Sometimes nursing home care is the only viable option for people who can no longer handle their own daily needs, even with help from family members or home health aides. When it’s no longer safe to stay at home, the professional care an outside facility offers can bring peace of mind.
The most beneficial Medicaid nursing home care strategy for an individual…
Medicaid’s rules are very restrictive in terms of who qualifies for Medicaid nursing home benefits. Many people have income and assets that far exceed Medicaid limitations. Lamson & Cutner’s Elder Law attorneys have devised a series of strategies for these circumstances. They result in people achieving Medicaid eligibility and retaining the benefit of a substantial amount of their money and assets.
Here are the hurdles you’ll face, and the solutions that can help you achieve Medicaid eligibility while providing you with financial protection.
The challenge for the single person who needs nursing home care.
The main problem an individual will have in meeting Medicaid qualifications for coverage is ownership of assets that have greater value than the current (2018) Medicaid limit of $15,150.
Additionally, Medicaid will examine your financial transactions going back five years to determine if any transfers have been made to others. This is called the “look back period.” Any transfers made during this time will be assessed against you in the form of a “penalty period,” during which Medicaid will not pay the cost of nursing home care.
Here’s an example of how these restrictions could affect you, if you needed nursing home care in New York City. If you gave one of your children $200,000 two years ago, and need to enter a nursing facility now, Medicaid would divide the $200,000 sum by their established 2018 NYC monthly “regional rate” of $12,319 for nursing home care. Then Medicaid would not provide any benefits for 16.2 months after you enter the facility, meaning that the nursing home would have to be paid privately during that time. That’s the “penalty period.” It starts when you enter the nursing home, and are otherwise eligible for Medicaid benefits.
Now, here’s how a Lamson & Cutner Medicaid lawyer can help you deal successfully with the problem.
The single person’s nursing home care Medicaid eligibility solution.
There’s an effective strategy that can help preserve about half of your assets if any transfers have been made or are to be made during the “look back period.” The numbers given below are approximate, since every situation is unique and financial ratios have to be tailored to your specific circumstances. It’s a two-step plan:
Step 1: First, using the $200,000 example mentioned above, about half of the amount, or $100,000, is given as a gift to a child, sibling or other trusted person. That means there will be a penalty period of just over eight months once you enter a nursing home. It’s about 8.1 months because $100,000 divided by the Medicaid monthly regional rate of $12,319 for nursing home care in New York City equals 8.1 months.
Step 2: In the second phase, a private annuity contract with a family member or other trusted party is created with the remaining amount of roughly $100,000. An annuity is a contract that requires specific payments at predetermined intervals. In this instance, the annuity is set to pay approximately $12,000 per month for 8.1 months to you, which you will use to pay the nursing home, along with any other income you have. This covers the cost of care during the “penalty period” imposed by Medicaid. Federal law allows Medicaid compliant annuities to be formed without incurring any penalties.
You can learn more about how effective planning protects you financially in Lamson & Cutner’s new Special Report, 25 Strategies to Prevent Financial Ruin from Long-Term Health Care Costs . It’s free, informative and easy to understand.
The successful end result: Medicaid coverage
Instead of being forced by Medicaid regulations to forfeit the entire $200,000 to pay for nursing home care, about $100,000 has been preserved and transferred to a trusted source. The money can be used on your behalf while you’re in the nursing home. Whatever is left after you pass on can go to family members or others, providing a financial benefit to them that would otherwise have been lost.
Here’s an actual situation:
In a case Lamson & Cutner’s elder law attorneys handled for an 85-year-old widow with numerous investments, assets and property in Florida, the firm arranged for the transfer of everything she owned to her daughter. Approximately half was an outright transfer, and the other half was used to purchase a private annuity from her daughter. L & C prepared a private annuity contract in an amount equal to approximately 50% of the value of her holdings, to provide cash flow during the “penalty period” imposed on her by Medicaid. The private annuity monthly income was used to pay for the nursing home during the penalty period, and the rest of the money, about half of her financial resources, was preserved. Her daughter can now use these reserves for attending to her mother’s needs, and making her stay at the nursing home as comfortable as possible.