I do a lot of estate planning in my law practice. Under some circumstances, estate planning becomes intertwined with Medicaid planning. Those attorneys who primarily deal with Medicaid planning refer to themselves as working in the area of “elder law.” One of the primary concerns in the elder law area is planning for the costs of long term care.
Some clients come through my door fearful that their hard earned money and assets will be used up for nursing home care. This in turn would force their spouse into poverty and prevent them from passing assets along to children and family. This area of the law can be extremely confusing and complicated, but I want to address in this article at least some of the basic principles involved in long term care and Medicaid.
Medicaid is a Federal and State funded program operated by the Division of Family Resources which is part of the Indiana Family & Social Services Administration. Medicaid pays necessary medical expenses for needy persons. In order to qualify for Medicaid, you must meet one of the categories for eligibility and you must also meet certain financial eligibility requirements. There are several categories for eligibility, but for purposes of this article dealing with long term care, the major categories include persons who are 65 or over, blind or disabled. If you fit into one of Medicaid’s eligibility categories, then you must also meet income and resource tests to become eligible.
Some people address long term care by looking to purchase nursing home insurance. The younger you are when you purchase this type of insurance the less the premium will be. If you are looking at purchasing a long term care policy, you should compare policies and premiums from at least two different companies. You should also consider if the nursing home policy is approved by the state of Indiana as a qualified policy under the Indiana Long Term Care Program. This program allows you to qualify for Medicaid and for every dollar the insurance policy pays for nursing home care, the amount you keep and qualify for Medicaid increases by a dollar. This state program also features a second policy which allows you to keep all of your assets.
Medicaid has special rules that apply to married couples which are designed to permit one spouse to be institutionalized without impoverishing the spouse staying at home. Under these spousal anti-impoverishment rules, the spouse staying at home can keep the residence, a car and one half of their non-exempt assets with a minimum of $23,184 and a maximum of $115,920 (these figures are adjusted for inflation each January 1st). Household goods and furnishings, irrevocable prepaid funeral arrangements and income producing property (so long as fair market rent is being received) do not count as assets under Medicaid rules.
An ongoing question that almost always comes up is this: Can’t I just give away all of my assets to make myself eligible for Medicaid? The answer is no. Medicaid restricts the transfer of assets from one person to a non-spouse in an attempt to make yourself eligible for Medicaid. Transfers between spouses are not penalized because resources of both spouses are counted in determining eligibility, but transfers to kids, family members or third parties result in a transfer penalty. Indiana has a “floating” transfer penalty for the five year period before someone files their Medicaid application. The penalty rule breaks down into two parts. The length of the penalty is determined by taking the amount gifted and dividing this amount by the average costs of nursing home care in Indiana. This figure for 2013 is $5,353 per month. If you make a gift of $25,000 then you will be ineligible for a period of 4.67 months ($25,000 ÷ $5,353 = 4.67). The second part of the penalty rule is that the penalty for the gift starts on the date you are in a nursing home and applying for Medicaid. The penalty doesn’t start from the date you make the gift. This is what makes the penalty a “floating” penalty.
There is not enough space in this article for me to address all the different rules and angles of Medicaid eligibility for long term nursing home care. Eligibility for Medicaid can be an extremely complex issue. The answers for each individual’s fact situation will be different. Options do exist. You need to seek competent legal advice if you have specific questions about your circumstances.
This article is published for information purposes only. It is not intended nor is it to be used as a substitute for independent legal advice.