Can Medicaid Take Your House?

If you are an elderly individual who has been living with your spouse for most of your life, it can be a scary situation if they are suddenly put into a nursing home, and it can leave your mind full of swirling questions and concern. Not the least of those questions might be if Medicaid can actually take your house in order to pay for the cost of the nursing home care that your spouse requires. Dealing with such a transition is hard enough in and of itself; you shouldn’t have to worry about potentially not having a place to live on top of it. So let’s put those fears you may have to rest.

Generally, a person’s house is exempt, and as such, isn’t counted when he or she goes to apply for Medicaid. You need to check current law to confirm this in your case. However, if you’re married and your spouse continues to live in the home, the home then becomes exempt regardless of value.

Also, some states will require that the person applying for Medicaid or the homeowner indicate either orally or in writing that they “intend to return” to their house if they are ever physically able to do so, regardless of how unlikely a scenario it may be. If the person isn’t able to understand this or communicate it, then a family member can do so for them to the state Medicaid workers.

Please note that although the house might be exempt at the time the owner applies for Medicaid, there are a few states that will begin to count the house once six months have gone by, but only if it’s clear that the owner won’t ever be able to go back to the home according to a physician’s examination and conclusion. However, this is a minority position, and most states will continue to exempt the house for as long as the applicant is alive.

However, in all states, once the Medicaid recipient dies, the state will then seek repayment of any Medicaid outlays made on behalf of the recipient. For instance, if your loved one was in the nursing home two years, and Medicaid was paying them.

To finish up, in most cases, you will not lose the house in order to pay the nursing home as long as the recipient is alive, but it may be sold to pay off Medicaid once they have passed away.

Other names on your home title other than you and/or your spouse

When a married couple applies for Medicaid, assets are either exempt or countable towards the Medicaid eligibility limit. Exempt assets usually include the residence, when a spouse or certain other family members are living there, one automobile, furniture, clothing, etc., Typically, when one spouse is in a nursing home and the other spouse is living at their residence, the residence is exempt for Medicaid eligibility purposes. This would mean the spouse could keep living in the house and it would not negatively impact the other spouse’s Medicaid eligibility.

However, sometimes the title to the residence is not in the name of either spouse. For example, the home could be “owned” by a trust that the married couple established. In this case, it is possible that the home will not be exempted for Medicaid eligibility because it is not owned by either spouse. For example, a federal court decided that it was improper when a married couple set up a trust to have ownership of the residence at the time of the Medicaid resource assessment, when the ownership could shift back to the couple. As a result, the residence was not exempt for Medicaid eligibility because it was not owned by either spouse at the time, and the couple was penalized for Medicaid eligibility.

If you are in a situation or considering a situation where a trust would own your residence, or if you are considering transferring ownership to your residence to someone else, it is very important that you contact an elder law attorney beforehand. Transferring title to property prior to getting Medicaid may result in a Medicaid penalty if they find that you transferred it for less than fair market value. As you can see, title and ownership transfer can be a very sticky subject when you are trying to qualify for Medicaid. Make sure to talk to a professional to help keep your Medicaid eligibility on track.

Medicaid impoverishment rules

Medicaid is a joint federal and state program that provides health coverage for certain eligible persons who have low incomes and minimal assets. Medicaid is not to be confused with Medicare which is an entitlement program for those aged 65 or over, those on disability, or those with kidney failure, among other things. Medicare is something you become entitled to because you or a spouse paid for it through taxes by Social Security. Medicaid, on the other hand, is not an entitlement program, and instead you must meet exact eligibility guidelines.

Medicaid eligibility is different for each state so it’s important that you check with a professional that is familiar with the laws and regulations of your specific state. Specifically, eligibility for Medicaid is determined at the state level and it is mainly based on your income and the amount of assets you own. The income requirements for Medicaid are determined by the MAGI (Modified Adjusted Gross Income) and the exact income limit will be based on factors such as the size of your household.

In addition to income limits, there are also caps on the value of assets that someone may have to be eligible for Medicaid. While the specifics may vary from state to state, this countable asset cap is usually around $2,000. However, there are assets that may be exempt from being counted towards this cap. Assets that may be exempt could include your family home, your automobile, life insurance, among other things.

There are other specific provisions that may allow the spouse of a nursing home resident to retain about one half of the couple’s joint assets from being counted toward the asset limit for Medicaid. This situation typically arises when one spouse is applying for Medicaid and the other spouse is relatively healthy. This is called the “Community Spouse Resource Allowance” and there are very specific requirements that need to be met. As such, it’s important to discuss this possibility with a professional, such as a professional Medicaid Planner.

An important consideration to keep in mind when applying for Medicaid is that there is a “look back” period. In most states, except California, the look back period is five years. This means that Medicaid will “look back” five years from the date of your Medicaid application to make sure that you didn’t sell or give away assets for less than their fair market value. This “look back” period is meant to ensure that people don’t give away assets to their friends and relatives just to get under the Medicaid asset limits.

If you or someone you love needs assistance with Elder Care law issues, call 856-281-3131. Let us help ease your stress and give you a plan.
 

How to Set Up a Funeral Trust

There are multiple ways a funeral trust may be set up:

  • It may be set up directly through the funeral services provider.
  • You can find someone who deals with funeral trusts specifically via the Internet to walk you through the process.
  • Funeral trusts are also sold through insurance companies, and any such trusts are normally funded via single-premium whole life insurance.

If you or someone you love needs assistance with Elder Care law issues, call 856-281-3131. Let us help ease your stress and give you a plan.

Advantages and Disadvantages of a Funeral Trust

As we begin to age, there are many significant decisions to consider. A funeral trust is one of many choices you should make in advance with the assistance of professionals and loved ones. A funeral trust is a contract you create with a provider of a funeral home or burial services.

Advantages

If you already have a funeral trust in place, any other relative or person, or the funeral home will be able to handle any arrangements you have when needed. This eases a burden for grieving families and friends since all the decisions have been made in advance. Another advantage is the possibility of increasing your potential eligibility to receive long-term care benefits through Medicaid–thanks to the Medicaid Funeral Trust. If the trust is funded with life insurance, you will also have no taxable income to report, as life insurance cash values grow tax deferred. Also by “locking in” to set prices early through the trust, you have already settled upon a mutually agreed upon price.

Disadvantages

If you are considering using a funeral trust, you should ensure that an independent trustee is in place in order to make sure that the funeral bill is reasonable and to pay out any excess to the family. You’ll also need to make sure that the proceeds in the trust will be an acceptable form of payment prior to naming the funeral home as a trustee or beneficiary. Additionally,  make sure all of your information is current, like your financial information, contact information, etc.  Similarly, if you happen to move,  make sure to change the trustee and beneficiary to the new funeral home. Remember to provide either your executor or all of your heirs with a copy of the trust along with any contact information you have for the funeral home and beneficiary (if different).

If you don’t, any income from assets in the trust could be taxed to you as the creator.

If you or someone you love needs assistance with Elder Care law issues, call 856-281-3131. Let us help ease your stress and give you a plan.

What Expenses Are Paid For By a Funeral Trust?

The following expenses are paid for via a Funeral Trust:

  • Basic Services of Funeral Director and Staff
  • Other Professional Services
  • Embalming
  • Other Care of Deceased
  • Funeral Home Facilities and/or Staff Services
  • Casket
  • Cemetery Charges
  • Cemetery and Burial Plot
  • Other Funeral Merchandise

You can read more about Medicaid Funeral Trusts here.

If you or someone you love needs assistance with Elder Care law issues, call 856-281-3131. Let us help ease your stress and give you a plan.

What is a Medicaid Funeral Trust?

It is possible that, in your search for answers to questions regarding Medicaid, you may have seen the term Medicaid Funeral Trust come up at some point. But what exactly is a Medicaid Funeral Trust?

The Internal Revenue Service (IRS) defines a funeral trust simply as a fund of pooled income that is set up either via the funeral home or cemetery. The trust is funded by any property (normally cash, bonds, or life insurance) that a person transfers into it with the express purpose of covering both funeral and burial costs.

More often that not, the funeral trust is entered into directly with the funeral home itself, and the funeral home may potentially agree to lock in costs for any future funeral or burial services at a predetermined (and agreed upon) price.

The funeral home may also serve as trustee for the trust as well.

A funeral trust may be either revocable or irrevocable. An irrevocable trust cannot be dissolved until all terms of the trust have been met. With an irrevocable trust, this means that the creator of the trust must die before the terms and assets in the trust can go to work—thanks to wording in the trust that states that assets cannot be paid until death. However, it is important to note that an irrevocable funeral trust CANNOT be dissolved by any person or entity (not even the creator of the trust) for any reason whatsoever. Neither can anyone have access to any assets placed in the trust at any time.

Conversely, a revocable trust can be created by anyone and then dissolved by the creator at a later date. When the trust is dissolved, any remaining assets in the trust will then go back to the ownership status they had prior to being placed in the trust.

If you or someone you love needs assistance with Elder Care law issues, call 856-281-3131. Let us help ease your stress and give you a plan.

Medicaid Liens

When Medicaid pays for benefits on behalf of their enrollees, they make that money back in the form of what is known as a Medicaid lien. For individuals ages 55 and up, states are required to recover payments via the person’s estate for things like nursing facility services, home and community-based services, and any and all related hospital and prescription drug services.

There are certain situations in which any money remaining in a trust after a Medicaid enrollee passes away can be used to reimburse Medicaid. However, states cannot reimburse money from the estate of a deceased person if he or she has a spouse that’s still alive, a child under age 21, or one who is blind or disabled, regardless of age. The states are also required to waive estate recovery when not doing so would cause undue hardship.

However, states may also impose some liens for Medicaid benefits that had been paid incorrectly in an effort to receive judgment by the court. They may also impose liens on any real property during the lifetime of a Medicaid enrollee who is institutionalized permanently. Exceptions are as follows: a spouse, child under age 21, a blind or disabled child (regardless of age) are living in the house, or there is a sibling who has an equity interest in the home.

It is required by law, however, for states to remove the Medicaid lien when the enrollee is discharged from the facility or hospital and returns home.

If you or someone you love needs assistance with Elder Care law issues, call 856-281-3131. Let us help ease your stress and give you a plan.

Qualified Income Trusts

A Qualified Income Trust (or QIT) is one that affords the beneficiary control over the amount of money that is used for eligibility to receive Medicaid benefits. A QIT may also be referred to as a Miller Trust, and any money that goes into the trust is not considered when it comes to determining eligibility for Medicaid. The Qualified Income Trust can be used to qualify for ANY area of Medicaid, but mostpeople use it to qualify for the provision of long-term care.

A QIT has to meet the following requirements:

  • It must be made up of ONLY the beneficiary’s income. This includes any accumulated interest from the corpus of the trust; and
  • When the beneficiary passes away, the state then receives all funds that remain in the trust, though only up to an equal to the total amount that Medicaid paid on behalf of the beneficiary.
  • The QIT has to receive approval from the Department for Medicaid Services.
  • The QIT must be irrevocable.
  • Income has to be put into the trust to bring the individual below the Special Income Standard of $1,656 per month.
  • No resources are allowed to be placed into the trust.
  • A separate bank account is required to be set up for the trust.

If you or someone you love needs assistance with Elder Care law issues, call 856-281-3131. Let us help ease your stress and give you a plan.

 

Five Strategies for Protecting Money from Medicaid

Oftentimes, people want to protect their money with the (good) intention of passing it on to family after they pass away. However, due to the eligibility requirements put in place by Medicaid, this is generally impossible to do. This is because Medicaid wants you to spend your money before they will spend their own to help you cover costs of long-term care. If someone tries to gift money or any other assets in an effort to qualify for eligibility, Medicaid will find out during the “look-back” period and then serve the applicant a penalty period—a time in which he or she will be unable to retain eligibility. To try and avoid this, let us now look at some strategies to help families and individuals meet their needs while also protecting their money from Medicaid.

  1. Asset Protection Trusts

This kind of trust does exactly what you think it would, at least on the surface. If created correctly, it can do a variety of other things too. Normally, an asset protection trust is made when someone is initially applying to receive Medicaid benefits, and an applicant can only have a certain amount of money and property in their name in order to qualify.

Applicants can transfer money and property to family and friends, but doing so comes with disadvantages and risks—for example, the possibility that the recipients may incur debts or liabilities that can expose any assets that have been transferred to potentially be collected by a creditor. Also, any low-basis assets, such as a house purchased long ago for much less than the current fair-market value will have the same low basis for those to whom they were left in the trust.

Assets can be given to the same people at your death, but are given a “step up,” as it were, in regard to the fair market value if a trust is used. In doing so, beneficiaries will be able to avoid any capital gains tax on the increased value that trusts assets will accrue while you are alive.

When it is properly designed to account for the protection of assets, a trust, and the assets you put into it, are no longer your own. Because of this, Medicaid cannot touch them and neither can any other creditors. This is also known as a “Medicaid Trust” for this very reason. However, you should know that any transfers you make into a trust—just like those to individual people—are also subjected to the “look-back” period.

If you transfer your home into the trust, you are able to keep the right to live in it for as long as you are alive. If you have any assets that produce income transferred into the trust, you are still able to receive any of that income, but you will have no rights to either withdraw or demand access to the principal after putting it into the trust.

  1. Income Trusts

There is a very strictly enforced limit on income when one applies to receive Medicaid benefits. If a person receives income that exceeds this amount, it is considered to be excess and has to be handled correctly in order to get and keep eligibility for Medicaid. To help with this, you can make use of Qualified Income Trusts (or QITs) and Pooled Income Trusts (PITs). Let’s now quickly look at each of them in more detail.

Qualified Income Trusts

These types of trusts are irrevocable, and are made to hold any excess income an applicant might have when applying for Medicaid benefits. They can also be known by their other name, Miller Trusts, and there are some states that let applicants to spend down on that excess income by using it on their own care so they can meet Medicaid limits. However, there are other states, known as “income cap” states, that do not allow applicants to spend down. These are the states in which a QIT is often useful, and a trustee can be named in order to manage disbursement of any funds for any acceptable expenses.

Pooled Income Trusts

A Pooled Income Trust is also irrevocable, but unlike QITs, these are especially for disabled people. Any extra income they may have is polled altogether and then managed by a non-profit organization that acts as trustee, and disburses any funds on behalf of those for whom the trust was created. It should be known that Pooled Income Trusts are neither an investment or for estate planning purposes. Any unused funds will stay in the trust for charitable purposes.

  1. Private Annuities and Promissory Notes

Many times, older adults can suddenly find themselves in a bit of a pickle, where they might require long-term care, but they’ve just transferred assets or may still be holding a substantial amount of assets. Getting rid of assets during Medicaid’s look-back period will then flag the person for a penalty. The penalty period is calculated by dividing the value of or the amount transferred by the regional monthly rate that Medicaid uses to provide for nursing home care. The end result is a specific period of time (in months) that the person will be ineligible for benefits.

In order to keep as many of the assets as possible while also still qualifying for Medicaid, applicants can make use of a private annuity or promissory note that will allow for a consistent cash flow from the assets that can then be used to pay for care, and shorten the penalty period.

NOTE THAT NEW JERSEY DOES NOT ALLOW FOR THE USE OF ANNUITIES OR PROMISSORY NOTES FOR MEDICAID PLANNING.

  1. Caregiver Agreement

Creating a caregiver agreement is a good way for a number of elderly people to obtain extra services that they either want or need, but that are not covered by Medicaid and are also outside the realm of possibility for what a nursing home or other long-term care facility or home care company may be able to do.

If there is a family member or other friend who isn’t working or who is taking time away, they are able to provide these services while also receiving an income for doing so. This also allows for the elder to be taken care of by someone he or she knows, which is often preferable. Services are able to be paid for in advance and will legally reduce the number of countable resources the applicant may have.

If the caregiver is paid in advance, there are certain things the agreement must have in order to be accepted by Medicaid. They are:

  • It must define the exact services to be provided by the caregiver and the number of hours worked.
  • The lump-sum payment has to be calculated using a reasonable life expectancy and the legitimate market rates for the services provided.
  • A daily log of services rendered and hours worked must be kept at all times, along with written invoices.
  • When the patient dies, any unearned amounts have to be paid to Medicaid, but no more than the amount Medicaid paid for the patient’s care.
  1. Spousal Transfers and Spousal Refusal

One of the most important facts about Medicaid laws is the fact that transfers between spouses are okay and are not subjected the look-back period. Because of this, they do not incur any type of penalty. One of the more basic strategies among married couples is to simply transfer assets that are already in the name of the spouse that requires care to the one that is well. If the ill spouse is in an institutional setting, like a nursing home, for example, the well spouse may be referred to as the “community spouse,” since he or she still lives in the home.

New York and some other states allow for something known as spousal refusal, in which the community spouse can refuse to provide care for the spouse that needs support. Because of this, the spouse in need of care will automatically be eligible for Medicaid and begin receiving services.

New Jersey, however, is known as a “spousal share” state—in which spousal refusal is not allowed and the resources of both spouses are counted toward eligibility amounts for Medicaid.

If you or someone you love needs assistance with Elder Care law issues, call 856-281-3131. Let us help ease your stress and give you a plan.