Planning A Must
Have you priced nursing homes lately? In Texas, you are looking at an average annual cost of $50,000. And we are on the low end; nationally, the average annual cost is closer to $75,000. New Jersey costs a whopping $109,500 annually.
Who the heck can afford that?
Medicaid provides several programs that are funded through a state-federal agreement. One of the programs provides long-term nursing home care benefits to pay for your residence in a nursing home or approved residential care facility. Because the requirements to qualify for a Medicaid program vary widely from state to state, we will limit our focus to Texas for now.
To qualify for this type of benefit, you must have a medical need and fall under the income and asset caps. These amounts change every year. For 2020, the income limit for an individual is $2,349 and the asset [resource] amount is $2,000. If you are married, then your spouse can also have income and resources that are protected. The minimum resource protected amount (called the SPRA) is $25,728 and the maximum is $128,640. The monthly maintenance needs allowance (MMNA) for your spouse is $3,216.50.
While the resource limit is low, there are certain types of assets that do not count. These include your homestead (provided it is valued at less than $595,000), a car, your burial plots, and pre-paid funeral arrangements.
A lot of people find that they are in that uncomfortable range of having too much income and assets to qualify, and not enough to pay for private nursing home care. That is where Medicaid planning comes into play.
For excess income, you can put a Miller trust in place. This keeps the income from being counted in any one month.
For excess assets, you need to look at each category carefully to see if it falls under an exception or if another planning technique will work.
Tip one: do not start giving away assets without first getting good legal advice. There is a 60-month look back period for gifts. The penalties for a gift can include loss of eligibility for a period of time. The rules about gifting are complex, and a mistake can be costly.
Tip two: there is often a fine line between Medicaid planning and elder exploitation. You need to be careful that you are not being convinced to impoverish yourself merely to enrich someone else.
Tip three: you need to have a good durable power of attorney in place that gives your agent broad authority to do Medicaid planning and file for the Medicaid application.
Tip four: do not rush to sell your house, because that will replace an exempt asset (homestead) with a non-exempt asset (cash).
Finally, be aware that Medicaid does not pay for all nursing home stays. It only pays for your stay in nursing-home designated “Medicaid bed” in a semi-private room. Those Medicaid beds can be difficult to find.
Medicaid planning is important. Don’t wait for a crisis to start.
This article does not constitute legal advice.