How To Save Money When You’re Already In The Nursing Home And Have Done No Planning

626213There is a common misconception that when a loved one or client enters the nursing home having done nothing in advance to protect assets, there are no options remaining. This is simply not true. While it is cheaper and easier to protect your assets in advance of needing nursing home care by using our Medicaid Trust, there are at least two important planning devices that can be implemented in a scenario where no advanced planning has been completed.

Spousal Refusal
First, for married couples, a strategy exists which potentially allows a spouse who remains in the community to retain significant assets in their name while the spouse residing in the nursing home qualifies for Medicaid benefits to pay for their stay at the facility. This strategy, called “spousal refusal”, allows a couple with assets in excess of the permitted limits to still qualify for Medicaid. For 2015 in New York State the spouse residing in the community is permitted to retain between $74,820 and $119,220 on a sliding scale in assets (called the Community Spouse Resource Allowance), depending on the amount of assets.

In addition to this Community Spouse Resource Allowance, a community spouse may retain: their home, an automobile, pre-paid funerals and burials for immediate family members, necessary tangible personal property, and retirement accounts in payout status. These assets are exempt for purposes of Medicaid qualification of the institutionalized spouse, but do not prohibit the government from instituting collection activities to recover the assets after the death of both spouses.

The spousal refusal option comes into play only when one spouse is already in the nursing home and requires careful planning by an attorney to shift assets into the community spouse’s name and subsequent to enrollment in Medicaid to use a Medicaid Trust to potentially shelter those same assets if the community spouse needs nursing home care within the following 5 years.

Gift Planning
In 2005 a major shift in Federal law altered the landscape of crisis planning for individuals already in a nursing home or for whom nursing home placement was imminent. Prior to that change, you could simply give away 1/2 of your assets and retain the other 1/2 and eventually qualify for Medicaid by spending down the 1/2 you retained until you reached the Medicaid resource qualification levels. After 2005, Medicaid now requires that if you want to start the clock running to qualify for Medicaid, you must be at the Medicaid resource qualification levels.

This means that you can no longer retain 1/2 of your assets and use them to spend down until you qualify for Medicaid. This change in Federal law resulted with the creation of what is referred to as a DRA (the Federal Deficit Reduction Act of 2005) compliant promissory note planning.

At its simplest, if you give away 1/2 of your assets, and loan the other 1/2 of your assets to your children, pursuant to a promissory note that complies with all the technical requirements of the Federal law, and your children repay you under the terms of the promissory note, you can qualify for Medicaid after you have turned over the amount of the loan to the nursing home. This is a complicated concept and requires the skills of a trained elder law attorney prior to implementation. The calculations for how much to give away and how much to loan are not 50/50, but rather, are dependent on the average cost of nursing home care and your monthly income, so the calculations are different in every single case.

These are just two of the strategies possible to qualify for Medicaid in a nursing home even if you have not done any planning. Please contact us if you or a loved one is interested in discussing these strategies further.

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