Aging is an inevitable part of life. For many, aging also means requiring care from others, either in your own home, an assisted living facility, or a nursing home. The question of how to pay for this care is a pressing one for many seniors or even for younger people who know that due to family history you are likely to require this care. Long term care insurance may not be affordable for you, but you may worry that you will not be eligible for Medicaid either. Fortunately, there are options you can consider to help you become eligible for Medicaid, while still being able to ensure your spouse is taken care of or that you can leave some assets for your children and grandchildren. There are many considerations when you begin looking at Medicaid planning strategies for nursing home care. While you can do this planning yourself, at Priority Law, our experienced estate planning attorneys may be able to guide you through the process more quickly and offer suggestions you may not think of on your own. Call (978) 935-2000 to schedule a consultation and learn more about your planning options.
What Is Medicaid and How Do I Qualify?
Medicaid is a joint assistance program managed by both federal and state agencies. In the Commonwealth of Massachusetts, the program is administered by the Division of Medical Assistance and is called MassHealth. The program offers financial assistance based on need and offers coverage in a nursing home if individuals meet financial and other qualifying criteria.
To qualify for MassHealth’s nursing home coverage, individuals must undergo an assessment and found to require long-term care in a nursing home. They are also required to pay the home a Patient Paid Amount (PPA) from their monthly income, after subtracting a Personal Needs Allowance (PNA) from that income. The PPA is most of the individual’s monthly income and, according to Medicaid Planning Assistance, Massachusetts does not have a hard limit on income for eligibility. The PNA is for the resident to use for items the nursing home does not provide, such as clothing, hair styling, or favorite personal hygiene items. The individual must also have $2,000 or less in countable assets. If the individual is married and their spouse will be remaining in their home, the spouse is allowed to retain a certain amount of their combined countable assets and an allowance from their combined incomes.
What Are Countable and Non-Countable Assets?
When discussing assets and Medicaid eligibility, individuals will often hear the term “countable assets,” which indicates there are non-countable assets. Many people wonder which assets are countable and which ones are not, as well as whether they can convert a countable asset into a non-countable one.
Non-Countable Assets
Non-countable assets are those that cannot be easily accessed for cash or whose cash value is low. Non-countable assets include:
- Burial accounts worth $1,500 or less plus accumulated interest
- Life insurance worth the total face value or cash value of up to $1,500
- Irrevocable trust account for burial and funeral
- Burial plot
- Inaccessible assets
- Family home under certain circumstances
- Car that has an equity value of $4,500 or less
- Business assets used to produce income
- Employer pensions
Countable Assets
Countable assets are any assets that are not non-countable. This includes stocks, bonds, mutual funds, bank accounts with joint ownership, vacation homes, land, IRAs, and boats. If an individual is not certain whether a particular asset is countable or non-countable, they may wish to consult with an estate planning attorney before deciding which Medicaid planning strategies they would like to use.
Medicaid Planning Strategies That Protect Your Assets
Many people have long believed that the only way to become eligible for Medicaid was to “spend down” their assets. In other words, they needed to spend or get rid of their assets until all that was left was under the required limits. Fortunately, there are many other Medicaid planning strategies that can be explored before resorting to spending down assets. From irrevocable trusts to spousal refusal, individuals can consider several options for protecting both their assets and their families while qualifying for MassHealth.
Irrevocable Trusts
An irrevocable trust can hold assets that individuals wish to pass on to loved ones. These trusts cannot be changed or revoked once they are set up and funded, so it is important that individuals are certain about the assets and beneficiaries of the trust before finalizing the details.
While the trust cannot be changed or revoked, the trust grantor can draw an income from it. Additionally, when assets are transferred into the trust, they are no longer owned by the individual and thus, are not countable for Medicaid. However, it is important to note that MassHealth has a five-year lookback provision. This means any assets transferred within five years of applying for Medicaid may still be counted as the individual’s assets. Therefore, it is best to establish this trust well in advance to avoid such scrutiny.
Annuities
An annuity is a contract with an insurance company. In exchange for a lump sum paid by the individual, the insurance company provides periodic payments for life or for a set period. Correctly structured annuities convert excess countable assets into an income stream. To be properly structured for Medicaid eligibility and not be counted as an asset, the annuity must be irrevocable, non-assignable, and provide equal payments with no deferred option. This is often a useful option when a healthy spouse needs to restructure assets when their partner requires care.
Asset Transfers
Individuals can legally transfer assets to their spouse or another family member. This is an option that some individuals choose when they already plan to leave specific assets to family members. However, like irrevocable trusts, asset transfers are included in the five-year lookback period. This means if the individual transfers assets within five years of applying for Medicaid, the program may count those assets against the individual. This lookback period is one reason that Priority Law recommends engaging in Medicaid planning long before you think you will need it. By transferring assets to loved ones sooner, individuals can reduce the risk that MassHealth will consider those assets to still be theirs.
Life Estates
A life estate is created when an individual or couple sells their home but retains the right to live in it for the rest of their life. The individual or couple, called the Lifetime Tenant Owner, would remain responsible for insurance, real estate taxes, and ordinary maintenance of the home. They are also able to continue taking advantage of any real estate tax exemptions and abatements, and can opt to rent the home if they choose while keeping all rental income. The Remainder Owner automatically becomes owner of the property when the last Lifetime Tenant Owner dies. Before the death of the last Lifetime Tenant Owner, the Remainder Owner cannot use the property or benefit from any income the property generates. This option reduces asset value for the individual applying for Medicaid without leaving them homeless.
Spousal Refusal
A healthy spouse can refuse to use their assets to pay for their spouse’s care. While this may sound cruel, it can be a very beneficial Medicaid planning strategy that protects a significant portion of a couple’s assets. Medicaid Planning Assistance describes the process as beginning with the Medicaid applicant transferring all assets over the limit to their spouse. They are not penalized for this, as applicants can transfer assets to their non-applicant spouse without it being considered in the lookback period.
Once the assets have been transferred, the non-applicant spouse signs a form called a Notice of Spousal Refusal. This form allows the Medicaid agency to determine the applicant spouse’s eligibility based on the requirements as if they were single, rather than married. When the applicant files their application, they will also a file a Spousal Refusal form. This form assigns the state the right to support the applicant. However, it also grants the state the right to sue the non-applicant spouse for reimbursement for the care provided to the applicant. This rarely happens but it is something that must be considered when thinking of using this strategy.
Family Situations That Impact the Need for Planning
While it may seem as though individuals can simply choose a Medicaid planning strategy and use it regardless of what happens, there are many family situations that may impact the need for planning and which strategy might be right for the circumstances. For example, when only one spouse requires care, the healthy spouse can handle the planning themselves. The healthy spouse is also protected by spousal impoverishment rules that allow the healthy spouse to keep the primary home, an income allowance, and a resource allowance.
If both spouses require care, and have not put a plan in place, their adult children would have to bear the financial and caregiving burden of a Medicaid denial. If a healthy couple wants to prepare for the future and preserve some assets for their children or grandchildren, they will likely want to explore their planning options early to ensure their children do not have to bear this burden and avoid risking a MassHealth denial. Finally, a single person who has no assets or income, regardless of health, is likely to be eligible for Medicaid and may not be as concerned about planning.
Alternatives to Medicaid Planning
While Medicaid planning is one option, there are other alternatives Massachusetts residents may want to consider. Eligibility for these options will vary and individuals may not be eligible for all of them.
Senior Care Options
Senior Care Options (SCO) is a comprehensive health plan that covers all the services usually paid for through Medicare and MassHealth. The plan provides services to its members by working with a senior care organization and its provider network. Health services are combined with social services, geriartric support services, and respite care for family and caregivers. There are no copays for members of the program.
Private Long Term Care Insurance
Like health, auto, or homeowners insurance, private long term care insurance is insurance where individuals pay a premium each month and then file claims as needed. Like those other types of insurance, individuals must be actively paying the premium when the coverage is needed. Like life insurance, individuals will find a better premium if they begin paying for this insurance when they are younger and still healthy, but this also means they will pay years of premiums and may never need the coverage. Unlike Medicaid, where the individual applies when they know they need the assistance, they are unlikely to be approved for long term care insurance if they wait to apply when they know they need it.
PACE Program
The Program of All-Inclusive Care for the Elderly (PACE) provides a wide range of medical, social, recreational, and wellness services to eligible participants. Individuals do not need to be eligible for MassHealth to enroll in PACE. However, if they meet the income and asset guidelines to be eligible for MassHealth, MassHealth may pay their PACE premium. Individuals must live in a county that offers PACE in order to be eligible while also meeting other eligibility requirements.
How Can a Massachusetts Estate Planning Attorney Assist With Medicaid Planning?
There are many factors that must be considered when determining which Medicaid planning strategies to use. To ensure that you explore each option thoroughly and understand the advantages and disadvantages of each, you may want to consult with a Massachusetts estate planning attorney. At Priority Law, our seasoned elder law attorneys may be able to help you determine which options you should use and set up your estate plan so that you can leave a legacy for your family while still qualifying for MassHealth if you need it. Call (978) 935-2000 to schedule a consultation and learn more about your planning options.