As described in more detail in the “Long Term Care Planning- Don’t Despair, Prepare!” post, Medicaid provides free long-term care as long as certain income and resource requirements are met.  Although most long-term care Medicaid recipients are in nursing homes, there are also Medicaid Waiver Programs available that provide alternatives to Nursing Home Care.  Here are a few programs:

Passport

• Provides personal care, respite care, homemaker services, home delivered meals, adult day care, chore services, emergency response, medical equipment and supplies, medical transportation, home health case management, etc.
• Must live in a non-institutionalized setting and have a physician who will authorize a home care plan.

Assisted Living Waiver Program

• Pays cost of Assisted Living Facility or Residential Care Facility services excluding the cost of room and board.
• Must be a nursing home resident or live in Residential Care Facility for at least 6 months or be enrolled in Passport.

To take advantage of Medicaid Waiver Programs, you must meet the same financial eligibility requirements as for traditional long-term care Medicaid.  Contact attorney Elizabeth Perla at (440) 333-2503 to discuss your planning options.

There are many Medicaid planning strategies designed to transfer assets without incurring a penalty.  (See “Personal Caregiver Agreement” post).  This blog will explore many of these strategies.  One such strategy is the Irrevocable Trust.  With an Irrevocable Trust, which is a trust that cannot be changed or terminated, drafted so that you receives only income and not principal, you can transfer your assets, wait 60 months and apply for long-term Medicaid without penalty. 

Why Can’t I Set Up a Revocable Trust Instead?

As a revocable trust can be changed or terminated by you at any time, the assets remain in your control.  As long as you retain control of an asset, the state considers it a countable resource for Medicaid eligibility purposes.  Hence, while a Revocable Trust can be a beneficial Medicaid planning tool in some cases (See “Before Applying for Medicaid a Married Couple Should Consider a Revocable Trust” post and “When a Spouse in on Medicaid, Look to a Revocable Trust” post) placing an asset in a Revocable Trust will not remove it from your countable resources and hence, will not affect Medicaid eligibility.

How is an Irrevocable Trust Superior to Simple Gifting?

The Irrevocable Trust has many advantages over simple gifting. 

• The trust can protect your assets from your recipients’ creditors and your recipients’ spouses should they get divorced.
• You can appoint yourself Trustee so that you can continue to manage the assets and make distributions to your loved ones at your discretion.
• You can continue to control the disposition of the assets at your death by retaining a testamentary limited power of appointment.

An Irrevocable Trust can be a great Medicaid planning tool if you have started planning early and have sufficient funds.  Contact attorney Elizabeth Perla today at (440) 333-2503 to discuss the Irrevocable Trust and other Medicaid planning tools.

In my previous post “Long Term Care Planning- Don’t Despair, Prepare!” I discuss the cost of long-term care and the importance of planning for Medicaid.  This blog will try to dispel many of the misconceptions relating to Medicaid planning.  One such misconception is that a person can simply give away assets in order to qualify for long-term Medicaid.

When a person applies for Medicaid, he will be asked whether he or a spouse made any gifts within the last 60 months.  (Different rules apply to gifts made prior to 2/8/09).  This question is asked because a person will be penalized for any gift made within 60 months of his application for Medicaid if the gift was made for the purpose of long-term Medicaid eligibility.  For example:

Mom gives her daughter her home worth $200,000 and the contents of her bank accounts totaling $40,000 within 60 months of her application for Medicaid.  Mom’s penalty period will be 39.8 months. ($240,000 divided by $6,023 (private pay rate) = 39.8 months). 

This means that once Mom is in a nursing home and financially eligible for long-term Medicaid, meaning she has less than $1,500, the government will not pay for any of her long-term care for 39.8 months!  How will Mom pay for her care for the next 39.8 months? 

Mom made a terrible mistake that could have been avoided with proper Medicaid planning.  Moreover, an even more common mistake is to do nothing at all!  Failing to plan could result in the complete depletion of an individual’s lifesavings on long-term care.  Why spend all your hard earned money on care when you don’t need to?  Contact attorney Elizabeth Perla today at (440) 333-2503 to discuss your Medicaid planning options.

In the prior post, “Know What a Living Trust Can Do for You (And What it Can’t Do For You)”, I discussed how a home, which is generally not a countable resource for Medicaid purposes, is countable when it is held in a Revocable Trust.  I explained how such an arrangement can cause a single person to be ineligible for Medicaid and how it can work to a married couple’s advantage.  I want to reiterate the advantage of a revocable trust to a married couple who is applying for Medicaid.

As stated previously, whereas a single person is only permitted to have $1,500 of countable resources, the spouse of the nursing home Medicaid applicant is permitted to keep half of the couple’s countable resources, up to $109,560.  The advantage of a revocable trust can be seen in the following example:

John and Jane Smith are married and applying for long-term Medicaid for John.  As part of the application process, the state looks at all of John and Jane’s assets.  The couple has $50,000 in an IRA, $40,000 in bank accounts, $20,000 in mutual funds and a home valued at $250,000.  The home is held in a Revocable Trust (aka a Living Trust). 

Since the home is in a revocable trust it is not exempt and is a countable resource.  Thus, the Smiths have $360,000 of total countable assets.  However, a Community Spouse is only allowed to keep half of the total countable resources, up to $109,560.  Thus, in this case, the Smiths will be able to keep $111,060 which is the maximum amount that Jane can keep as the Community Spouse ($109,560) plus the maximum amount that John can have as a Medicaid recipient ($1,500).  The Smiths will have to spend down the remaining $248,940 to qualify. 

However, instead of spending any of their money, the Smiths can simply move the home out of their Revocable Trust and deed it in John and/or Jane’s name.  The home will then be considered an exempt resource and not countable for Medicaid eligibility purposes and the Smiths will be down to $110,000 in countable resources, under the maximum resource amount of $111,060.  John Smith will have qualified for long-term Medicaid without him or his wife spending down a dime.

Alternately, if the Smiths had their home outside of a revocable trust, it would have cost them $53,500.  The $250,000 home would have been exempt and not a countable resource.  Thus, the Smiths would have had a total of $110,000 in countable resources.  Jane would have been permitted to keep half that amount ($55,000) and John would have been able to keep $1,500, and the remaining funds ($53,500) would have had to be spent down to qualify.

If you are married and considering applying for long-term Medicaid for you or your spouse, or you know someone who is, contact attorney Elizabeth Perla today at (440) 333-2503 to discuss the revocable trust. The potential saving are simply too great to pass up.

A living trust, the popular term for a trust that is established during a person’s lifetime and can be revoked or changed at any time, has its advantages.  A living trust can help your heirs by eliminating the expense and time of probate, allow you to consolidate your assets, and avoid the necessity of a guardianship over your estate should you become incompetent, among other benefits.  However, revocable trusts have no tax benefits and can work for or against you if you apply for Medicaid.  Here’s how:

When a person applies for Medicaid benefits, all assets are countable for purposes of determining eligibility, including any assets in a revocable trust.  Current Medicaid eligibility requirements only permit a single individual to have up to $1,500 worth of countable resources to qualify.  (If the individual is married, his spouse will be able to keep additional assets.)  However, some assets, most notably an individual’s residence, are exempt, that is they are not a countable resource.  Here’s the kicker: If your residence is in a revocable trust, rather than simply held in your name, it will not qualify for the residence exemption and will instead be treated as a countable resource.  The following is an example to illustrate.

John Smith is single and applying for nursing home Medicaid.  He has $1,500 in cash and lives in his  home worth $250,000.  John would qualify for Medicaid as he has less than $1,500 worth of assets and his home is exempt.  However, if instead John’s home was being held in a revocable trust then he would not qualify for Medicaid as his home would not be exempt and he would be considered $250,000 over the permitted resource amount.

However, although a revocable trust can hurt a single person’s ability to qualify for Medicaid, it can benefit a married couple. Whereas a single person is only permitted to have $1,500 of countable resources, the spouse of the nursing home Medicaid applicant is permitted to keep half of the couple’s countable resources, up to $109,560.  A revocable trust can be a wonderful way to increase the spouse’s resources as shown in the following example.

John Smith is married and applying for nursing home Medicaid.  He has $50,000 in cash and lives in his own home worth $250,000.  Because the home is exempt, and hence, not a countable resource, John and his wife have $50,000 of countable resources.  John and his wife would be permitted to keep $26,500 (half of $50,000 plus $1,500) and would have to spend down $23,500 of their cash. 

Now, let’s see what the result would have been had John and his wife had their home in a revocable trust prior to John applying for Medicaid. 

The $250,000 home would have been a countable resource, and combined with their $50,000 in cash, John and his wife would have had $300,000 in countable resources.  John and his wife would have been able to keep $111,060 (maximum amount of $109,560 plus $1,500).  Moreover, instead of spending down any of their funds, John and his wife could simply transfer their cash and home into the sole ownership of John’s wife. 

In addition, in order to avoid the potential ineligibility of John for Medicaid should his wife predecease him, John’s wife should put the cash into a revocable trust.

In conclusion, the living trust can be a beneficial instrument for general estate planning as well as Medicaid planning purposes.  The key is having a knowledgeable attorney to help you take advantage of its benefits and avoid its pitfalls.  Contact attorney Elizabeth Perla at (440) 333-2503 today to discuss living trusts or other elder law and Medicaid planning issues.