The concept of “Medicaid planning” sounds completely counterintuitive. Why would you intentionally out yourself in a financially needy position? After all, you worked all of your life to avoid this fate.
This makes sense on the surface, but there is a good reason why Medicaid should be on your radar. The United States Department of Health and Human Services reports that 70 percent of seniors will need some type of living assistance, and paid care is very expensive.
Medicare does not pay for the custodial care that nursing homes and in-home caregivers provide, but Medicaid will pay if you gain eligibility. Elder law attorneys engage in Medicaid planning to help clients gain Medicaid eligibility.
In this post, we will share five key facts that will help you understand Medicaid and nursing home asset protection.
Asset Limit and Non-Countable Assets
There is an asset limit of $2000, but some assets are not countable for Medicaid eligibility purposes. For example, wedding rings, engagement rings, and heirloom jewelry are not counted, and your household and personal items are exempt.
In addition, you can have unlimited term life insurance, a prepaid burial plot, $1500 saved for final expenses, and $1500 of whole life insurance. The most significant non-countable asset is your home, but there is an equity limit of $603,000 in Oklahoma in 2021.
Healthy Spouse Allowances
When a married person applies for Medicaid while their spouse is still living independently, the healthy spouse is entitled to two allowances. The first is the Community Spouse Resource Allowance (CSRA), which generally equals half of the couple’s countable assets. The maximum CSRA in Oklahoma is $130,380. The minimum CSRA is $26,076, and the healthy spouse may retain this minimum amount even if it is more than half of the countable assets.
A Medicaid beneficiary in a long-term care facility may receive a $75/month personal needs allowance, and the rest of his/her income goes toward the cost of the care. However, the law allows some flexibility if the healthy spouse relies on the income to maintain a reasonable standard of living. This second allowance is the Monthly Maintenance Needs Allowance, which amounts to $3260, which changes annually to account for inflation.
A Medicaid Trust Can Provide a Solution
In an effort to remove countable assets from your name to gain Medicaid eligibility, resources may be conveyed to a Medicaid trust. The Medicaid trust is an irrevocable trust, meaning you are unable to dissolve the trust or access the principal.
However, you may accept distributions of the trust’s earnings, and this may allow you to maintain your lifestyle while living independently. If and when you apply for Medicaid, you would no longer receive the income, but the principal would not be countable.
Advance Planning Is Key
In order for this planning to work, assets must be transferred to a Medicaid trust early. The Medicaid application process requires a “five-year look back” period, meaning that transfers out of your name must occur at least five years before you apply for Medicaid coverage.
The most important thing to know about Medicaid planning is the simple fact that we can help you create a plan that ideally suits your needs.
If you act in advance, you can enjoy your golden years in comfort and go forward with the knowledge that nursing home costs will not destroy your legacy.
You can schedule a consultation at our Oklahoma City office if you call us at 405-843-6100, and you can use our contact form if you would prefer to send us a message.