I’ve had many conversations with families on the pros and cons of Medicaid. Many families feel that the Medicaid process is too stressful or do not understand how it will benefit their loved ones. This is especially true with Medicaid because of the specialized terminology that is used, confusion about the process, lack of knowledge on Medicaid policy, and the extensive work it takes to prepare an application. However, with the right help and guidance it becomes a very achievable goal. When the process is over, clients are glad they went through it all because their loved ones’ funds will not be unnecessarily depleted by expensive nursing home fees.
Are Assets and Income the Only Factors to consider when making an application for Medicaid?
One scenario we often encounter includes a hidden element. Lets say your mother has to be placed into a nursing facility for long term care and she has very few assets, maybe less than $2,000.00. What many people do not understand is that gratuitous transfers (those for less than fair market value) will result in disqualification. Depending on how much was transferred the disqualification period can be a partial month, or many many months.
This scenario assumes she is under the asset limit, and has no other countable assets.
What Kind of Gifts Does Medicaid Consider in an application for Medicaid?
Before she can qualify for Medicaid, we would need to address the gifting. Medicaid has a five year look back period and treats assets, including money, transferred to any person for less than fair market value as a gift. It is important to not get hung up on the word “gift.” This rule will apply to any transfer for less than fair market value.
Gifts could be birthday gifts, funds transferred to another individual, sale of a home for less than fair market value, sale of a vehicle for less than fair market value, transfer of assets (house or vehicle) to family, handouts to family members, etc. Essentially, the Department of Children and Families does not accept any transfer of assets, accounts, or money to anyone for any reason without money received in return for the fair market value of the item. Short of complete return of all gifting, there is no way around this issue without the help of an attorney and proper legal documents and spend downs.
How Can I Fix Gifting in Preparation for Medicaid?
Typically, we suggest a few legal strategies to address gifting. Returning gifts, using promissory notes and other obligations to return equivalent value for the gift, and then transferring that obligation for fair market value of a non-countable asset or payment for services are some of the options we use.
After the gifting is addressed, in this example, she would qualify. The Department of Children and Families will still evaluate her income and assets to make sure she meets all requirements.
Some people think a will or other testamentary transfer strategy is enough to protect assets from Medicaid. Wills and other testamentary transfers must be probated and have no real effect on assets during lifetime, which is what DCF cares about at the time of the application.
It is very important to make sure any assets remaining in the applicant’s name avoid probate to protect them for the applicant’s heirs and beneficiaries.
Some families think their family member has enough money to afford care in a skilled nursing facility, and question why they may need Medicaid when they can private pay? Private pay is always an option. However, the average going rate for private nursing home care is nearly $10,000.00 a month. If someone stays in a nursing home for a year, they can plan on spending nearly $120,000.00. At this rate, even relatively large estates will be depleted by nursing home care.
I would also suggest looking through our practice page regarding Medicaid for some additional information.
If you are considering an application for Medicaid to pay for skilled nursing care in a nursing home, contact us for a free consultation to find out how we can help you and your loved one apply for Medicaid.