Too often, people do not think about how they will pay for nursing home care (or skilled nursing care) until they (or a loved one) need it. Most of us assume we will go on living healthy lives and may not need long-term care or assistance. However, it is important we plan for the future as nursing home expenses can be quite costly (averaging $8,000-$12,000 per month).
Paying for Nursing Home Care with Medicaid: Top Five Facts You Need to Know
You may assets that you want to pass on to loved ones or charitable organizations, but without proper planning or knowledge, you risk losing your nest egg as you try to keep up the continually rising costs of care. Below, we will discuss five facts you should know about Medicaid and nursing home care costs as you start preparing for the future.
In this article, the assumption is that the applicant meets Medicaid’s “medically needed” requirement for nursing home care and I am going to focus on the financial considerations and requirements to qualify for Medicaid payments for your nursing home care. It is also important to note that we are discussing Medicaid, not Medicare. Only Medicaid covers nursing home expenses (if you qualify). Medicaid is a joint program between Federal and State governments; states have specific guidelines and rules. Also, the figures used below are based on 2022 numbers and change annually.
There Are Medicaid Income Limitations.
To qualify for Medicaid, you cannot exceed the income limit. In Florida, if you make more than $2,523 per month, you will not qualify. For example, if you have a Social Security income of $2,100 a month and a pension of $923, you are over the income limit by $500. If you are looking at a monthly bill for the care of $10,000 and don’t have any retirement savings, what happens?
With the help of our estate planning attorneys, you can still qualify if you create an irrevocable trust (Qualified Income Trust). Using the previous example, the excess $500 is put into the trust and paid over to the nursing home. Medicaid would then cover the difference. Please be advised: if you are married, your spouse can make as much income as they want, and it does not count against you. Also, if they do not make a minimum monthly income, they may be entitled to some of your Social Security as well.
There Are Medicaid Asset Limitations.
Just as there are income caps, your assets cannot exceed a certain amount. This is usually the real shocker for people when applying for Medicaid. The limits differ depending on whether you are single or married.
If you are single, here are the most common assets you get to exclude from your asset calculation:
- Your home, furnishings, and personal belongings,
- A car
- A burial plot
- Certain retirement funds (if periodic payments are being made)
- Income-producing property
- Medicaid qualified annuities
- An additional $2,000
Therefore, if, for example, you have $20,000 in a checking account, $30,000 in a CD, and $50,000 in stocks and bonds for total non-excluded assets of $100,000, after deducting the $2,000 you get to exclude, you would have to pay out $98,000 to the nursing home before you would qualify for Medicaid benefits.
If you are married, you also must include ALL of your and your spouse’s combined assets and the total assets your spouse can then exclude is $137,400. Therefore, if your spouse has an additional $100,000 in cash, savings, and stocks and bonds in the above example, you would have combined non-excluded assets of $198,000. Deducting the $137,400 exclusion leaves $60,600 to be paid down before the applying spouse qualifies for Medicaid benefits. We will discuss how you can protect certain assets later.
Medicaid Has a Five-Year Lookback Period.
One question that estate planning attorneys are often asked is: “What if I transfer my assets to my kids so I can qualify for Medicaid?” While that is a strategy you can employ, we do not advise doing this as there can be problems later, such as your child failing to return the asset or creditors seizing your child’s assets (including assets you transferred them).
Another problem with transferring assets is Medicaid’s five-year lookback period, which involves an investigation into asset transfer made for less than fair market value and your financial situation five years preceding your application. For example, if you gave your daughter $100,000 for a down payment on her house two years ago, Medicaid would penalize you at the rate of $9,750a month, for 10.25 months, before you would qualify for Medicaid benefits. Because of the lookback period, it is even more important to start planning as soon as possible.
We Can Assist You with Crisis Planning.
Crisis planning is what we refer to when someone is about to enter a nursing home or is already in a nursing home and needs to apply for benefits. If that person has too much income or too many non-excluded assets to qualify, that is where we can assist you in qualifying for benefits by:
- reducing your income through a Qualified Income Trust, or
- applying other strategies, such as gifting, promissory notes, and qualified annuities to preserve a portion of your assets and help you qualify for benefits as soon as possible.
It’s Never too Early to Start Proactive Planning.
We are often asked, “When should we start planning?” The short answer is: sooner rather than later, especially if you are over 50 years old or beginning to suffer from medical issues like dementia. If you are deemed competent and do not have a proper power of attorney in place, your family have to apply for guardianship before applying for Medicaid.
Being proactive is the best approach to Medicaid planning. The earlier you start planning, the more thoughtful and intentional you can be. You will also have the opportunity to consult with our attorneys, your accountant, investment advisor, trusted family members or friends, and other advisors. Using this proactive approach, you can take advantage of our process which includes a “Family Asset Protection Blueprint™” where we:
- Analyze your current financial situation
- Advise you of your best options and make certain recommendations
- Help you preserve your assets (via an irrevocable trust, purchasing an income-producing property
- Set up Medicaid qualifying annuities
- Ensure your retirement accounts qualify
- And more
For help with your estate and Medicaid planning needs, retain The Dellutri Law Group, PA. Our estate planning attorney, Mark Martella, Esq. is equipped to help clients with crisis or proactive planning. To schedule a complimentary consultation, please call (800) 391-4337 or email mmartella@dellutrilawgroup.com.
