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Medicaid Asset Protection Planning: An Overview
Medicaid/Asset Protection Planning saves a person’s (or couple’s) assets from being spent on long-term care, to include nursing home care. It is the means by which an individual or couple can pass some significant part of his/her assets to children, family, friends or other beneficiaries. Without Medicaid/Asset Protection Planning an individual will most likely spend everything he/she owns, with the exception of $2,000.00 to $4,000.00, for long-term care.
Medicaid/Asset Protection Planning is the only way to protect and preserve your assets.
Briefly stated, Medicaid is a joint state and federal program of medical assistance for low to moderate-income individuals who are aged 65 or older, blind or disabled. Once an individual qualifies for Medicaid the program will pay the majority of the costs of a nursing home. And, for those in New Jersey Medicaid will also pay the costs of an assisted living facility for individuals who qualify for the Medicaid Only program.
There are two Medicaid programs. The first is the “Medicaid Only” program. To qualify for this program an individual cannot have monthly income (as of January 1, 2005) in excess of $1,737.00 nor countable resources in excess of $2,000.00. Thus, to be eligible for Medicaid Only an individual must have exhausted all but $2,000.00 of his/her assets. The second program is the “Medically Needy” program. This is for people whose monthly income is in excess of $1,737.00. For these individuals they may have countable resources up to $4,000.00. In this program it is necessary to have health insurance that covers what Medicaid does not.
Medicaid, in addition to physical need, evaluates two basic items to determine whether an individual qualifies for entry into the program. The first item is the individual’s income. Income, in this context, means Social Security, pension income or other similar income. It does not include income generated by investments because Medicaid looks at the investment as an asset and assets have to be liquidated. The second item is the individual’s or, in the case of a married couple, the couple’s assets.
As indicated above, an individual is allowed to keep a minimum amount of assets depending upon the program for which the individual qualifies. If there is a community spouse, the assets are divided between the couple according to formulas developed by Medicaid. The division of assets is not necessarily equal. The community spouse is allowed to keep (for the year 2005) a minimum of $19,020.00 and a maximum of $95,100.00 of joint assets. Joint assets actually include everything owned by either or both of the spouses whether owned jointly or individually. The community spouse is also allowed to keep all exempt (non-countable) assets. An example of an exempt asset is the marital home or an automobile.
In order to prepare a Medicaid/Asset Protection Plan our office gathers detailed facts concerning the applicant’s or, if married, the couple’s financial situation. To do this we use specially designed forms which the client(s) completes. Once the forms are completed, we review the information and generally engage in one or two in-depth meetings with the client(s) (and often his/her family) in order to conclude the fact-gathering process. In this phase it is most important that we ascertain the goals of the individual/couple and the family. When that phase of our work is finished we are then able to begin designing the Medicaid/Asset Protection Plan in keeping with what we learned and in keeping with their goals.
In order to construct a Medicaid/Asset Protection Plan we also need to consider the following facts: Is there a community spouse? What countable resources does the applicant and/or the couple possess and, if there is a community spouse, what allowances is she or he entitled to receive? We evaluate the couple’s financial need. We take a look at whether there are children, siblings or other relatives and their health and financial situations. We look at the amount and nature of all assets held by the parties and determine what assets are exempt (non-countable) and non-exempt (countable). We look at the income of the individuals.
Once we have completed our evaluation we then consider building the plan using the following techniques: Transfers or gifting; converting countable assets to non-countable; developing a spend-down plan that maximizes the expenditure of money on behalf of the applicant, bearing in mind that all expenditures do not have to be for health care. These building techniques deal only with those assets (resources) that are deemed to, or in fact, belong to the individual seeking admission to the long-term care facility or nursing home. Our aim is to preserve as much as possible for the individual/couple and the family.
The Medicaid program evaluates the applicant’s financial situation as of the first period of continuous institutionalization or the date of the Medicaid application, whichever occurs first. This review is referred to as the “snapshot” of the applicant’s financial situation. Also, Medicaid utilizes a 36-month look-back period for transfers/gifts to individuals (and a 60-month look-back for transfers/gifts to trusts) from the date of the snapshot. Bear in mind that transfers/gifts within the look-back period incur a penalty, as discussed below, which disqualify the applicant from receiving Medicaid for a certain period of time. Working within the Medicaid regulations we are able to determine any penalty and devise a Plan to maximize transfers/gifts.
Without a Medicaid/Asset Protection Plan an individual who becomes a resident in a long-term care facility (assisted living facility or nursing home) may well be forced to spend all of his/her assets to support himself or herself in the nursing home. This means that, depending on the situation and, regardless of the total amount of assets the individual may have, he or she may have to spend all but from $2,000.00 to $4,000.00 before the state and federal government will pick up the cost.
By utilizing a Medicaid/Asset Protection Plan we can qualify the individual for Medicaid more rapidly and, at the same time, ensure that some portion of the person’s assets are protected for his/her children, grandchildren or heirs. It is often possible to protect approximately 50% of the individual’s assets. When a community spouse is involved, it is frequently possible to save much more than 50%.
It is important to bear in mind that each individual situation is unique and, therefore, each case must be evaluated on its own merit and based upon its own specific facts. Savings will vary from case to case and no concrete representations regarding savings can be provided until a complete and thorough evaluation of the individual’s/couple’s financial situation is performed.
In plans that utilize a transfer/gifting approach, there will more than likely be a certain period of ineligibility for Medicaid benefits. The period of ineligibility is determined by dividing the amount of the gift by an amount set by Medicaid. The current amount is $6,050.00, which is supposed to represent the average cost of a semi-private nursing home room in the State of New Jersey at the present time. The result equals the amount of months an individual will be ineligible (disqualified) from receiving Medicaid. Thus, in any gifting program a certain amount of money is held aside, in the name of the applicant, to pay the nursing home during the period of disqualification. Once the period of disqualification has expired the individual should be eligible, assuming all other qualifying factors are also present, to have Medicaid pay the cost of nursing home care. Please note that careful attention must be paid to the disqualification period because it is a criminal offense to apply for Medicaid during any period of disqualification.
Once Price & Price, LLC, is engaged to develop an individual’s Medicaid/Asset Protection Plan we continue to monitor the individual’s situation until such time as the person qualifies for Medicaid. We will, throughout the entire period of time, fine-tune the plan in keeping with financial changes experienced by the applicant (or couple) and implement revisions to the plan as changed circumstances require. We also, as part of the planning process, estimate for the applicant when he/she will be Medicaid eligible. We ask that the applicant or his/her family contact us approximately two months prior to that date so that we may, once again, carefully analyze the situation in order to determine when the application for Medicaid should be filed.