Myth #1: The Nursing Home is going to take away the house.
The skilled nursing facilities have nothing to do with assets or Medicaid recovery. In Colorado, your house is not a countable asset for purposes of Medicaid qualification up to a value of $552,000.00. There are two scenarios you have to consider when doing Medicaid planning; the spouse of the person going into long term care still living in the house, or; the person going into a skilled facility is unmarried.
Under the first scenario, the spouse (called the Community Spouse) will retain possession of the home without estate recovery. There are also rules about assets that may be transferred to the Community Spouse without penalty.
If the person who needs skilled care has no spouse at home, the house is not included as an asset if the person intends to return home. This does not mean that the elderly person can or will return home, but rather that they intend to return home. This intent precludes the home from being an asset for the purposes of Medicaid qualification, but does not protect it from estate recovery by Medicaid after the person passes away.
There are other methods of protecting the home from estate recovery if planning is completed early enough or in special circumstances, such as a disabled child or adult child caregiver. You need to contact a qualified elder law attorney who is familiar with all state and federal regulations in order to plan before the crisis occurs.
Myth #2: You can give away money or assets and Medicaid will never know.
Remember that the county and state offices determine Medicaid qualification and they will not qualify a person without an extensive disclosure of all bank and financial records. Titles to cars, deeds to land, and banking histories are all available to these offices and they are very thorough in their investigation. If the records do not track the
funds perfectly, your family member will be denied benefits. If the office determines you were trying to defraud the Medicaid program, your family member could be denied permanently.
One of the most common “do-it-yourself” Medicaid planning techniques is to just give assets away. Although making gifts can be a crucial part of an effective asset protection plan, doing so without a plan, or, worse yet, without fully understanding the consequences and ramifications of such action, can be financially devastating, particularly since the passage of the Deficit Reduction Act (DRA) in 2006. Fortunately, the Medicaid rules which can “punish” an applicant for transferring or gifting assets in anticipation of Medicaid, also has, if you understand how the system works, significant opportunities for protecting assets. In many ways it’s the “half empty or half full” concept. Some of these methods provide for protecting the assets even from estate recovery, while others will provide for the additional personal needs of your family members but be available for estate recovery after the person is gone.
Sometimes families will attempt to “hide” assets, or at least conveniently “forget” about them. After all, how is Medicaid going to find out about that piece of property that you gave to your son last year? Keep in mind that failure to disclose assets in order to obtain Medicaid benefits is a crime (Medicaid fraud) and could result in prosecution, as well as legal action to recover the cost of benefits obtained fraudulently. It is just not something you want to even consider.
Myth #3: If you have a Trust or Annuity, you are protected from Medicaid recovery.
During the last two decades, the financial gurus across the nation declared that all senior citizens needed a Revocable Living Trust and millions of seniors followed that advice. In some cases, well-intentioned but misinformed sales people led their clients to assume, or believe, that a Living Trust would somehow provide their assets with protection from Medicaid. Although a properly drawn Living Trust may provide many benefits, protection from Medicaid is not one of them. Assets in a revocable Living Trust are still available to the patient and are therefore, in most cases, still considered as countable (for Medicaid qualification) resources and required to be spent down or eliminated in some other form before Medicaid will provide benefits. In addition, when trying to protect assets, there are certain conditions under which a Living Trust could cause the patient to lose up to 65% more of his/her assets than would have been necessary had there been no Living Trust in the first place. Some forms of properly drawn Irrevocable Trusts may protect some assets from Medicaid if they are instituted prior to the five year “look back” period. However, the trusts have to be properly drafted to have certain provisions that protect these assets from Medicaid qualification and may protect some of the assets from Medicaid Recovery.
Annuities are another sales tactic for some sales people who do not understand how Medicaid works. There are Medicaid Compliant Annuities that protect some assets for the purposes of Medicaid qualification but not from estate recovery. If you have an annuity that is not Medicaid compliant, then the funds in that asset will be counted as available for the purposes of qualifying for Medicaid.
In Colorado, the income from the annuity is also counted as part of the applicant’s income regarding the income cap for qualification. If the applicant’s monthly income is over $2,199.00 in 2015, then an income trust must be drafted in order to qualify for Medicaid.
The qualification numbers for 2013 are based upon the raises in Social Security Insurance levels. While a person was required to have an income below $2130 in 2013, the allowable income for 2015 is higher. If you or your family member is earning less than that figure, you may qualify for Medicaid based upon income. Your spouse’s income is not included in qualification for Medicaid; only the applicant’s income is included for the purpose of income qualification. If the applicant earns more than $2,199, but less than the average monthly cost of long term care, a qualified lawyer can draft an income only trust, also called a Miller Trust or a Utah Trust that will allow a person to be qualified for Medicaid based upon income.
For more information on Medicaid Myths, please contact Rose Zapor at 720-213-6065.