Many people are a little bit confused when they first hear that Medicaid is something they should learn about as they are looking ahead toward their senior years. After all, you pay into the Medicare program all your life in anticipation of earning eligibility when you reach the age of 65. Why should you care about Medicaid?
Here’s the answer: Medicare does not pay for long-term care, but Medicaid will pick up the tab for nursing home expenses.
This jointly run federal-state government health insurance program is intended for people with sparse resources, so there is an income limit, and a low asset limit of just $2000. However, if you take the right steps in advance, you can potentially qualify if you engage a licensed elder law attorney to guide you appropriately.
The first good news is the fact that everything that you own is not considered to be a countable asset with regard to this $2000 limit. If you own your home, it is not counted, but there is an equity limit of $572,000 at the time of this writing. Your household goods, personal effects, heirloom jewelry, wedding ring, engagement ring, and motor vehicle are exempt as well. Plus, you can have up to $1500 of whole life insurance and unlimited term life insurance coverage.
In many instances, a person that is married will require nursing home care while his or her spouse can still live independently. In Medicaid parlance, this healthy spouse is referred to as the “community spouse.” When a healthy spouse is remaining at home, there is no equity limit at all. Plus, there is a Community Spouse Resource Allowance. This equates to half of the shared assets that are considered to be countable by the Medicaid program.
However, there is a limit to the Community Spouse Resource Allowance. At the time of this writing, it stands at $123,600 in the state of Michigan, where our office is located. This is the maximum, but there is also a minimum Community Spouse Resource Allowance of $24,720. To explain the minimum by way of example, let’s say that you and your spouse have $30,000 of shared countable assets. Half of that is $15,000, but because there is a minimum allowance, the healthy spouse would be allowed to keep $24,720.
A monthly maintenance needs allowance may also be available to the community spouse. Under Medicaid rules, almost all of the income that is brought in by the person that is going to be entering a nursing home must go toward the cost of the care. This rule does not apply if the healthy spouse is relying on some or all of this income to maintain a reasonable standard of living. At the present time, the maximum monthly maintenance needs allowance in Michigan is $3090, and the minimum this $2030.
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With careful planning, you can divest yourself of the assets that would be preventing you from qualifying for Medicaid. One way to do this would be to convey resources into an irrevocable Medicaid trust. The principal would not be accessible to you, but you would be able to continue to receive income that is generated by the trust until and unless you submit your application for Medicaid coverage.
All the above can sound quite simple. You go about your business as usual, and if you find out that you need to enter a nursing home, you can establish a trust or give assets to your loved ones. In fact, there is a rule in place to prevent reactive divestitures. A penalty is imposed and your eligibility is delayed if you give away assets within five years of applying for Medicaid. This is why intelligent, informed advance planning is necessary.
If you would like to discuss Medicaid planning strategies with our firm, you can set up a consultation right now if you call us at 586-493-7661.