Most people would like to receive care in the comfort of their own homes when they need it. Sometimes though a spouse is too ill or disabled for that to be a safe option. That’s when a professional facility can give the well spouse peace of mind, of knowing that the ill spouse is being cared for appropriately. An Elder Law attorney can help you satisfy Medicaid eligibility requirements for coverage of such care.
If your spouse needs nursing home care, here’s how to be sure you’re both protected to the greatest extent possible.
If your spouse needs to enter a nursing home, you ideally want all the money and assets you’ve accumulated over a lifetime of hard work to be preserved. That way you can continue on with a secure lifestyle, and use your financial resources as necessary to make your husband or wife as comfortable as possible. It’s all achievable with good Elder Law planning. Lamson & Cutner Elder Law attorneys do it every day.
The financial challenge a married couple will face when one partner needs nursing home care.
Many married couples who have planned for retirement believe they are in a comfortable financial position. The mortgage is paid off on the home or their rent is a reasonable amount; they have managed to save some money and have invested it wisely, and they have Social Security retirement benefits, a pension, and distributions from an IRA or a 401(k) plan.
However, when the need for nursing home care arises, suddenly financial stability is out the window. Who can afford to pay up to $15,000 per month (or more) on nursing home care? Savings evaporate quickly, and monthly income is often totally inadequate to cover all the expenses.
In addition, if the couple’s assets are being used up to pay for the ill spouse’s care, what does this mean for well spouse? Medicaid makes allowances for the assets and income of well spouses, as described below. The allowances work for some people, but leave many others in an extremely vulnerable financial position.
Transferring Assets Between Spouses to Qualify One for Medicaid
In order for the ill spouse to achieve Medicaid eligibility (assume it’s ‘he’ this time), he can transfer his assets to the well spouse (known as the “community” spouse, and let’s make it ‘her’). Medicaid does not penalize one spouse for transferring assets to the other spouse. If the ill spouse’s assets are below $15,750 (in 2020), he will then be eligible for Medicaid. However, there’s a catch: if the well spouse’s assets are above a certain level, called the “Community Spouse Resource Allowance” (CSRA), Medicaid will look to the well spouse to contribute to the ill spouse’s care until her assets fall below the CSRA. The CSRA is calculated by a formula, and is not the same for everyone, but the maximum CSRA in 2020 is $128,640.
There’s a way to minimize the damage. In New York, the well spouse is permitted to decline to pay for the ill spouse’s care. This is called “spousal refusal.” In New York this is such a common practice that Medicaid has a Spousal Refusal form that people sign. Medicaid cannot refuse to provide services to the ill spouse, so the ill spouse will begin receiving Medicaid services.
Medicaid will attempt to recover at least some of the cost of the services it provides to the ill spouse by billing the well spouse, but there are two reasons Spousal Refusal is still a good idea. First, many such bills are open to the possibility of being negotiated. Second, even if Medicaid pushes to recover all the costs of the services they provided, they bill the well spouse at the Medicaid rate, which is lower than if the well spouse had paid with private funds. Thus the well spouse will at least receive a significant discount on the cost of the services to the ill spouse.
Income Doesn’t Affect Medicaid Eligibility, But It Is Not Ignored
Income can also be allocated, and is also restricted. The spouse in the nursing home is required to contribute all his income except for $50 to the home, with several wrinkles. Wrinkle #1: If his wife’s income is above the unfortunately named “Minimum Monthly Maintenance Needs Allowance” (MMMNA) of $3,216 (in 2020), she is required by Medicaid to contribute 25% of the amount in excess of the MMMNA to the nursing home. Wrinkle #2: On the positive side, if her income is below $3,216 per month, she is entitled to as much of her husband’s income as will bring her up to the MMMNA.
These allowances permit some couples to achieve a better result. However, for many well spouses, reducing their assets down to $128,640 (or below) and limiting them to $3,216 in income per month will leave them in a highly vulnerable financial situation. If the well spouse develops a need for care herself, or wishes to supplement care of her ill spouse with, for example, a personal aide a few hours a week, she could exhaust her monetary reserves very quickly.
How a Lamson & Cutner Elder Law Attorney can protect you from a financial crisis.
What a couple can do for each other and their family.
With proper Elder Law planning, you can retain the benefit of all your money and assets. That way the nursing home is paid for, and you can maintain your lifestyle. Here’s a three-step plan to accomplish that result for you.
Step 1: If you own a home, it’s transferred to the “community” spouse, who does not need nursing home care. Medicaid classifies this as an exempt transfer, and it is not subject to a penalty.
Step 2: Transfer liquid assets such as savings and securities to the “community” spouse also. This too is an exempt transfer, and protects your cash and other assets from having to be used to pay for nursing home care.
Step 3: As soon as your spouse is in the nursing home, and Medicaid benefits are approved, you should begin taking Elder Law and Estate Planning steps of your own. These steps will help protect you in the future, should you need care either in your home or in a nursing home.
Because of the five year look back in the case of a nursing home, and because of laws requiring spouses to support each other (“in sickness and in health”), you may not be able to protect all your assets, but taking the appropriate steps will give you the greatest chance of protecting as much of your assets as possible. There are numerous complicating factors, which is why using the best possible Elder Law and Estate Planning attorney is crucial.
Learn more about asset protection strategies and Medicaid qualitifactions for full payment of nursing home care in Lamson & Cutner’s recently published Special Report, 25 Strategies to Prevent Financial Ruin from Long-Term Health Care Costs.
The benefits you receive with this approach.
This sequence of strategies provides the opportunity to keep your home, income and other assets intact for your use, and still receive full Medicaid funding for the nursing home care your spouse needs. As the healthy “community” spouse, you can continue to live in dignity with the same lifestyle. You’ll have funds to supplement the care provided to your spouse by the nursing facility, and make his or her stay there more pleasant.
Additionally, your home and other assets can be preserved for transfer to family members or heirs when you both pass on, and will be subject to favorable tax treatment if you have an asset protection trust.
Another excellent advantage of these strategies is that if you eventually need either home or nursing facility care, the legal and planning steps will already have been taken to facilitate your own Medicaid eligibility for benefits. These methods will also put you in the best possible position to preserve the greatest amount of your money and other assets. These can be used to maintain your lifestyle at home, or to make life more comfortable for you in the nursing facility. Any assets left after you’ve both passed on can be transferred to your children or heirs.
Here’s an example of a case in which Lamson & Cutner, Elder Law attorneys, helped a couple protect their significant liquid assets:
The client was in her 80’s, and suffered from Parkinson’s Disease. After several strokes, seizures and other serious medical complications, she became uncommunicative. Since all assets were held jointly with her husband, L & C lawyers arranged to transfer them all to him. That protected the money from loss under Medicaid eligibility requirements. The firm then filed an application for nursing home benefits, which was approved. The end result was that the couple’s money was shielded against loss, and is now available for the husband to use on behalf of his wife, and to maintain the lifestyle he’s been used to.