmarried individual, the asset threshold is a mere $1,500.
However, these asset thresholds are not the end of the story when determining what can be protected for you or your family when applying for Medicaid. Think of it in these terms: When you file your federal taxes, you could simply file a 1040 EZ form and forego many deductions and credits. But a better tax result can be reached by hiring an accountant to guide you through the 1040 to minimize your federal tax liability.
The same concept applies to Medicaid planning. With help and guidance in planning for a Medicaid application, there can be substantial financial savings. For example, consider a husband and wife who own a home valued at $200,000, a car worth $20,000, and $400,000 in other assets including retirement funds, bank accounts and investments. Assume the wife has been diagnosed with Alzheimer’s Disease and appears to need care beyond what the husband can provide.
Fortunately, their home is an exempt asset and will not be counted towards their available resources. The same applies to their car. What about the rest of their assets? One technique permits conversion of approximately $300,000, the amount beyond what the well spouse can normally keep, into a qualified annuity income stream for the husband just before applying for Medicaid. Under current Medicaid rules, a Medicaid-qualified annuity is not treated as an available resource and once the annuity contract is purchased, the wife is “asset eligible” for Medicaid. The husband will continue to enjoy the income stream from the annuity and can build back his financial well being over time.
This family was able to preserve all of their net wealth without having to spend down all of their assets for care costs. Depending on a family’s objectives, there are many planning solutions available. Typical goals are preserving assets for the well spouse or preserving inheritances for younger generations.
In either case, those goals can likely be accomplished by implementing techniques available under the Medicaid regulations. Planning options are available, even to those who at first seem too wealthy to qualify.
When you or someone you know falls into the unfortunate circumstance of needing costly elder care, remember that there are options available that prevent impoverishment and financial devastation.