Paying for Long-Term Care: Are You Eligible To Receive Medicaid?

Estate Planner July-Aug 2000

You’ve worked a lifetime to build up your assets and create a legacy for your family and you probably don’t want to lose everything to pay for long-term care costs. Giving away assets may make sense if you or a loved one is facing the prospect of nursing home placement, but be aware of the availability and consequences of receiving public benefits to cover the cost of care. Long-term nursing home care is expensive and not covered by Medicare, which forces many elderly individuals to apply for Medicaid benefits.

Medicaid eligibility for long-term care depends on your financial position. To prevent you from intentionally impoverishing yourself, an ineligibility period is applied for asset transfers made before applying for Medicaid. The rules are complex because some assets are exempt from the determination of an applicant’s financial status, and the transfer of certain assets to certain individuals also does not affect eligibility. Let’s take a closer look at the implications of transferring assets to qualify for Medicaid.

The Rules of the Game

Each state has different requirements, but generally, transfers you make within a certain period of application for Medicaid are subject to penalties that make the transferred property includable in your financial position for the relevant period. The period varies depending on whether an asset was transferred to a trust (60 months) or outright to an individual (36 months). Whether the trust was revocable and the value of the property transferred may also affect the ineligibility period.

What Is Exempt?

The Medicaid system exempts certain assets from the determination of eligibility. For example, your principal residence is exempt if your spouse or a disabled child lives there. In addition, you may transfer the residence without impact on Medicaid benefits to a child who:

  • Is under age 21,
  • Is disabled, or
  • Has provided care to you and has been residing in your residence with you for two years before the date you enter the nursing home.

An automobile is also exempt up to $4,500 if you are unmarried, or up to an unlimited value if you are married. Burial and cemetery plots of any value are exempt. Household goods of up to $2,000 in value are exempt. Finally, up to an additional $2,000 in any form is exempt from the determination.

To prevent impoverishment of your spouse who remains in the home, he or she is permitted to retain a certain amount of assets and is entitled to a monthly income allowance fixed by statute. These amounts are adjusted annually for changes in the cost of living.

Recovering Medicaid Expenses

Federal law requires all states to have a program that provides for the recovery of nursing home and long-term care Medicaid expenses from the estates of deceased applicants and from their transferees. A state may have a claim against a person’s estate for the amount paid to a nursing home spent on behalf of that person.

The term “estate” is generally defined as all real and personal property included within your estate. It also includes any other real and personal property and other assets in which you had a legal title, or interest, at the time of death. It may include assets conveyed to a survivor or heir through joint tenancy, tenancy in common, life estate or a revocable trust. In most states, the claim may not be enforced until after the surviving spouse’s death and only if there is no surviving child who is under age 21 or is disabled. The claim may be waived in some circumstances where a hardship exists.

Plan Now For Long-term Care Costs

Long-term care insurance that covers both nursing home and stay-at-home care may be the solution to protecting your estate for yourself and your loved ones. The availability and consequences of receiving public benefits such as Medicaid to pay for long-term care can greatly affect your estate planning strategy.