Our firm maintains an active practice in the following areas of Medicaid planning:
I. Medicaid nursing home benefits. Everyone who works has to pay into the Medicare system. Many presume that Medicare will cover all their medical expenses, including those of a nursing home. They are wrong. Medicare covers 21 days in a nursing home. Even with a medigap policy, such as Part C, the coverage only increases to 100 days. Medicaid, a needs-based government program, provides nursing home benefits for the vast majority of patients requiring such services for the rest of their lives. We help clients qualify for this valuable benefit.
Clients present two basic approaches to Medicaid. Some just want to qualify for the benefit of themselves and their spouse, which subjects their estates to repayment of the Medicaid benefits they received through a process known as estate recovery. Others want to avoid estate recovery so that the maximum amount possible will pass to their children. Avoidance of estate recovery is much harder to accomplish than mere qualification for Medicaid and involves various sophisticated techniques that our attorneys must tailor to the facts of each case.
Any qualification for Medicaid will entail meeting the financial limits on resources and income. In 2012, the resource limit is $115,640 for a married couple and $2,000 for a single individual; the income limit is $2,094 per month for every applicant (spousal income is not counted). For Medicaid purposes, some resources are “countable” against the financial limits, while others are “noncountable.” Most of our clients exceed the resource or income limits, or both, which necessitates a restructuring of their finances.
The resource limit can be met by converting “countable” resources into “noncountable” resources. Some examples are: using cash (which is always countable) to purchase a burial contract, make improvements to the home, or purchase a vehicle; and to begin drawing benefits from a retirement plan, which is countable unless in pay status. The resource limit can also be met by spending down resources.
The income limit can be met by establishing a Qualified Income Trust. Any income paid into the trust will not be considered income for purposes of meeting the income limit because the trust commits such income to the payment of nursing home costs with any amount left at death being pledged to repay the state for Medicaid benefits paid during life.
We encourage clients to begin Medicaid planning as soon as it appears that they may need it. Medicaid imposes penalties for transfers made within five years of a Medicaid application, so if transfers to children are contemplated, the best time to plan is prior to the penalty period.
There are insurance alternatives to Medicaid that, in appropriate cases, we advise clients to discuss with their insurance advisor in our estate planning conference.
II. Special needs trust. Victory in a personal injury case or receipt of an inheritance usually produces financial benefit to the recipient. That is not the case for those who are on Medicaid. These extra resources can easily push the client over the resource limit, thereby disqualifying them for Medicaid and also SSI (which is usually their sole source of income). To avoid this disastrous result, we assist the client in establishing a special needs trust to receive such funds. All property placed in a special needs trust is considered noncountable for Medicaid and SSI purposes.
A special needs trust is an arrangement placing a trustee in charge of the client’s personal injury proceeds or inheritance. The trustee may only use the funds to supplement the client’s government benefits. The trust must be established by a parent, grandparent, guardian, or a court. Under very limited circumstances, the client can establish the trust for himself. The trust permits the client to enjoy the benefits of the extra funds in a myriad of ways that supplement the basic needs provided by Medicaid and SSI. Examples of benefits the trust can provide include: home improvement, new furniture and appliances, and a vehicle.
Special needs trusts are strictly regulated. The trust itself must be approved by the state before it can be funded. Also, the trustee must file annual accountings with the state to prove that the trust is being administered according to legal requirements. Finally, upon the death of the client, the trust assets must be used to repay the state for benefits provided to the client during life.
The requirements for a special needs trust sometimes are not as beneficial to the client as simply using the proceeds to purchase “noncountable” resources. We have found that in some cases the client’s purchase of a home, household contents, and a car, all of which are “noncountable,” meet the client’s needs better than a special needs trust. The use of the personal injury proceeds or inheritance must be carefully planned to avoid a disqualification under Medicaid and SSI.
Our attorneys have significant experience in working with clients to establish special needs trusts or purchase “noncountable” assets so that their personal injury award or inheritance will truly benefit them.
III. Medicaid Planning booklet. Download our Medicaid Nursing Home Planning and Special Needs Trust booklet for more information.