Eleventh Hour Medicaid Planning

While preparing for long term care should preferably occur years before entering an assisted living home, this is not constantly possible or perhaps thought about up until it is too late. The following post, nevertheless, details numerous methods that are offered for people with “a foot in the door” of an assisted living home with respect to their offered assets.

1. Under a plan commonly referred to as the “Reverse Rule of Halves”, a specific getting in an assisted living home can transfer all of his properties (over and above the Medicaid resource allowance ($13,800.00 in 2011) to his heirs, and after that look for Medicaid – understanding that the application will be rejected due to the fact that he has transferred possessions. He will then be ineligible for Medicaid for a period of time equal to the total assets moved divided by the average monthly expense of a nursing house. On Long Island in 2011 that’s $11,445.00 per month. The successors to whom he moved his possessions must then perform a promissory note to him, accepting pay back, in month-to-month installments a quantity equivalent to about half of the overall properties transferred, plus interest at a “affordable” rate (which the Department of Social Provider states is 5%.)
The nursing home will then be paid the institutionalised individual’s monthly earnings plus the monthly payments on the promissory note up until the period of ineligibility ends. If, for example, a person with $200,000 in possessions requires retirement home care, under the Reverse Guideline of Halves, he will need to invest half of his assets on assisted living home care before becoming eligible for Medicaid – simply as under the old Rule of Halves. Rather than just transfer one-half of his properties as in the past, he would move the whole $200,000 to his beneficiary, who would sign a promissory note to him vowing to pay back $100,000, plus interest at 5%. He would then be disqualified for Medicaid for roughly 10 months: $100,000 (or half of the possessions moved) divided by the Medicaid divisor ($11,445.00). If he had $1,000 each month in income, that $1,000 (less a little personal allowance) would be paid to the retirement home, and the balance of the assisted living home expenses would be paid from the heir’s regular monthly payment under the promissory note. Those payments would continue till the duration of ineligibility expires at which time Medicaid will be authorized.

The promissory note must fulfill certain requirements. The repayment should be actuarially sound, suggesting the monthly payments should suffice that the loan can be paid back during the institutionalised individual’s life span. The payments should be made in equivalent quantities with no deferral and no balloon payment. The promissory note likewise should prohibit the cancellation of the balance on the death of the lender. Finally, the note must be non-negotiable, otherwise it might be figured out that the note itself has a worth, which might make the candidate ineligible.
2. Nonexempt properties under Medicaid can be converted to exempt possessions. For example, the neighborhood partner can buy a bigger personal home or include capital enhancements to an existing residence. This way nonexempt cash would be converted into an exempt residence.

3. An immediate annuity that is irrevocable and non-assignable, having no cash or surrender worth (i.e., permitting no withdrawals of principal) can be acquired with excess money. The annuity contract must offer a month-to-month earnings for a duration no longer than the actuarial life span of the annuitant-owner. In case the annuitant dies before the end of the annuity payout period, the policy’s successor recipient would get the staying installations. This method can transform a nonexempt excess property into a revenue stream that undergoes the more liberal earnings rules of what the neighborhood partner can keep under Medicaid. An annuity with a term surpassing the annuitant’s life span might be thought about a transfer impacting Medicaid eligibility.
4. Liquid resources should be utilized to settle customer debts and prepay burial plots and funeral service expenditures (including a family crypt), thus investing down excess cash in an appropriate fashion.

5. Kids can be compensated for documented household and care services as long as the quantity is reasonable. An independent quote ought to be gotten before identifying the amount of remuneration and the household ought to have a written contract with the relative offering care. This is more commonly known as a “Caregiver Contract”.
6. All joint and individual assets that are in the name of the institutionalized spouse should be moved to the neighborhood spouse. In 2011 the optimum Neighborhood Partner Resource Allowance (“CSRA”) is $109,560.00. After such transfers, possession security planning can be carried out for the neighborhood partner).

7. Under the Medicaid transfer rules, particular transfers are exempt. The transfer of a house is exempt if the transfer is to a partner, a minor (under 21), or a blind or handicapped child, a brother or sister with an equity interest in the home who resided in home one year prior to institutionalization, or a child who lived in home 2 years and offered care so as to keep the person from becoming institutionalized.
Certain other transfers of any resource may also be exempt.