Goals
- Securing Medicaid Benefits for Helen.
- Ensuring Amy and her husband are able to secure their finances to support themselves and provide for Helen’s care.
- Preserving the value of the gift of the home.
Solution
Amy decided to enlist the help of ECR Planning’s Certified Medicaid Planners in order to make sure that she submits the application correctly on the first attempt. This way she and her husband preserve their assets, avoid unnecessary stress and frustrating bureaucratic delays, and save the out of pocket costs on Helen’s ongoing care if they were to make a second attempt at the application.
Process
Luckily Helen’s income is only $2,000 per month, and she is below the Medicaid income limit for her state. But at $2,000 a month, and paying for a $9,500 nursing facility means her deficit is going to be $7,500 monthly.
Helen needs to be below $2,000 in total assets in her state to be eligible for Medicaid. Her countable assets in the eyes of Medicaid are $100,000. Therefore her spend down will be $98,000 before she is eligible for Medicaid.
However, there is another issue Helen is facing. Because she gave the deed of her house to her daughter after her husband passed, Medicaid is going to view that as “gifting.” Gifting in the realm of Medicaid will typically incur a penalty, but typically it is a penalty of time and not dollar value. In Helen’s state, the penalty divisor is $10,000.
More simply put, because Medicaid views the amount gifted as $100,000 for the house, at a penalty divisor of $10,000, this means that starting the first day Helen is approved for Medicaid, her benefits will not start for the next 10 months. If Helen has to be below $2,000 in assets and pay $9,500 per month to the facility, how will she pay for her care over the 10 month penalty period?
Financial Tools
One potential solution to Helen’s problem is a Medicaid Compliant Annuity. A Medicaid Compliant Annuity is a product that can be purchased with the remaining assets and make Helen eligible for Medicaid immediately. It’s a special type of annuity that turns countable assets into income. It must be set up accurately with the correct wording. A Certified Medicaid Planner is authorized to help you get the right MCA to fit your needs and avoid any Medicaid penalties.
Helen could purchase a Medicaid annuity that would give her just enough money to pay for her care privately during the penalty period. This product would cost about $75,000. The purchase would be an allowed expenditure during the look back period.
A final expense policy could also be purchased at this time for $10,000 to cover the costs of a funeral, memorial, or burial services. Finally, she may elect to use Medicaid planning services, as well as purchase other needed items to complete her spend down to $2000.
The Medicaid compliant annuity performs an essential function in this case because it allows the applicant to start the penalty promptly and to have enough income to afford to pay for the cost of the nursing home through the 10 months of penalty.
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