Q&A: Medicaid Planning

There are many things to consider when applying for Medicaid and the process can be very confusing. It’s also important to start planning for Medicaid before you actually need to apply. Below are some frequently asked questions we hear from individuals regarding Medicaid planning and eligibility.

Question: What is Medicaid?

Answer: Medicaid is a Federally, State, and County-funded program that provides services to people who meet financial and medical eligibility requirements. Among the many services it provides is the payment of skilled nursing facility care and community-based long term care.

 

Question: What are the Medicaid eligibility requirements?

Answer: Eligibility is based on income and resources. When your income and the value of your resources are equal to or less than a certain amount (which is determined by the government and changed annually), the Department of Social Services (DSS) will deem you to be Medicaid-eligible.

 

Question: Can I give my children the family home and still qualify for Medicaid?

Answer: Your home is probably one of your biggest assets.  You may be concerned about losing it if you need nursing home care in the future.  In some cases, you may be able to transfer the property to your children, continue living there and qualify for Medicaid.

If you transfer your home to your child and reserve a “life estate” in the deed, you will still qualify for all of your exemptions (star, senior star, VA etc), but as great as that sounds there is a down side.  The home must be transferred at least 5 years before you are looking to have Medicaid pay for your care. If you transfer the house to your child and the child gets divorced, are sued, file bankruptcy or worse yet die, they own your house and your home would be subject to the problems they have in their life.  Additionally, if you want to sell your house you have to ask for permission to sell your house and your child will have to pay capital gains on the sale as your home is not their primary residence.

A trust is an effective tool for safeguarding assets during your life as well as after you die.  An Irrevocable Trust will protect your home from the cost of future nursing home care as well as avoid probate should you pass away owning the home.  You can change the trustee and the beneficiaries at any time so you are in full control of the trust even though it is irrevocable.

 

Question: My mother recently transferred her assets to me. Must she wait 5 years before applying for Medicaid?

Answer: Not necessarily. The amount of time she will have to wait is based on a formula, which differs from County to County. However, there are two time periods of which you should be aware.

Look-Back Period for Nursing Home Benefits: The DSS will look back 5 years to review/discover any direct transfers (outside of a Medicaid Trust) or gifts that a Medicaid applicant may have made. However, this does not mean that someone has to wait 5 years to become Medicaid-eligible.

Waiting Period: The Waiting Period is the actual length of time during which someone is ineligible to receive nursing home Medicaid. The Waiting Period calculation is based on the value of transferred assets.

 

Question: Is my house exempt from the claims of Social Services?

Answer: A house may be exempt if a Medicaid applicant or the applicant’s spouse still lives in that house. If the applicant is single/widowed and goes into a nursing home, the exemption may be lost. If the applicant sells the house, the proceeds may be exposed to pay for nursing home costs.

 

Question: What happens to my income if I enter a nursing home, then apply for Medicaid?

Answer: Medicaid regulations state that a nursing home Medicaid applicant will be allowed to keep $50 per month in income, regardless of marital status.

 

Question: How much must I “spend down” before I am Medicaid eligible?

Answer: Medicaid regulations state that a Medicaid applicant, whether married or single, must “spend down” to $14,850. If there is a spouse who is still living outside of an institutional setting, that spouse (also known as the Community Spouse) may keep a maximum of $119,220 in additional assets. The $119,220 figure is known as the Community Spouse Resource Allowance (CSRA).

 

Question: If I am not institutionalized (e.g., in a nursing home), but I am receiving Medicaid benefits, will my spouse still be able to retain $119,220 in additional resources?

Answer: No. If a Medicaid recipient lives at home, the resource levels are much lower. The Medicaid rules allow a married couple a combined monthly income of $1,007 ($12,075 annually) and a resource allowance of $18,113.

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