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The focus of our Summer
Newsletter was to give you useful, introductory
information on long term care for the elderly. The
emphasis was on the importance of planning; ahead of
time rather than on the eve of disaster. Funny how many
opt for the latter: more anxiety and fewer options.
Instead, let’s take the less traditional approach and
consider some planning techniques before you have an
emergent situation. |
Spousal Refusal
Sally
and Alex are a middle aged, married couple with two teen-aged
children. Sadly, Sally has been diagnosed with early stage
multiple sclerosis. They want to do some planning in the event
that Sally needs institutional Medicaid sometime in the future.
They own a home, with a fair market value of $750,000.00, and
most of their income is produced by Alex who is an accountant.
Sally is a homemaker who has a part-time job in an art gallery.
They have 529 college fund trusts for their children, and Alex
has an IRA with a balance of $250,000.00 and a brokerage account
with a balance of $150,000.00. Sally has very little money and
no pension.
Ordinarily, each spouse has a duty
of support for the other, much the same way a parent has for a
minor child. The law calls that individual a legally responsible
relative, so it would be fair to assume that Sally and Alex are
legally responsible for the expenses of one another and their
minor children.
But, in fact, Alex has the right
to refuse to support Sally's medical expenses. If he signs a
statement to that effect, then Medicaid MUST consider Sally's
income and resources in her Medicaid application without
considering Alex's assets. This approach can be enormously
helpful under circumstances like Sally and Alex's.
Transfer of Assets
While
there is no penalty for the transfer of assets when one is
attempting to qualify for Medicaid in-home care, there is a
penalty for what is referred to as a "non-exempted uncompensated
asset transfer." An uncompensated transfer is really a gift.
Medicaid does not penalize for purchases of goods or services,
normally. Since 2006, Medicaid has looked back five years from
the date of submission of an institutional Medicaid application
to determine if any non-exempt uncompensated transfer of assets
has been made. This transfer of assets rule has changed
dramatically, but what has not changed is the effect of exempted
transfers. Those transfers trigger no penalty. Let's take a look
at some of those exempted transfers.
Exempted Transfers
For
many middle class families, their home is their single biggest
asset, as is the case for Sally and Alex. Medicaid views a home,
or primary residence, with a fair market value of less than
$750,000.00 as exempted, so long as the Medicaid recipient, her
spouse and minor children reside therein as their primary
residence. But what if, in time, Alex predeceases Sally and
their children reach the age of majority?
If Sally remains confined to a
long term care facility and Medicaid makes the determination
that she is a permanent resident therein and unable to return
home, Medicaid could then place a lien on the homestead. Such an
act would make the family's biggest asset vulnerable, and it is
difficult to have such a lien removed. Take it from me, I have
had no such luck.
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"Such an act
would make the family's biggest asset vulnerable, and it
is difficult to have such a lien removed. Take it from
me, I have had no such luck." |
However, the transfer of a
homestead to a spouse, minor child, disabled or blind adult
child is considered exempted. No penalty. Also, the transfer of
a homestead to a caregiver adult child who has resided in the
homestead with the Medicaid applicant for two years prior to the
applicant's institutionalization is exempted. Again, no penalty.
The transfer of a homestead to a sibling with an equity interest
therein who has resided in the homestead with the Medicaid
applicant for one year prior to the applicant's
institutionalization is exempted. Once more, no penalty.
Transfers of money or personal
property between spouses is exempted and unlimited, and
transfers by a parent to a certified disabled child are exempted
and unlimited. Special care should be utilized here so as not to
jeopardize that disabled child's eligibility for benefits.
Special Needs or Supplemental Needs Trusts can be very useful
here, and shall be the subject of a future newsletter.
Long Term Care Insurance
I
have never been a proponent of long term care insurance, despite
what many of my colleagues think. I find most policies
disproportionately expensive when you view what the insured
obtains in return, if anything at all. Ask: what is the monthly
premium for an insured my age, and what benefits can I rely on
monthly? How long can I expect the payments to continue?
I would caution anyone interested
to shop around thoroughly, or, in the alternative, I would
suggest that you ascertain what the monthly premium would be,
then open a mutual fund or bank account and have a direct
deposit in the amount of that premium deposited monthly. After
several years, that account should contain a tidy sum suitable
for medical care-or even better- if you do not need that medical
care in your old age, a payment for that cruise around the
world.
It just takes a little planning.
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