Case Study #1
Medicaid Planning for Married People
Ralph and Alice were high school sweethearts who lived in Smyrna, Georgia their entire adult lives. Two weeks ago Ralph and Alice celebrated their 51st Anniversary. Yesterday Ralph, who has Alzheimer’s disease, wandered away from home. Hours later he was found sitting on a street curb, talking incoherently. He was taken to a hospital where he is being treated for dehydration. The family doctor tells Alice she needs to place Ralph in a nursing home. They both grew up during the Depression and have always tried to save something each month. Their assets, totaling $182,000, not including their house, are as follows:
Savings Account $30,000
CD’s $90,000
Money Market Account $50,000
Checking Account $12,000
Residence (no mortgage) $80,000
Ralph gets Social Security and pension checks totaling $1500.00 each month; Alice’s Social Security check is $450.00. If Alice and Ralph have to pay the private pay rate to the nursing home, their entire life savings will be gone in less than two years! What’s more, Alice is afraid she won’t be able to pay her monthly bills, because a neighbor told her that the nursing home will be entitled to all of Ralph’s Social Security and pension checks.
There is good news for Alice. It is possible she will get to keep her income, most of his income and most of their assets . . . and still have the state Medicaid program pay Ralph’s nursing home costs. While the process may take a little while, the end result will be worth it.
To apply for Medicaid, she will have to go through the Georgia Department of Family and Children Services (DFCS). If she does things strictly according to the way DFCS tells her, she will only be able to keep her home and $111,560 ($109,560 for the community spouse + $2,000 for the applicant spouse) of their assets plus she will be entitled to a minimum monthly income to pay her expenses.
But the results can actually be much better than the traditional spend-down, which everyone talks about. Alice might be able to turn the spend-down amount of roughly $75,000 into an income stream for her that will increase her income and meet the Medicaid spend-down right away. In other words, if handled properly, Ralph might be eligible for Medicaid from the first month he goes into the nursing home.
Please note that this will not work in every case. That is why it is important to have an Elder Law attorney guide you through the system and the Medicaid process to find the strategies that will be most beneficial in your situation.
Alice will have to get advice from someone who knows how to navigate the system. But with proper advice she may be able to keep most of what she and Ralph have worked so hard for. This is possible because the law does not intend to impoverish one spouse because the other spouse needs care in a nursing home. This is certainly an example where knowledge of the rules and how to apply them can be used to resolve Ralph and Alice’s dilemma.
Of course, proper Medicaid planning differs according to the relevant facts and circumstances of each situation as well as the state law.
Case Study #2
A Trust for a Disabled Child
Margaret and Sam have always taken care of their daughter, Elizabeth. She is 45, has never worked, and has never left home. She is “developmentally disabled” and receives SSI (Supplemental Security Income). They have always worried about who would take care of her after they die. Some years ago, Sam was diagnosed with dementia. His health has deteriorated to the point that Margaret can no longer take care of him. Now she has placed Sam in a nursing home and is paying $4,000 per month out of savings. Margaret is even more worried that there will not be any money left for the care of Elizabeth.
Margaret is satisfied with the nursing home that Sam is in. The facility has a Medicaid bed available that Sam could have if he were eligible. Medicaid would pay his bill. However, according to the information she got from the social worker, Sam is $48,000 away from Medicaid eligibility. Margaret wishes there was a way to save the $48,000 for Elizabeth after she and Sam are gone. There is.
Margaret can consult an Elder Law attorney to set up a “special needs trust” with the $48,000 to provide for Elizabeth. As soon as Margaret transfers the money to the trust, Sam will be eligible for Medicaid. Elizabeth won’t lose her benefits, and her security is assured.
Of course, all trusts must be reviewed for compliance with Medicaid rules. Also, failure to report assets is fraud, and when discovered, will cause loss of eligibility and repayment of benefits and perhaps even criminal penalties. Still, some people question making gifts before entering a nursing home.
Case Study #3
Can Financial Gifts to Children Protect Your Assets from Medicaid?
After her 73-year-old husband, Harold, suffers a paralyzing stroke, Mildred and her daughter, Joan, need advice. The doctor tells them that Harold needs long-term care in a nursing home. They have some money in savings, but not enough. Mildred doesn’t want to lose her house and all their hard-earned money. She doesn’t know what to do.
Joan has heard about Medicaid benefits for nursing homes, but doesn’t want her mother left destitute in order for Harold to qualify for them. Joan wants to ensure that her father’s medical needs are met, but she also wants to preserve Mildred’s assets. Joan and Mildred wonder if Mildred can just give her money away to Joan as a gift, so that she doesn’t lose it when Harold applies for Medicaid. Joan asks, “Can’t my mother give away $13,000 a year?” That way Joan could keep the money for Mildred to meet Mildred and Harold’s future needs.
Joan has confused general estate and gift tax laws with the issue of asset transfers and Medicaid eligibility. The Federal Gift Tax provision allows people to give away $13,000 per donee per year without having to file a gift tax return. What they do not know is that this refers to a Gift Tax exemption. It has nothing to do with Medicaid. A “gift” to a child in this case is actually a transfer and Medicaid has very specific rules about transfers.
At the time Harold applies for Medicaid, the state will “look back” five years to see if any gifts have been made. The state does not let you just give away your money or your property to qualify for Medicaid. Any gifts or transfers for less than fair market value that occurred during the look-back period will cause a delay in Harold’s eligibility for Medicaid.
So what can Harold and Mildred do? They may be able to institute a gifting program, save a good portion of their estate and still qualify for Medicaid. But they have to set it up just right; the rules are very nit-picky. You should consult a knowledgeable advisor on how this may be done.
