Louisiana Long Term Care Medicaid Planning Blog

Protect at Least Half Your Estate - Even if Already in the Nursing Home

 

I want to tell you about a new Medicaid planning strategy that we've had success with in our office. I'm really excited about it. Most of you know the rule that if you transfer stuff out of  your name and you wait five years then your stuff is protected so you don't have to spend it all down to $2,000 before Medicaid pays the sixty or seventy thousand dollar a year nursing home cost.

 

We have a new strategy. We've used it, we've submitted all the documentation to the Medicaid office and they've approved it. Our clients are protecting their estate by using the strategy and it enables families who have a loved one entering the nursing home or already there to protect roughly half of what they have.

 

We have a scenario where Mom had $100,000, had a stroke and she had to go live in the nursing home. Normally, you'd think she has to spend it all down to less than $2,000. But we were able to implement this strategy. Mom was private pay for a few months then months later, Mom was eligible for Medicaid. The family still had $50,000 of the original $100,000 they had when Mom entered the nursing home. If you'd like to find out more about this strategy, just contact our office. Our toll free number is 866-491-3884.

Community Spouse Allowance Increased for Louisiana Married Couples

During 2010 and 2011, the amount of Countable Resources that a married couple could own to be eligible for Louisiana Long Term Care Medicaid if one of the spouses went into a nursing home (Institutionalized Spouse) and the other spouse continued to reside at home or in the community (Community Spouse) could not exceed $109,560.

For example, let's say Grandma and Grandpa own a home, a car, and they have $100,000 in the bank. If Grandpa goes in the nursing home and Grandma continues to live at home, Grandpa will be eligible for Medicaid so long as he meets all of the other eligibility requirements.

Today, new regulations were issued by the Louisiana Department of Health and Hospitals which increased this "Community Spouse Resource Allowance" from $109,560 to $113,640 for Medicaid applications in 2012. Click here to see the schedule.

While the home property is an exempt asset for Medicaid, it appears that there is a limit on the amount of equity in a home that is exempt. While I can't find a reference to Schedule Z-2300 anywhere else in the Medicaid Manual, it was revised to indicate that $525,000 in home equity is exempt for 2012 - up from $506,000 in 2011. Click here to see schedule Z-2300.

If you or your family have between $100,000 and $750,000 in assets you want to protect from nursing home expenses, and you want to avoid nursing home poverty, give us a call from anywhere in the state at 866-491-3884.

 

 

Donate Home for Medicaid?

 

I was speaking with another Louisiana lawyer from another part of the state yesterday. He called to ask me my advice on whether families should transfer their home to their children before they die in attempt to preserve that home from long term care nursing home costs.

 

I said there are two reasons why you should not transfer your home to your children. First, you will lose your homestead exemption. This is something very valuable to Louisiana residents. Second, your family will lose what’s called a step-up-in-basis and will likely pay a lot more capital gains tax when they sell that property in the future. So those are two big reasons why you should not transfer your property to you children. There are other ways to structure things to protect the value of the home even if you have to go into a nursing home and still qualify for Medicaid. Be aware of this and don't make those mistakes that may cause your family to have to pay a lot of extra tax whether it is property tax or capital gains tax.

 

Paul Rabalais

Danger: Home Offered For Sale

 

I want to talk to you about Medicaid planning, specifically about your home. Most people understand that if someone goes into a nursing home they can have a home and still be eligible for long-term care Medicaid, but there's a whole host of Medicaid rules on the home. In the Medicaid Eligibility Manual, it says, "If the home property is offered for sale, it is no longer excludable." What that means to me is that if Grandma goes into the nursing home, has a home and has $1500 she will get into the nursing home and qualify for Medicaid because she has less than $2000 in countable resources. If the family puts Grandma's home up for sale, it is no longer excludable and it becomes a countable resource since obviously the value of that home is more than $2000 monthly. Grandma will end up getting kicked off of Medicaid. So be wary of that rule that says if the home is offered for sale then it's no longer an excludable asset.

Medicaid Planning with a Medicaid Living Trust

 

 

I want to take a moment to talk about some important long-term care Medicaid eligibility issues. There’s a lot of Louisiana residents concerned that they'll have to deplete their life savings if they ever go into a nursing home. So these people are rushing to put all of their assets into their children's names. There's another alternative that allows you to retain control over what you have and there are also some tax advantages to it as well. We call this our Medicaid Living Trust. You can put stuff in your kid’s names and you can put stuff into a very particular type of trust that has all the necessary Medicaid language in there. There are some pros and cons of each that I want to go over with you for just a second. Furthermore, you have to do this five years before you go into the nursing home so don't wait until the last minute.

 

There are several reasons to not put assets in your kid’s names. First, you lose control of those assets. It's not yours anymore to control.  The second reason to not put your assets in your kid’s names is that they will have to pay taxes if it produces income. So now you're adding tax consequences to your children. The third reason to not transfer assets to your children is because of what is called a step-up-in-basis. If you give them appreciated assets then when they sell them at some point in the future, there's going to be capital gains tax to pay.

 

By putting it into your Medicaid Living Trust that we create for you, number one, you stay in control of your assets as the trustee of your trust. You control the buying and selling all those assets. Number two is that there are no income tax consequences to your kids when you put it in your Medicaid Living Trust. It's called a grantor trust for tax purposes. You get all the income, you pay tax on all the income and the tax consequences don't change. The third reason is that your children will benefit from a step-up-in-basis when you die if you have some assets that have appreciated in value. If those assets are in your name or are in what is called a grantor trust when you die, those assets get a step-up-in-basis. So there will be no tax for your children to pay when they sell those assets.  

 

So be aware that there are some pros and cons of putting assets in your kid’s names and losing control versus putting things into a trust where you retain control but structure those assets in a way where you qualify for Medicaid in the future.

Paul A. Rabalais

Louisiana Medicaid Eligibility and Usufruct

 

I was giving a presentation earlier this week and a gentleman asked me if someone has a usufruct over the assets they don't really own, they just have the usufruct of, do they have to spend those assets down before they qualify for Medicaid if they go in a nursing home? Unfortunately, yes you do. The Medicaid Eligibility Manual is crystal clear. If someone goes into a nursing home and they have the usufruct of assets, perhaps their spouse died or they inherited the usufruct from someone, they have to spend all those assets down until the value of all those assets are less than $2,000 before they qualify for Medicaid. This may seem unfair but that's how it is.

 

Over and over again we talk about planning ahead and planning early.  Understand what your options are so that way you can make sure you protect not only what you own but what you have the usufruct of so that you’ll qualify for Medicaid if you need to go into a nursing home.

Louisiana Medicaid Eligibility and Debt

 

As many of you know, when qualifying for Medicaid if you ever go into a nursing home, Medicaid looks at the total amount of assets that you have. One thing that confuses people is they don't look at the amount of debt that they have when they go into a nursing home.

I was meeting with a family yesterday and Mom was about to go into the nursing home in the next few days or weeks. They were concerned because they had over $220,000 of financial assets, which is over the $109,000 figure when you have one spouse in a nursing home and one spouse who stays at home, that she wasn’t going to qualify for Medicaid and they were going to have to pay for that $5,000 a month nursing home cost out of their pockets. They realized that they owe $115,000 on a reverse mortgage on their home. So what they can do is just take part of their financial assets and pay off the $115,000 reverse mortgage then on the next day they'd have $105,000 of countable resources under the $109,000 figure. Mom would qualify for Medicaid immediately.

Be aware that Medicaid disregards debt and the asset valuation. They don't look at net worth; they just look at your assets.

Louisiana Medicaid Planning: Divorce v. Depleting Life Savings

 

Just this past Friday I was working with a husband and his son. They were about to put his wife in a nursing home. This family has to decide on either getting a divorce for Medicaid eligibility or depleting their life savings that they've worked hard for 70+ years to build.

Bottom line is if you plan ahead by starting this process at least 5 years before you go into the nursing home, you can enable your family to avoid very difficult decisions that this family is going through. Usually when you are about 65 or 70, that's when families start considering Medicaid planning. So get the information now, plan and do what you have to do to protect your family.

Louisiana Medicaid Planning and IRAs

 

Today I want to talk to you about Medicaid eligibility planning, particularly when someone is going into the nursing home with an Individual Retirement Account (IRA). I was working with a family from Baton Rouge yesterday and Dad was going into the nursing home with his main asset being an IRA. So they face having to take distributions from their IRA while Dad is in the nursing home and spending that money on nursing home costs until the total value of dad's assets are less than $2,000.

We're going to plan ahead and we're going to do some things to protect some of that money, but it does require taking distributions from the IRA and paying income tax on those distributions. So in order to minimize the income taxes, they are going to take a distribution from the IRA this year and another distribution after the first of next year. Then we are going to do some Medicaid planning to protect that money.

It's a little more difficult to do Medicaid eligibility planning if you have an IRA. It often requires taking some distributions which would be taxable income. Be careful with IRA's since there are special rules on Medicaid planning.

Paul Rabalais

Medicaid Eligibility Planning

 

I met with a woman yesterday whose husband has fairly advanced dementia. She was worried she would no longer be able to take care of him in her own home. She went to visit a few nursing homes and they gave her a lot of information including the medicaid application. The medicaid application won't do her any good unless her husband is going to be eligible for medicaid.

If one spouse is in the nursing home and another spouse is at home, then that couple can have a vehicle, a home and an additional $109,000 in assets. I started asking her about her assets and she really didn't know how much her accounts are valued at. So she is meeting with her financial advisor today to discuss the value of those accounts.

So much of medicaid eligibility planning is about knowing what you own when you enter a nursing home. So make sure before you start this process of trying to figure out if you or a loved one is eligible for long term care medicaid, you have a good grasp on what you or they own and the value of those assets. Then we can start the process of making sure things are set up properly to protect what you have for your loved ones.

Paul Rabalais