Eleventh Hour Medicaid Planning
While preparing for long term care need to ideally take place years before getting in a nursing home, this is not always possible and even considered up until it is far too late. The following short article, however, describes a number of methods that are available for people with “a foot in the door” of a nursing home with respect to their available properties.
1. Under a plan typically called the “Reverse Rule of Halves”, a specific getting in a retirement home can transfer all of his possessions (over and above the Medicaid resource allowance ($13,800.00 in 2011) to his heirs, and then make an application for Medicaid – understanding that the application will be denied since he has moved assets. He will then be ineligible for Medicaid for a duration of time equivalent to the overall possessions transferred divided by the average regular monthly cost of an assisted living home. On Long Island in 2011 that’s $11,445.00 each month. The heirs to whom he moved his assets should then carry out a promissory note to him, accepting repay, in month-to-month installations an amount equal to about half of the overall assets transferred, plus interest at a “reasonable” rate (which the Department of Social Solutions states is 5%.)
The assisted living home will then be paid the institutionalised individual’s month-to-month earnings plus the month-to-month payments on the promissory note up until the period of ineligibility ends. If, for instance, a person with $200,000 in assets needs assisted living home care, under the Reverse Rule of Halves, he will have to invest half of his properties on retirement home care prior to ending up being eligible for Medicaid – simply as under the old Rule of Halves. But rather than simply transfer half of his possessions as in the past, he would move the entire $200,000 to his beneficiary, who would sign a promissory note to him promising to repay $100,000, plus interest at 5%. He would then be disqualified for Medicaid for around 10 months: $100,000 (or half of the properties moved) divided by the Medicaid divisor ($11,445.00). If he had $1,000 each month in earnings, that $1,000 (less a little personal allowance) would be paid to the nursing home, and the balance of the nursing houses costs would be paid from the beneficiary’s monthly payment under the promissory note. Those payments would continue up until the duration of ineligibility ends at which time Medicaid will be authorized.
The promissory note should meet certain requirements. The payment should be actuarially sound, meaning the monthly payments must be adequate that the loan can be repaid throughout the institutionalised individual’s life expectancy. The payments must be made in equal amounts with no deferment and no balloon payment. The promissory note also must prohibit the cancellation of the balance on the death of the lending institution. The note must be non-negotiable, otherwise it may be identified that the note itself has a value, which might make the candidate ineligible.
2. Nonexempt assets under Medicaid can be transformed to exempt properties. The community partner can buy a bigger personal home or include capital improvements to an existing residence. By doing this nonexempt money would be transformed into an exempt residence.
3. An immediate annuity that is irreversible and non-assignable, having no money or surrender value (i.e., allowing no withdrawals of principal) can be bought with excess cash. The annuity contract need to supply a month-to-month income for a duration no longer than the actuarial life span of the annuitant-owner. In case the annuitant passes away prior to the end of the annuity payment period, the policy’s successor recipient would receive the staying installations. This technique can transform a nonexempt excess property into a revenue stream that undergoes the more liberal income guidelines of what the neighborhood spouse can retain under Medicaid. An annuity with a term going beyond the annuitant’s life span may be thought about a transfer impacting Medicaid eligibility.
4. Liquid resources ought to be used to settle customer debts and prepay burial plots and funeral service costs (including a household crypt), therefore spending down excess money in an acceptable fashion.
5. Children can be compensated for documented home and care services as long as the quantity is sensible. An independent estimate needs to be obtained prior to figuring out the quantity of reimbursement and the household need to have a written agreement with the member of the family providing care. This is more frequently referred to as a “Caregiver Agreement”.
6. All joint and specific properties that are in the name of the institutionalized partner should be transferred to the neighborhood spouse. In 2011 the maximum Neighborhood Partner Resource Allowance (“CSRA”) is $109,560.00. After such transfers, property security planning can be carried out for the neighborhood partner).
7. Under the Medicaid transfer guidelines, specific transfers are exempt. The transfer of a home is exempt if the transfer is to a partner, a small (under 21), or a blind or disabled kid, a bro or sister with an equity interest in the house who lived in house one year prior to institutionalization, or a child who lived in home 2 years and provided care so regarding keep the person from ending up being institutionalized.
Certain other transfers of any resource might likewise be exempt.