Long-Term Care & Medicaid Planning

Protect Yourself, Your Loved Ones, and Your Property

Don’t wait for a crisis – plan ahead to protect yourself, your loved ones, and your property!

Learn how a Medicaid Asset Protection Trust can protect your property and your family from Medicaid spend-down if you need long-term care and Medicaid Estate Recovery after you pass.

LONG-TERM CARE WORRIES:

If you are worried about the possibility of needing long-term care as you get older or your health declines, you are not alone. Unfortunately, there is good reason for concern.

Roughly 60% of us will need some sort of long-term care during our lifetimes. As you get older, the likelihood of needing long-term care increases. The good news is that 65% of seniors who need long-term care can receive some or all of their care at home. However, 35% will require nursing home care for at least a year. 20% will need long-term care for more than 5 years.

These are alarming statistics! The numbers become even more worrisome when you factor in the cost of long-term care. In Montgomery County, Ohio, home health care or assisted living costs average more than $6,500.00 per month. A private room in a nursing home costs an average of almost $128,000.00 per year. For many families, these costs are financially devastating.

MEDICARE DOESN’T COVER MOST LONG-TERM CARE COSTS:

Medicare covers very few of these long-term care expenses.

Medicare does provide limited, short-term coverage for care in a skilled nursing home or rehabilitation facility if you are admitted to the hospital as an inpatient for at least 3 days and require skilled nursing services or rehabilitative care when you are released. Even in these limited circumstances, Medicare pays 100% of the costs for only the first 20 days. Medicare will pay part of the costs of nursing home care and rehabilitation for up to another 80 days, if you continue to meet all other eligibility criteria. The average Medicare covered nursing home stay is only 22 days long – Medicare rarely pays for a full 100 days of skilled nursing or rehabilitation care.

Medicare never covers the costs of custodial long-term care related to dementia or other health conditions that cannot be “rehabilitated”. Most long-term care is considered custodial care and is not covered by Medicare. Overall, Medicare pays for less than 20% of all long-term care costs.

LONG-TERM CARE COVERAGE OPTIONS:

If Medicare pays for less than 20% of long-term care costs, what other options are available?

MEDICAID LONG-TERM CARE PROGRAMS:

There are three Medicaid programs that provide long-term care benefits: Nursing Home Care, Assisted Living Waiver, and PASSPORT.

MEDICAID ELIGIBILITY CRITERIA:

To qualify for long-term care Medicaid benefits, you must meet health care, asset, and income eligibility requirements.

WHAT IS MEDICAID SPEND DOWN?

Medicaid “spend down” is the process of spending your excess financial resources for your own long-term care expenses and other permissible expenditures until you are sufficiently impoverished to qualify for long-term care Medicaid benefits. Medicaid is a need-based benefit program and all applicants must meet the financial eligibility requirements described above. Spend-down strategies may include prepaying funeral and burial expenses, paying creditors, buying exempt resources, purchasing a Medicaid-compliant annuity, creating a Medicaid-compliant trust, and more.

Both the timing and spend down strategies selected matter! Please do not attempt Medicaid spend down without consulting with an attorney. An effective spend-down plan will enable you to minimize the amount of resources spent on long-term care expenses and qualify for Medicaid benefits more quickly. A haphazard or do-it-yourself plan may result in an improper transfer penalty or more resources spent towards your costs of care.

WHAT IS MEDICAID ESTATE RECOVERY?

Medicaid Estate Recovery is the State payback process used to recoup funds after a Medicaid recipient dies. The State may seek recovery from a deceased Medicaid recipient’s estate or from property transferred to beneficiaries. If you have a living spouse, Medicaid Estate Recovery will be postponed until after your spouse has passed. Most assets that you own at the time of your death will be subject to Medicaid Estate Recovery. Assets that are considered exempt at the Medicaid application stage (including your home and retirement accounts) are subject to Medicaid Estate Recovery.

WHAT IS AN IMPROPER TRANSFER PENALTY?

Future eligibility for Medicaid benefits may be adversely affected anytime you give money or other assets away. The State penalizes Medicaid applicants who make gifts or transfers for less than fair market value during the five years prior to application. The five years prior to Medicaid application is referred to as the “look-back period”. All gifts or transfers for less than fair market value during look-back period are considered “improper transfers.” The federal annual gift tax exclusion amount does not apply to Medicaid transfers. The State imposes a penalty period based on the value of all assets improperly transferred. During an improper transfer penalty period, Medicaid will not pay for the costs of your long-term care. Your long-term care expenses will have to be paid from your limited remaining resources or by other family members.

MEDICAID ASSET PROTECTION TRUST PLANNING:

You can plan ahead to protect your excess resources for your family if you need long-term care. A Medicaid Asset Protection Trust (MAPT) is a pre-need planning strategy designed to protect your assets from Medicaid spend down during your lifetime and Medicaid Estate Recovery following your death. A MAPT Trust is an irrevocable trust that allows you to protect and preserve your excess assets for your children, grandchildren, or other beneficiaries. Ideally, a MAPT Trust should be created and assets transferred into trust at least five years before you may need to apply for Medicaid benefits.

A MAPT Trust is irrevocable, meaning you won’t be able to withdraw assets transferred into the trust for your own personal use. To receive the full asset-protection benefits of a MAPT Trust, you must appoint someone other than yourself or your spouse to serve as trustee, and you cannot be a beneficiary of the trust principal. When using a MAPT Trust to protect and preserve your assets, you give up control over and access to the value of your assets in exchange for protection from creditors in general and Medicaid in particular. If you can access the principal assets of a trust, Medicaid can too.

Since you cannot be a beneficiary of the principal or asset value of your own MAPT Trust, you will want to retain sufficient assets in your personal name to support yourself and sustain your lifestyle throughout your lifetime. Only assets that you do not intend to need for your personal support (your excess assets) should be transferred into a MAPT Trust.

Giving up control over and access to the assets in your MAPT Trust is a definite drawback to long-term care asset protection planning. We can reduce the negative impacts somewhat by retaining certain rights for you within the trust terms, including the rights to continue living in your home, receive income earned on trust property, direct the trustee’s investment decisions, borrow money from the trust, remove and replace the trustee, and change trust beneficiaries. If you are interested in using a MAPT Trust to protect a small business, family farm, or other income-generating property, managing those assets within a limited liability company (LLC) will allow you to maintain some management control over property owned by the MAPT trustee.

The most common asset people choose to transfer into a MAPT Trust is their home. If you transfer your home into a MAPT Trust, you may continue living in your home rent-free. You may also direct the trustee to sell your home and purchase an alternate residence if you decide to move or downsize. However, you will not be able to use proceeds from the sale of the home for your support or borrow against the equity in your home to supplement your income or personal assets.

ADDITIONAL MEDICAID PLANNING STRATEGIES:

If you anticipate needing long-term care and Medicaid benefits within the next five years, or if you need Medicaid now, there are many short-term and crisis planning strategies available. Depending on your financial, health, and family circumstances those options may include:

• Purchasing a Medicaid Compliant Annuity for you or your spouse
• Strategic Gifting to family members (an improper transfer penalty will apply)
• Creating a Pooled Trust or other Medicaid exempt trust
• Borrowing against the equity of your home to increase the amount of resources your spouse can retain (if your combined countable resources are less than $310,000)
• Transferring assets to or for the benefit of a disabled family member

Please seek the advice and assistance of an experienced Medicaid planning attorney to assist you. There are very specific laws and rules that must be followed for each of these planning strategies. If done incorrectly, your long-term care Medicaid benefits could be delayed or denied.

As mentioned under Estate Planning, Wills and Trusts, my maternal grandparents were two of the most important and influential people in my life growing up. I paid attention when they spoke, and they talked a lot about what would happen as they got older or their health failed. I would roll my eyes and change the subject – I thought they worried about the future too much. But in their 80s, my grandmother developed Alzheimer’s and my grandfather’s heart condition worsened. They eventually needed 24/7 care and assistance. Thankfully, they had been planning ahead for years for exactly this possibility. My grandparents set a good example for me to follow and prompted my interest in estate planning and elder law. They both passed while I was in law school, but I honor their memory by helping other families plan for their own long-term care needs.

Please note, Medicaid eligibility is determined under the laws and regulations in effect on the date of Medicaid application, not the laws in effect when Medicaid planning is undertaken. The laws and regulations governing Medicaid eligibility may change between the time of planning and the date of application.