Asset Protection Strategies for Long-Term Medicaid Care
The U.S. Department of Health and Human Services has predicted that a person turning 65 today faces a close to 70% chance of needing some form of long-term care service in their remaining years.
Many people think they can avoid needing such care or simply don’t want to face the idea and deal with the details. Long-term care can be extremely expensive — the average cost of a semi-private room in an Arkansas nursing home is $5,353 a month — and often people don’t understand their rights and options.
Long-term care insurance, a person’s individual finances and Medicaid are the primary sources of money for long-term care.
Forethought in the form of a savings plan or paying insurance premiums over time are ways for a person to prepare for such a major life change. But many don’t go to the trouble or don’t want to spend the money on such advance planning, and frequently Medicaid becomes the go-to payment method for long-term care.
But Medicaid is means tested, requiring applicants to have low incomes and limited assets.
For married or single applicants to nursing home care in Arkansas, the Medicaid income limit is $2,382 a month per individual (meaning $4,764 per couple) with assets of no more than $2,000 for single applicants and $3,000 for married applicants. The numbers are the same to qualify for waivers for home- and community-based services.
For married applicants with only one spouse applying, the asset limit is $2,000 for the applicant and $130,380 for the non-applicant.
Medicaid basically wants people to spend their own money on long-term care first. Medicaid eligibility requirements make it hard for seniors who want to hang onto their money or will it to someone to meet the qualification standards.
Like most states, Arkansas has a five-year, Medicaid look-back period in which it checks assets transfers dating back five years from application to make sure nothing was sold or given away under fair market value. Violators pay a financial penalty as well as being disqualified and wind up paying for the care out of their own pockets after all.
But Arkansans can employ a few income and financial asset planning strategies to protect their money and assets.
A medically needy pathway exists in the form of a spend-down program that allows categorically aged, needy or blind people who are over the Medicaid limit to pay their excess income on their medical bills down to the income limit, after which they qualify for the remainder of the spend down period.
A qualified income trust allows the overqualified to place the excess in an irreversible trust that is not considered part of Medicaid eligibility income. A trustee is named and the money is used for very specific purposes like accrued Medicaid expenses.
Then there are a range of Medicaid asset planning strategies families can employ when working with a Medicaid planning professional.
These include funeral trusts, spousal asset transfers, annuities, spending down excess assets and medicaid asset protection trusts.
A Lady Bird Deed is a life estate deed in which the Medicaid recipient keeps their home for the remainder of their life, after which it is transferred to a beneficiary. Since home ownership technically changes, it is not considered part of a recipient’s estate.
A Medicaid Divorce is a legal termination of marriage when only one spouse is applying for long-term care Medicaid and protects the assets of the non-applicant spouse.
“Half a Loaf” strategies are a complicated way around the look-back rules by creating a revenue stream through a process of giving a family half of one’s assets and purchasing a Medicaid compliant annuity.
No family should undertake any type of long-term care Medicaid strategy without consulting a professional Medicaid planner. A number of sites like medicaidplanningassistance.org can help you locate professionals nearby to help navigate these critical decisions involving your loved one’s long-term care.