Medicaid Spend Down Strategies

Medicaid is not just for the indigent.  Medicaid is a government program which offers a variety of benefits to those in need, which includes elderly individuals who need assistance with paying for long term care costs. With the right planning, assets can be protected for the next generation, while helping a person become eligible for help with long term care costs.

Medicaid was to help with insurance coverage and protect seniors from the costs of medical care, regardless of their income, health status or past medical history, reports Kiplinger in a recent article “How to Restructure Your Assets to Qualify for Medicaid.” Medicaid was a state-managed, means-based program, with broad federal parameters that is run by the individual states. Eligibility criteria, coverage groups, services covered, administration and operating procedures are all managed by each state.

With the increasing cost and need for long term care, Medicaid has become a life-saver for people who need long term nursing home care costs and home health care costs not covered by Medicare.  So, this article will discuss various techniques and ideas on how to become eligible for Medicaid when appropriate.  However, this article is for ideas only, and I cannot stress this enough, but you should never undertake a Medicaid spend down without the advice and direction of an attorney.

If the household income exceeds your state’s Medicaid eligibility threshold, two commonly used trusts may be used to divert excess income to maintain program eligibility and thereby spend down income.

QITs, or Qualified Income Trusts. Also known as a “Miller Trust,” income is deposited into this irrevocable trust, which is controlled by a trustee. Restrictions on what the income in the trust may be used for are strict, and include things such as medical care costs and the cost of private health insurance premiums. However, the funds are owned by the trust, not the individual, so they do not count against Medicaid eligibility.  This tool is extremely effective, which facilities eligibility despite the amount of income.

If you qualify as disabled, you may be able to use a Pooled Income Trust. This is another irrevocable trust where your “surplus income” is deposited. Income is pooled together with the income of others. The trust is managed by a non-profit charitable organization, which acts as a trustee and makes monthly disbursements to pay expenses for the individuals participating in the trust. When you die, any remaining funds in the trust are used to help other disabled persons.

Meeting eligibility requirements are complicated and vary from state to state. An estate planning attorney in your state of residence will help guide you through the process, using his or her extensive knowledge of your state’s laws. Mistakes can be costly, and permanent, and often appear in Medicaid spend down.

For instance, your home’s value (up to a maximum amount) is exempt, as long as you still live there or intend to return. Several other exemptions may apply depending on the assets.  Otherwise, the amount of countable assets for an individual is $2,000, more for a married couple.

Transferring assets to other people, typically family members, is a risky strategy. There is a five-year look back period and if you’ve transferred asset without getting adequate value in return during that period your eligibility could be affected. So, gifting strategies could be risky.  If the person you transfer assets to has any personal financial issues, like creditors or divorce, they could lose your property.

Asset Protection Trusts, also known as Medicaid Trusts. You may transfer most or all of your assets into this trust, especially if they are otherwise countable. Upon your death, assets are transferred to beneficiaries, according to the trust documents.  This needs to be done in advance of the 5 year look-back, which is why this works best in anticipation of long term care need in the future, not when its imminent.

Right of Spousal Transfers and Refusals. Assets transferred between spouses are not subject to the five-year look back period or any penalties. Some states allow Spousal Refusal, where one spouse can legally refuse to provide support for a spouse, making them immediately eligible for Medicaid. The only hitch? Medicaid has the right to request the healthy spouse to contribute to a spouse who is receiving care but does not always take legal action to recover payment.

I should also point out that Medicaid recovery is an important aspect of Medicaid planning.  You can see this link for more details on that topic.  https://www.galliganmanning.com/protect-assets-from-medicaid-recovery/

Talk with your estate planning attorney if you believe you or your spouse may require long-term care and before undertaking Medicaid spend down. Consider the requirements and rules of your state. Keep in mind that Medicaid gives you little or no choice about where you receive care. Planning in advance is the best means of protecting yourself and your spouse from the excessive costs of long term care.

Reference: Kiplinger (Nov. 7, 2021) “How to Restructure Your Assets to Qualify for Medicaid”

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Value of Hobbies to your Health

Hobbies can greatly enrich our lives as we age, improve our well-being and increase life expectancy.

As we go into Labor Day weekend, I thought it might be nice to focus on a topic that isn’t about work.  It isn’t a task or something you have to do.  Instead, I going to focus on leisure.

Specifically, studies have shown that having hobbies can improve your well-being and even extend life expectancy, which helps lead to enjoyable golden years.  So with that, here are a few hobbies that may have a powerful impact on your health according to Money Talks News’ recent article entitled “7 Hobbies That Help You Live Longer”.

  1. Reading. Stress is a big source of health problems that shorten lives, and reading can provide a ready escape into a new world.  According to a study out of the University of Sussex, reading can decrease your stress levels by 68%. Reading improves your stress after only a few minutes because your mind focuses on what you are reading. This distraction eases the tensions in muscles and the heart.  This is a personal favorite hobby of mine and I would recommend it to anyone, even people who don’t think of themselves as “readers.”
  2. Gardening. A number of studies show that the physical activity of gardening — combined with being in a lush, green atmosphere — can enhance and extend life. People in their 60s with green thumbs decrease their risk of developing dementia by 36%, according to research from Australia.  I couldn’t find the citation for this, but I’ve been told that heart rates will reduce once you are outside in a green area after only 10 minutes.
  3. Cooking. Restaurant and processed foods are no good for your health. They can contribute to life-shortening illnesses, like diabetes and cardiovascular disease. However, people who make meals from scratch are much more apt to eat a healthier diet. The more often you cook at home each week, the higher you’ll tend to score on the U.S. Department of Agriculture’s Healthy Eating Index. University of Washington researchers say: “Home-cooked dinners were associated with greater dietary guideline compliance, without significant increase in food expenditures. By contrast, frequent eating out was associated with higher expenditures and lower compliance.”
  4. Listening to music. Research shows that regularly attending concerts can add years to your life. One study found just 20 minutes of listening can increase your sense of well-being by up to 21%. In particular, concert attendance increases:
  • Feelings of self-worth by 25%
  • Feelings of closeness to others by 25%; and
  • Mental stimulation by 75%.

The study concluded that such positive feelings could increase your lifespan by up to nine years. According to Fagan, “Our research showcases the profound impact gigs have on feelings of health, happiness and well-being — with regular attendance being the key.”

     5.  Volunteering. Helping others is another great hobby to extend your life, but only if your motives are pure. A study published in the journal Health              Psychology found that volunteering extends life, but with a strange caveat, according to the American Psychological Association:

“Volunteers lived longer than people who didn’t volunteer, if they reported altruistic values or a desire for social connections as the main reasons for wanting to volunteer, according to the study. People who said they volunteered for their own personal satisfaction had the same mortality rate four years later as people who did not volunteer at all, according to the study.”

Researchers think that proper motivation is key to getting the most out of volunteering because it buffers volunteers from stressors, like impingement on the volunteer’s time and lack of pay, which are part of doing good works.  I can say anecdotally that as people age and after they retire, sometimes they lack a focus and throw themselves into volunteering.  It isn’t a healthy approach, they are basically recreating their work experiences and the stress that comes with it.

       6.  Walking. This hobby can have a profound impact on your health, and those who take brisk walks might live up to 20 years longer than couch            potatoes, according to a Mayo Clinic study. Again, it’s brisk walking — at least three miles per hour or 100 steps a minute — is required to get the life-extending benefits.

       7.  Owning a pet. A lot of research has found that pet owners enjoy many health benefits from being around their furry friends. For example, a meta-  analysis of studies published between 1950 and 2019 found that dog owners had a 24% risk reduction for death from any cause. The benefit is even more pronounced for seniors with existing heart problems. The study authors believe walking a dog — (see #6) — may play a big role in these improved health outcomes. Another study in the Journal of Vascular and Interventional Neurology found that people who own cats have a reduced risk of death from heart attack or stroke.

Hopefully this weekend you’ll spend time on your hobby, or pick one of these as a new one!  Happy Labor Day!

Reference: Money Talks News (Aug. 20, 2021) “7 Hobbies That Help You Live Longer”

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Retaining Assets While Being Medicaid Eligible

Medicaid is a program with strict income and wealth limits to qualify, explains Kiplinger’s recent article entitled “You Can Keep Some Assets While Qualifying for Medicaid. Here’s How.” This is a different program from Medicare, the national health insurance program for people 65 and over that largely doesn’t cover long-term care. In this system, clients often have a goal of retaining assets while being Medicaid eligible.

If you can afford your own care, you’ll have more options because all facilities (depending on the level of medical care) don’t take Medicaid. Even so, couples with ample savings may deplete all their wealth for the other spouse to pay for a long stay in a nursing home. However, you can save some assets for a spouse and qualify for Medicaid using strategies from an Elder Law or Medicaid Planning Attorney.

You can allocate as much as $3,259.50 of your monthly income to a spouse, whose income isn’t considered, and still satisfy the Medicaid limit. Your countable assets must be $2,000 or less, with a spouse allowed to keep half of what you both own up to $130,380. Countable assets include things like cash, bank accounts, real estate other than a primary residence, and investments.  However, you can keep a personal residence, personal belongings (like clothes and home appliances), one vehicle (2 for married couple), engagement and wedding rings and a prepaid burial plot.  There are more detailed rules for countable and exempt assets, but suffice it to say most things count.

If you have too much income over the $2,382 income per month for the application, you can use a Miller Trust aka Qualified Income Trust for yourself, which is an irrevocable trust that’s used exclusively to satisfy Medicaid’s income threshold. If your income from Social Security, pensions and other sources is higher than Medicaid’s limit but not enough to pay for nursing home care, the excess income can go into a Miller Trust. This allows you to qualify for Medicaid, while keeping some extra money in the trust for your own care. The funds can be used for items that Medicare doesn’t cover.

However, your spouse may not have enough to live on. You could boost a spouse’s income with a Medicaid-compliant annuity. These turn your savings into a stream of future retirement income for you and your spouse and don’t count as an asset. You can purchase an annuity at any time, but to be Medicaid compliant, the annuity payments must begin right away with the state named as the beneficiary after you and your spouse pass away.

These strategies are designed for retaining assets while being Medicaid eligible for married couples; leaving an asset to other heirs is more difficult. Once you and your spouse pass away, the state government must recover Medicaid costs from your estate, when possible. This may be through a a claim on your probate estate (usually means the house) before assets go to heirs, reimbursement from a Miller Trust or other items.  That is a topic unto itself, albeit an important one, so see here for more information on Medicaid recovery.  https://www.galliganmanning.com/protect-assets-from-medicaid-recovery/

Note that any assets given away within five years of a Medicaid application date still count toward eligibility. Property transferred to heirs earlier than that is okay. One strategy is to create an irrevocable trust on behalf of your children and transfer property that way. You will lose control of the trust’s assets, so your heirs should be willing to help you out financially, if you need it.

Reference: Kiplinger (May 24, 2021) “You Can Keep Some Assets While Qualifying for Medicaid. Here’s How”

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