Meet Helen, who’s 88-years-old, widowed and has been living with her daughter Amy for the last year. Amy and her husband both have full-time jobs, and they don’t feel like they’re giving Helen the level of care she needs and deserves. They think she needs nursing home care, but they’re not sure how any of them can afford it.
Helen has early symptoms of Alzheimer’s disease, and a recent stroke has left much of her right side paralyzed. She needs assistance with all five of the Activities of Daily Living as defined by Medicaid: mobility, bathing, dressing, eating and, occasionally, toileting. Requiring help with just three of the five Activities of Daily Living constitutes needing a Nursing Facility Level of Care (NFLOC) in the state where Helen and Amy live, and needing that level of care is the medical requirement for Medicaid’s nursing home coverage.
In addition to meeting the medical requirement for Nursing Home Medicaid, Helen also meets one of the financial requirements – the income limit. Her income is $2,000/month, all from Social Security benefits, and that puts her well below the individual income limit in her state. The other financial requirement, the asset limit, is a different story.
The individual asset limit for Nursing Home Medicaid in Helen’s state is $2,000, but she has $100,000 in assets in the form of stocks and CDs left to her by her late husband. She also owned a home worth $100,000, but she recently signed the deed to that house over to Amy.
Amy knows her mother would quickly burn through her savings paying for nursing home care out-of-pocket since the homes they are looking at cost $9,500/month. She and her husband can’t afford to take on that expense, either. After doing some research, Amy finds out Medicaid will cover nursing home expenses for qualified individuals, but she also discovers her mother’s assets put her over the asset limit. She reads something that suggests there are ways for seniors to qualify even if they are over the financial limits, so Amy decides to contact the Certified Medicaid Planners at Eldercare Resource Planning to try and help her mother.
$75,000 Worth of Assets Preserved Thanks to Eldercare Resource Planning
• Secure Medicaid’s nursing home coverage for Helen.
• Maximize Helen’s resources, including the gift of her former home to Amy.
• Enable Amy and her husband to maximize their own resources while still ensuring quality care for Helen.
After her initial consultation with Eldercare Resource Planning, Amy recognizes that help from our integrated team of Certified Medicaid Planners (CMPs), financial consultants and legal advisers is exactly what she and her mother need. We know we can help Amy and Helen achieve all the goals listed above because we’ve done it before. Plus, we can make sure Helen’s Medicaid application is completed and submitted correctly. That’s one less thing Amy will have to do or worry about, because we will ensure it’s all done correctly, and that’s important. One error could lead to an application being denied or a penalty period of ineligibility, which would leave Helen and Amy paying those pricey nursing home bills out of pocket.
When our team of professionals digs into Helen’s case, they immediately spot a red flag – signing over the home to Amy. Medicaid views this is as giving a gift, and that violates Medicaid’s Look-Back Period, which prevents applicants from simply giving away their assets to get under the asset limit. As a result of this violation, Helen will face a penalty period of ineligibility.
The length of the penalty period is calculated by using the amount of money or value of the asset that violated the Look-Back Period (in this case, it’s the $100,000 value of the home that Helen gave to Amy) and a “penalty divisor,” which can vary by state. Helen’s penalty period turned out to be 10 months long.
Next, our CMPs double check Helen’s income to make sure that it is indeed under the limit. They find that it is, but there are ways to qualify for Medicaid if you are over the income limit. It should also be noted that anyone receiving Medicaid’s nursing home coverage, like Helen hopes to be, is required to give almost all of their income to the state to help cover the cost of care. They are only allowed to keep a small personal needs allowance (between $30 and $200/month depending on the state), enough to make Medicare premium payments if they are dual eligible and enough to make spousal income allowance payments to qualified spouses.
Next, our team of professionals will determine which of Helen’s assets will be counted toward Medicaid’s asset limit, and the total value of those assets. As it turns out, the $100,000 in stocks and CDs are the only countable assets, which means she is $98,000 over her asset limit of $2,000.
Given all the information, our CMPs come up with a plan for Helen to “spend down” her excess $98,000 in assets so she can qualify for Medicaid, and in the process she will be able to cover the nursing home expenses she has to pay out of pocket during her penalty period. Helen could spend down her excess money on almost anything, as long as she spends on herself (spending on others violates the Look-Back Period) and doesn’t purchase anything that would be a countable asset, like a second car or expensive jewelry. She could pay off debt, take a vacation or pay medical bills. But to cover her long-term care expenses during the penalty period and to get the most out of her assets, our CMPs advise Helen to spend down using two financial tools that we will discuss next.
Our CMPs suggest Helen spend down the bulk of her money by purchasing a Medicaid Compliant Annuity for $75,000.
In short, annuities works like this: You purchase an annuity with a lump sum of cash, and the company you purchased it from (usually an insurance company) pays you back that total over predetermined length of time with monthly payments.
In this case, Helen purchased an annuity worth $75,000 that will pay her back over the course of the next 10 months (the time of her penalty period), which means she is going to get $7,500/month for the next 10 month. Add that to Helen’s $2,000/month in Social Security benefits, and she can afford to pay out of pocket for the $9,500/month nursing home during her period of ineligibility.
Not all annuities are Medicaid Compliant Annuities, which need to follow multiple rules in order to meet Medicaid standards, including being immediate, fixed and irrevocable. Fortunately for Helen and Amy, they didn’t have to worry about buying the wrong kind of annuity because they had a CMP by their side while they made the purchase.
After buying the Medicaid Compliant Annuity, Helen still has $23,000 in assets to spend down ($98,000 total – $75,000 annuity = $23,000). Our CMPs suggest she spend $15,000 on another financial tool, an Irrevocable Funeral Trust. The money in these trusts will be used to pay for the owner’s funeral and burial expenses after they are deceased, but it won’t count toward Medicaid’s asset limit.
That leaves Helen with another $8,000 to spend down, and she does that by paying off debt and paying Eldercare Resource Planning for our Medicaid planning services, which are both allowable spend down expenses.
After liquidating her assets and purchasing a Medicaid Compliant Annuity, Helen could afford to move into a nursing home and receive the kind of full-time care she truly needed. After her 10-month penalty period was over and the payouts from the Medicaid Compliant Annuity stopped, Helen smoothly transitioned to Medicaid coverage.
Our CMPs had already helped Amy and Helen gather all the financial paperwork needed for the application. They also helped complete the application correctly and well ahead of time, and then submit it at exactly the right time. So, there was no lapse in coverage and no need to even worry about it.
In the end, Eldercare Resource Planning:
• Helped Helen get the long-term nursing home care she needed, which was valued at $9,500/month.
• Relieved the pressure on Amy and her husband to care for Helen or pay for her care.
• Enabled Amy to keep the home she inherited from her mother.
• Enabled Helen to use $15,000 of her savings to pay for funeral and burial expenses and take another burden off of Amy’s shoulders.
Our team of Certified Medicaid Planners™ will help you navigate the difficult landscape of Medicaid for long-term care.
