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Medicaid / Asset Protection

The thought of all your assets being wiped out if nursing home care becomes necessary is frightening.  It is important to be informed regarding the rules that apply when the State helps pay for nursing home care.  By knowing those rules, you can plan ahead.  The following are answers to some of the most common Medicaid questions in Washington.

QUESTION: IF YOU ARE SINGLE WHAT ASSETS MAY YOU HAVE AND QUALIFY FOR MEDICAID?

ANSWER:  If you are single, you are allowed $2,000, plus one car (which is exempt, no matter how much it is worth, if it is used for transportation for the Medicaid recipient); a $1,500 burial fund or life insurance with a face value of $1,500 (or various combinations thereof) or an irrevocable prepaid burial plan; a burial plot; a home if the equity interest does not exceed $560,000 (however, the home will be subject to a Medicaid lien) and household furnishings and personal effects.

QUESTION: IF YOU ARE MARRIED WHAT ASSETS MAY YOU HAVE AND QUALIFY FOR MEDICAID?

ANSWER: If your spouse is “institutionalized” on or after August 1, 2003, you are allowed:  a) $2,000 plus b) the greater of $54,726 or ½ your non-exempt assets on the first day of “institutionalization”* up to a maximum of $120,900.  In addition you are allowed at least one car, a home and household furnishings and personal effects.  Each of you is allowed a burial plot plus a $1,500 burial fund or life insurance with a face value of $1,500 (or various combinations thereof) or an irrevocable prepaid burial plan.  The exemption for your home does not apply if your equity interest is greater than $560,000 unless one of a few exceptions apply.  One of the exceptions is that the Medicaid recipient’s spouse resides in the home.

QUESTION: MAY YOU MAKE GIFTS TO YOUR CHILDREN TO PROTECT YOUR ASSETS?

ANSWER: If nursing home care suddenly becomes necessary, many people immediately think, “I’ll gift my assets to my family so I can meet the Medicaid limits on resources.”  The problem is gifts** made within 60 months of applying for Medicaid and (with a few exceptions) made to someone other than your spouse will disqualify you.  This is called the 60-month “look-back” period.  The period of disqualification before you can qualify for Medicaid is calculated by dividing the total gifts made in a month by the average daily cost of nursing home care (which as of 10/16 is $297 per day) and rounding down to the next whole number.  The result is the number of days you will have to wait after you would be otherwise eligible for Medicaid to pay for long term care services based on an application approved by the Department of Social and Health Services.

QUESTION: WHAT PLANNING SHOULD EVERYONE DO NOW IN CASE CARE IS NEEDED LATER?

ANSWER: Prior to being in crisis, you should review with your elder law attorney whether your power of attorney is designed with the flexibility needed to give your family all possible options if you become disabled.  This may include the power to make gifts, revoke trusts, revoke your community property agreement, etc.  You should also review with your financial advisor whether long-term care insurance is appropriate for your situation.

QUESTION: IS THERE PLANNING TO DO NOW SO YOUR SPOUSE IS NOT KICKED OFF MEDICAID IF YOU DIE FIRST?

ANSWER: You can put a Special Needs Trust for the benefit of your spouse in your will.  The trust stays dormant until you pass away.  But after your death all assets you own can be protected for your spouse’s benefit.  This is called a “Testamentary Special Needs Trust”.  I wish more people knew about it.  Planning ahead while both spouses are alive will make things so much easier on your children if their surviving parent needs long term care.

Hopefully the above information is helpful.  We all hope that each of us can live our life fully until it is our time to go without having to suffer the challenges of dealing with a stroke, Alzheimers, etc.  Becoming disabled is painful for any of us to ponder.  Because of that, many people put blinders on and do no planning.

Day in and day out I see, in my elder law practice, the result of the failure to plan.  I meet with families who are dealing with the emotional burden of an unanticipated medical crisis for their parent or spouse.  On top of the emotional pain caused by the medical problem, they are additionally stressed because their parents did not do disability planning.

You can lessen the trauma for your family by educating yourself on Medicaid and by planning ahead.  Columbia Legal Services at www.washingtonlawhelp.org has excellent information on Medicaid.  There are also a number of opportunities for taking classes on disability planning and Medicaid in our community.

You would serve yourself and your family well by taking the time to gather more information and think through the issue of disability as it relates to your planning.  The very best thing that could happen is that it is information you and your family  never need because you turn out to be one of the lucky ones who does not have to face the challenge of disability at the end of life.

 

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* As defined by DSHS

**Gifts made prior to May 1, 2006 are subject to a different analysis.

***This article was last revised to reflect Medicaid rules for January 2017.

 

Elizabeth A. Perry, a member of the National Academy of Elder Law Attorneys, has been helping Clark County residents with their estate planning needs for over 20 years. Her practice emphasizes wills, trusts, probate and Medicaid planning. You are invited to call her to schedule an appointment or sign up for a class at (360) 816-2485. ©Liz Perry 2017

(The above should not be construed as specific legal advice and is intended for general information purposes only)

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