As people age, they may require care either at home or at assisted living accommodations, such as nursing homes, which can be an expensive endeavor. Not everyone can afford care insurance in the long term, and people may worry about Medicaid eligibility; however, by taking certain steps, it is possible to maintain this eligibility while still providing for loved ones. Learn some Medicaid planning strategies for nursing home care, and explore the estate planning options available for those wanting to plan for long-term care by contacting a seasoned Florida and Minnesota elder law and estate planning attorney; call Roulet Law Firm, P.A. today at (941) 909-4644 for their Florida office or (763) 420-5087 to reach their Minnesota branch. Or you can fill out the form on this page and a member of our team will reach out to you to schedule your consultation.
What Is Medicaid?
According to the Department of Health and Human Services (HHS), Medicaid refers to a program run at a state and federal level that helps individuals cover medical expenses when they have limited resources. Each state has its own Medicaid program, but these must comply with federal rules, meaning the benefits and requirements for these programs vary between states. Medicaid can cover personal and nursing home care bills, and those eligible typically only have to make small payments for specific medical services or items, with the program covering other expenses.
State Medicaid Requirements
Per the Minnesota Department of Human Services, in Minnesota, Medicaid eligibility requirements vary depending on a person’s age, family size, household income, and immigration, disability, and citizenship status. Typically, blind, disabled, and elderly residents are eligible, in addition to the following individuals:
- Adults whose household income is no more than 138% of the federal poverty level (FPL)
- Pregnant women whose household income is no more than 283% of the FPL (coverage lasts for one year following the child’s birth)
- Children aged two or younger in households with an income exceeding no more than 288% of the FPL
- Children aged between two and 18 in households with an income exceeding no more than 280% of the FPL
The two bodies in Florida that determine Medicaid eligibility are the Department of Children and Families (DCF) and the Social Security Administration (SSA). Anyone receiving Supplemental Security Income (SSI) benefits from the SSA is automatically eligible. Under the DCF’s requirements, the following individuals are eligible, provided they require insurance/healthcare assistance and have a low income:
- Children
- Parents
- Pregnant women
- People who were previously in foster care
- Caretakers related to the children in their care
- Non-citizens requiring emergency treatment
- Disabled or elderly individuals not receiving SSI
Medicaid Planning Techniques
Various asset and income planning strategies can help individuals qualify for Medicaid if they exceed the income thresholds. In addition, some techniques can help safeguard a person’s home from Medicaid’s processes for recovering costs paid to a Medicaid recipient, known as the Medicaid Estate Recovery Program (MERP). Below is an outline of these strategies, ranging from relatively straightforward to more complex.
Irrevocable Trusts
Several types of irrevocable trust can help boost Medicaid eligibility. For instance, an irrevocable funeral trust (IFT), established to pay a person’s burial and funeral bills in advance, can reduce an individual’s countable assets, helping them remain below Medicaid’s countable asset limit. Another relevant irrevocable trust is the Medicaid asset protection trust (MAPT), which also prevents assets from counting toward this limit while also preserving them as an inheritance for loved ones; worth noting, however, is that MAPTs violate Medicaid’s look-back rules, meaning anyone who utilizes these can expect a period of ineligibility, making them only suitable for individuals planning for nursing home care in the far future.
Utilizing a miller trust, or qualified income trust (QIT) is another strategy available for Medicaid applicants; this involves transferring income exceeding the Medicaid limit into this type of irrevocable trust, which means it no longer forms part of the applicant’s estate, where a trustee ensures these funds only contribute toward the recipient’s medical care expenses, with any remaining money typically transferring to the state after the recipient’s death. Discover more effective Medicaid planning strategies for nursing home care, and learn how the knowledgeable lawyers from Roulet Law Firm, P.A. can help individuals plan for later life. Contact our firm today to speak to an experienced Minnesota estate planning attorney.
Spousal Transfers
If a single spouse applies for Medicaid, spousal protections can prevent the other spouse who does not apply for Medicaid from becoming impoverished, resulting in a much higher countable asset threshold for the non-applicant spouse. In addition, these protections can help lower the Medicaid applicant’s resources to boost eligibility. Alongside this, spousal protection rules enable applicants to transfer their wealth to non-applicants to provide them with sufficient monthly income so they can continue to live at their residence, which lowers the Medicaid applicant’s monthly income.
Medicaid Annuities for Spouses
Another option involves utilizing Medicaid-compliant annuities, a technique that changes a non-applicant spouse’s non-countable resources into non-measurable income. This involves transferring funds to an insurer, which then makes monthly payments to the non-applicant spouse. Provided the annuity is irrevocable and makes immediate monthly payments not exceeding the recipient’s life expectancy, these can generally help boost Medicaid eligibility.
Spend Down Excess Assets
Medicaid applicants may choose to spend down their assets to stay within Medicaid’s asset thresholds. For instance, they make medical device purchases not covered by their insurance, invest in home improvements, or pay off debts. Importantly, they cannot sell their assets or gift them without potentially breaching Medicaid’s look-back rules.
Medicaid Divorces
If only a single spouse is applying for Medicaid, one option is to obtain a Medicaid divorce, which can protect the non-applying spouse’s assets while also reducing the applicant’s countable assets. Typically, this approach is suitable for couples with significant assets, exceeding $500,000, as applicants with lower resources may find utilizing spousal transfers a more appropriate option.
However, if you later need care, your assets will then be available. So this is only protects you from paying for your spouse, but does not protect your assets in the event you later need care. So this is only a partial solution and you should consider additional strategies.
Spousal Refusal
While Medicaid does consider a married couple’s assets as jointly owned, married Florida residents can improve Medicaid eligibility through the spousal refusal approach, where a non-applying spouse refuses to use their own assets to cover long-term medical care costs for the applicant spouse. However, while rare, a Medicaid agency may choose to bring a lawsuit against the non-applying spouse utilizing this strategy to recuperate long-term medical care costs.
And even if the Medicaid agency does not bring a lawsuit, just like with a Medicaid divorce, your assets are still at risk in the event you need care. So again, this is only a partial solution.
Half-A-Loaf Strategies
Half-a-loaf strategies involve gifting assets to lower the countable assets of a Medicaid applicant while preserving these resources for loved ones to inherit. While these approaches breach Medicaid’s look-back rules, leading to Medicaid ineligibility for a certain period, the applicant can combine this technique with other strategies to ensure they can fund long-term medical care until the ineligibility period ends. This technique typically involves the applicant transferring half of their wealth to family members and buying a Medicaid annuity with their remaining resources, creating a stream of income used to fund care costs during the time while experiencing Medicaid ineligibility.
Lady Bird Deeds
Florida Medicaid applicants can utilize ladybird deeds to safeguard their homes for loved ones to inherit. Here, the recipient maintains ownership of the home during their lifetime, but after they pass away, ownership transfers automatically to their beneficiaries. Since the home is no longer part of the deceased individual’s estate, Medicaid agencies cannot recover long-term medical care costs through MERP.
However, there are some potential issues with Lady Bird Deeds that you need to be aware of before you use one.
Your Kids’ Spouses Now Own it Too
In Florida, spouses must sign off on the sale of any real estate owned by their spouse even if they are not listed on the title. What that means is, if you transfer your home to your two children with a Lady Bird Deed and they are married, you have also given your children’s spouses ownership and they will all have to sign off on the sale of the property. This can often lead to disagreements and conflicts on how to manage the property as each of your children and their spouses will need to consent.
No Protection from Divorce or Creditors
If you transfer your home outright to your kids, it is not protected in the event they get divorced, get sued, have poor money management skills or required long-term care themselves. How would you feel if you found out that your home was transferred to one of your kids but that they lost it in a divorce? If you give it to them outright, that could happen. And, with the high rate of divorce, it may even be likely.
If one ore more of your kids needs nursing home or long-term care themselves, they could lose the home and any other money they inherit from you. So imagine this, you transfer your home to your kids with a Lady Bird Deed to try to protect it from being lost to your nursing home costs. However, it is then lost when one of your kids needs care.
These issues can all be avoided with a well-drafted revocable trust.
Revocable Living Trusts
Trusts are a safer alternative to Lady Bird Deeds. Here, the recipient maintains ownership of the home during their lifetime, but after they pass away, ownership transfers automatically to their beneficiaries via their trust. Since the home is no longer part of the deceased individual’s estate, Medicaid agencies cannot recover long-term medical care costs through MERP.
However, unlike a Lady Bird Deed that transfers the property outright to your kids, your trust can be designed so that only your trustee needs to sign off on the sale; rather than all of your kids and their spouses, which reduces the likelihood of conflict.
Also, your trust can be designed to protect the money you leave for your children in the event they get divorced, get sued, have poor money management skills or require Medicaid themselves to help pay for their own long-term or nursing home care.
Child Caregiver Exception
A person applying for Medicaid may transfer ownership of their home to an adult child, provided they are healthy, to help avoid MERP and ensure the child keeps the home as their inheritance. The requirements for this are that the child has to live with the parent for at least two years before the parent enters a nursing home and has to provide care to the parent during this period that the parent would otherwise have received in a nursing home.
Sibling Exception
Medicaid applicants can transfer home ownership to a sibling with equity in the property. To prevent a state agency from recovering costs via the home through MERP after the recipient’s death, the sibling has to have an existing ownership stake in the home and has to have lived there for at least a year prior to the recipient applying for long-term Medicaid.
Income Spend Down
Certain states, including Florida and Minnesota, permit Medicaid applicants to spend any income exceeding the Medicaid threshold on medical bills. Once they have reduced their income to this limit, they can then gain Medicaid eligibility.
Speak to a Seasoned Florida and Minnesota Elder Law & Estate Planning Lawyer for Ways To Protect Your Home and Savings from Nursing Home and Long-Term Care Costs
Moving into a nursing home or assisted living accommodation, or even just having a need for in-home health care, can be an emotionally and financially challenging time for a person and their loved ones. To afford substantial nursing home costs, many families resort to selling their assets, using their savings, and exhausting other resources, but with prudent planning, it is possible to obtain Medicaid qualification to help fund these bills. To understand more about legally compliant Medicaid planning approaches for long-term and nursing home care, consider contacting Roulet Law Firm, P.A.; call our Minnesota location at (763) 420-5087 or our Florida office at (941) 909-4644 to book a confidential consultation with our legal team. Or you can fill out the form on this page and a member of our team will reach out to you to schedule your consultation.
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