Louisiana Long Term Care Medicaid Planning Blog

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 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.

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

Can Medicaid Sell Your Parents' Home to a Stranger?

Our awesome staff set up a conference call last week with someone who had inquired about Medicaid planning. This family's main concern was the expressed something like the following: "Several of our family members all live on the same street. When my parents die after receiving Medicaid benefits, can the State of Louisiana sell my parents' home to anyone with their estate recovery rights?"

Actually, I don't think Medicaid will sell the home to anyone. Her parents had named an executor of their Wills. If Medicaid pursues its Estate Recovery claim, it will be up the executor (a trusted family member) to sell the house in order to satisfy Medicaid's Estate Recovery rights. The family was relieved to learn this. In fact, there is another family member that is willing and able to purchase the parents' home for fair market value if the Louisiana Department of Health and Hospitals pursues its estate recovery rights after both parents die.

Paul Rabalais 

Louisiana Long Term Care Medicaid Planning and Protecting the Home

 

Generally, the home is an exempt asset for Louisiana Long Term Care Medicaid Eligibility Purposes. This means that you can own a home and still qualify for Medicaid so long as your other "Countable Resources" total less than $2,000 in value.

There are many, many, many rules regarding the home. Here - generally - are three:

1. If your home is "offered for sale," it is no longer excludable;
2. If your home is out of state, it is a countable resource; and
3. Estate Recovery laws permit Medicaid to recover Medicaid assistance payments from your estate. Since your exempt home will be in your estate, the estate will have to sell the home to pay the Medicaid debt.

The key to avoiding problems that result from the application of Medicaid eligibility rules is to plan ahead - plan at least five years before you need nursing home care.

Your Retirement Account Could Be a Huge Hurdle for Medicaid Eligibility

Yesterday I met with a woman who was interested in qualifying for medicaid in case she ever needs to enter a nursing home as she gets older. I explained to her that the only way to qualify for medicaid payments for long-term nursing home care was to make sure her assets totalled less than $2,000 at the time she applies for medicaid benefits.

I have written about countable resources on this blog previously and essentially all of your countable resources are the assets that count toward that $2,000 limit. Included in Countable resources is the value of any IRA, 401(k), or other retirement account. What does this mean?

It means that the funds in those accounts must be donated into an irrevocable trust if they place you over the $2,000 limit. The only way to put those funds into trust would be to close out the account and then move the the money you take out into an account in the name of the trust. However, when you close out the account and receive the value of your retirement account in full, you will be taxed on this entire amount because the IRS views it as income. This means that often medicaid planning is not a viable option for individuals with large retirement accounts,

If you would like to discuss Medicaid planning and what options you have in preparing for long term care,feel free to call me at (504) 274-1980 or shoot me an email to Chris@rabalaislaw.com

Chris Kane, Attorney

Director, New Orleans Office