- Applying for Medicaid assistance so that you or a loved one may move into a long-term care facility can be an arduous process governed by a highly detailed body of law. Many things that you have heard about qualifying for Medicaid may not be true, or may not apply to your particular situation. A nursing home or hospital that offers to file a Medicaid application for you has no obligation and lacks the expertise to advise you on how to protect your assets. Some things to consider:
- Assets in a revocable living trust are not protected and must be used to pay for the costs of long-term care.
- If you are married, your home is exempt and cannot be taken when applying for Medicaid. If you are single or widowed, your home is exempt up to $750,000. If you transfer your home to your children, not only will it result in immediate ineligibility for Medicaid, but it could also:
- Trigger a gift tax;
- Result in the loss of any property tax exemption;
- Result in your child’s spouse (the in-laws) inheriting your home.
- Giving your assets away means losing control. It’s not safe even if you wholly “trust” the recipient. If that person divorces, goes bankrupt, or is sued, all of the money you transferred is at risk. There are asset protection trusts that permit you to keep 100% control of your assets without the risk of losing them if long-term care is needed.
- You do not have to wait 60 months to qualify for Medicaid. Eligibility is calculated on a case-by-case basis. It is possible to have over $250,000 in cash and qualify immediately.
- It is never too late to protect your assets, even if you are already in a nursing home. In many cases, you can qualify for Medicaid sooner if you are already in a nursing home.
- Applying for Medicaid prior to qualification could result in being disqualified for a longer period of time than you otherwise would have been.
- Medicaid also covers home-based services that allow you to stay in your home and have a loved-one care for you.
- Consider long-term care insurance. An annual premium for a couple is usually less expensive than one month of nursing home care, and insurance premiums significantly increase as you get older. Statistically, there is a 60-70% likelihood that you will enter into a long-term care facility for any period of time. The earlier you plan, the better!
MEDICARE v. MEDICAID
It probably comes as no surprise that people often confuse the benefits offered by Medicare with those offered by Medicaid. Below are a few distinguishing characteristics about each program.
Who and what is covered:
Medicare is a health-care benefit provided by the federal government to individuals over age 65, or under age 65 and disabled. Medicare covers doctor visits, tests and care provided in a hospital setting, and limited benefits in a nursing home. In most instances, Medicare will only pay for 20 days in a nursing home.
Medicaid is a public assistance program that provides health care insurance for the needy. To qualify, you must not exceed certain income and asset limits. Medicaid will cover all of your nursing home costs if you qualify.
How to qualify:
To qualify for Medicare, you must be over 65, and eligible for Social Security benefits. You may also qualify if you are under age 65 and have been disabled for two years. An application at the Social Security office will get your benefits started.
To qualify for Medicaid, you must submit a multiple-page application and provide detailed proof of all of your financial transactions (banking, CDs, stocks, bonds, income, expenses, annuities, etc.) for the previous 60 months.
Planning For A Child With Special Needs
For a child with special needs (minor or adult), it is especially important to make sure that he or she does not become disqualified from any state or federal benefits because of a direct inheritance of a sum of money through a will, via intestacy, or a life insurance payout. Allowing funds to pass to a special needs trust for the benefit of the special needs child ensures that the child will continue to receive benefits such as Supplemental Security Income (SSI) and Medicaid (benefits related to the beneficiary’s disability and personal income level), and Medicare and Social Security Disability Income (employment-based benefits typically derived from the beneficiary’s retired, deceased, or disabled parent). Even if the child does not rely on Medicaid for medical coverage, there are many community-based programs for which a child must be “Medicaid qualified” to receive.
In addition to creating a special needs trust itself, all IRAs, 401k plans, payable on death (POD)/transfer on death (TOD) accounts, and jointly-held accounts should also list the special needs trust as the recipient instead of the special needs child.
There are many different types of special needs trusts. For instance, a special needs trust can be established by a third party who funds the trust with his or her own assets, and as of December 13, 2016, a special needs individual may personally establish his or her own special needs trust without court approval, although there are more restrictions.