Sandra W. Reed’s Life Care Planning: Medicaid ‘What ifs’ –Too much income, too many assets?

Attorney Sandra W. Reed answers your life planning questions.

Attorney Sandra W. Reed answers your

life planning questions.

Editor’s Note: This is the second part of Sandra W. Reed’s column on Medicaid benefits and who qualifies for them.

Applicants With Too Much Income

The Single Applicant

A single Texas applicant who seeks Medicaid benefits in 2013 for long-term care is limited to a gross income of $2,130 a month. The applicant whose income is over this amount by even one penny will not qualify.

Example:  Irene had a stroke. Her husband died in 2002. She owns a home worth $250,000 and one car. She receives a monthly Social Security check of $1,813, from which a Medicare supplemental insurance premium of $310 has been deducted. She has $1,500 in her bank account and no other assets. Irene’s countable resources do not disqualify her for Medicaid. Will she qualify under the income limits?

Answer: No. Irene’s gross income is $2, 240 a month, $110.00 over the qualifying limit of $2,130. Is there anything Irene can do to qualify?

Answer: Yes. Irene needs a Qualified Income Trust, a so-called Miller Trust. This is the only solution to the over-income problem. The Miller Trust is not like a traditional trust. Its sole purpose is to funnel funds first from applicant to trust and then from trust to the care facility.

Irene needs a qualified attorney to draw up the trust document. The trustee sets up a new bank account with Irene’s Social Security number, making the trustee as the only signatory. Irene’s Social Security checks are deposited into the trust. The Medicare supplemental premiums can still be paid from her gross SS benefit. Irene receives a $60 allowance for personal needs. The balance goes to the care facility with Medicaid paying the balance charged.

The Married Couple

If one spouse needs facility care and one remains at home, the stay-at-home spouse can keep all income in his or her name.  If the at-home spouse’s income is below $2,898, he or she may keep a portion of the incapacitated spouse’s income to meet that figure. If both incomes are below $2,898, they can keep other resources. This will be discussed in more detail in next week’s column.

Example: Clancy is in a nursing home. He and his wife, Janice, own a $150,000 home, one car and prepaid burial policies.  heir countable resources do not disqualify Clancy. Clancy’s income from teacher retirement is $2,200 monthly. Janice’s gross monthly Social Security check is $850. Will Clancy qualify?

Answer:  No. His income is over $2,130. Clancy needs a Miller Trust to qualify. However, Irene can keep Clancy’s income to bring her up to $2,898.  Clancy’s Miller Trust distributes this way:  (1) $60 to Clancy; (2) $2,048 to Irene ($2,898 – $850); and (3) $92 to the care facility. Medicaid pays the balance the facility charges.

Applicants Over Resource Limit

The Single Applicant

The single applicant asset limit is $2,000. The applicant must exercise available options to meet that amount.

The Married Applicant

The $2,000 resource limit makes families nervous, especially when one spouse remains at home. They worry about upkeep on the house and necessities for the at-home spouse. Medicaid addresses that concern by allowing the at-home spouse to keep assets above $2,000 to avoid becoming impoverished.

Medicaid first lumps all assets together, regardless of whether owned in one or the other’s name or both. Medicaid sets a minimum of $23,184 on these combined assets. If the figure is below that amount, the otherwise qualified applicant qualifies immediately and the at-home spouse keeps all assets. Medicare sets a maximum of $231,840 on these combined assets. If the combined assets are between $23,184 and $46,368, the at-home spouse may keep $23,184.  If the combined assets are between $46,368 and $231,840, the at-home spouse may keep half. If the combined assets are over $231,840 , at-home spouse is allowed to keep $115,920.

Options When Assets Exceed Allowable Value

Options are available if assets are more than the allowable value. The options are not as simple as the Miller Trust for dealing with the over-income level. Families will benefit from consulting a knowledgeable attorney to discuss appropriate methods for their circumstances. The remainder of this column will discuss three options: (1) spending on care; (2) converting countable resources into non-countable ones and (3) gifting.

Spending Assets

Let’s assume applicant has too much cash. The simplest solution is to spend it on care until the money reaches the level to qualify. However, this is not always the best policy.

Converting Countable Assets

The better solution may be to convert countable cash into a non-countable asset. This can be done a number of ways. Pay down any mortgage on the home. Pay off credit cards. Purchase pre-paid burial policies. Make repairs and improvements to the home, a non-countable resource. Replace an old car, another non-countable asset, with a newer model.  In other words, spend cash but retain value.

Gifting                                                                                                                                                

 This option must be done with extreme care and caution with the assistance of an attorney familiar with the issues. It is fraught with problems if not done properly.

Example: The applicant gives money away, which invokes a penalty of a number of days of ineligibility on the applicant for Medicaid.  For the year 2013, the penalty is calculated by dividing the amount of the gift by $142.92. The penalty period begins on the day the applicant is placed in a Medicaid bed and is otherwise eligible.

The gift recipient pays the difference between the applicant’s income and the monthly cost of long-term care. Medicaid re-calculates each month, subtracting from the gift the amounts paid for care and certain expenses, such that the penalty period and the gift amount meet in the middle. Generally, the recipient of the gift can retain 40 to 60 percent of funds transferred.

 Sandra W. Reed is an attorney with Katten & Benson, an Elder Law firm, whose principal office is located in Fort Worth. She lives and practices in Somervell County. If you have questions or concerns, please contact her by email at swreed2@yahoo.com or by phone at 254-797-0211.

 

 

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