Categories: Elder law, estate planning, Medicaid planning, nursing home, asset protection, long term care, Winston Salem, North Carolina, NC.
Medicare was set up by our government as a health insurance program, which helps to pay seniors’ health care costs. Because it is insurance, when a senior uses Medicare to pay for medical expenses, the senior does not have to pay Medicare back.
But if the senior will need skilled nursing care, such as nursing home care, the Medicare program covers only 100 days, with part of that time requiring copays. Frequently, the Medicare insurance carrier will terminate the senior’s 100 days of skilled nursing care early, requiring the senior to private pay for further skilled nursing care.
In North Carolina, monthly nursing home expenses can range from $5,000 to $10,000 per month. Because most older families cannot afford to pay skilled nursing care expenses by themselves for very long, they must rely on Medicaid to pay those expenses. Medicaid now pays about 63% of our long term care bill in America.
Because the U.S. has not developed a comprehensive long-term care program for seniors, seniors frequently must use Medicaid, which was originally designed as a poverty program (not a healthcare program), to supplement their assisted living payments, or to pay for nursing home care. Because it is a poverty program, Medicaid has strict asset limits for participants.
An individual needing to use Medicaid to pay for long term care may not have more than $2,000 in assets when he or she applies to Medicaid. If the applicant is married, his or her spouse is allowed to keep more assets, but that amount is still limited.
Because $2,000 is such a small amount, many people believe that a senior, or a senior and her spouse, must “spend down,” or “give away” many of their assets so that they lose use of those assets, in order to qualify for Medicaid.
Medicaid Planning is instead designed to help a senior, and a senior’s spouse, to keep as many assets as possible for themselves and their families, while qualifying for Medicaid. Proper Medicaid planning may save the family from unnecessarily losing many thousands of dollars.
There are two types of Medicaid planning. Advance Planning, or Proactive Planning may help protect assets well in advance of needing Medicaid. Crisis Planning takes place when a family knows that Medicaid will definitely be needed.
In both advance and crisis planning, the elder lawyer may “shelter” countable Medicaid assets by exchanging them for non-countable assets.
Medicaid Planning may involve the following techniques:
- Moving Assets between husband and wife. Medicaid allows the home or community spouse to have many more assets than the institutionalized spouse–thus assets may be moved between spouses.
- Irrevocable trusts. Assets may be protected from Medicaid more than 5 years in advance by using an irrevocable trust, such as a Medicaid Asset Protection Trust (MAPT).
- Medicaid annuity. Assets such as retirement accounts may be moved into a special Medicaid Compliant Annuity (MCA), which is exempt from Medicaid.
- Real property such as the home and family farm may be protected through estate creditor protection techniques such as JTWROS ownership.
- Promissory note. Assets may be sheltered by using a Medicaid-compliant promissory note.
Other ways to preserve assets include:
- Making home improvements or a new car purchase.
- Buying an exempt single premium life insurance policy designed for ill seniors.
- Purchasing real property held in a joint tenancy with right of survivorship.
- Purchasing a prepaid irrevocable burial policy.
- Shifting assets to a family business.
- Sheltering assets in an appropriate Special Needs Trust.
- Transferring assets to an appropriate Sole Benefit Trust for another disabled person.
If a senior may need Medicaid to help pay the long term care bill in the future, advance planning can help to protect assets early against high medical costs.
An elder law attorney can potentially help seniors keep more their assets when applying for Medicaid, and to better protect those assets for their heirs and loved ones.