Many families with elderly parents or spouses should consider consultation from an elder law attorney about Medicaid qualification and benefits. Qualifications for Medicaid are complex and it is important that families take proactive steps to maximize their potential benefits.
As an unfortunate example of insufficient planning, consider the case of Schell v. Department of Public Welfare. Upon his death, Mr. Schell left roughly $300,000 in a trust and named his wife as the primary beneficiary. Mrs. Schell decided to dissolve the trust and distribute the remaining funds equally between her two children.
However, when she was admitted to a nursing home two years later, she was denied eligibility for Long Term Care (LTC) benefits. This denial resulted from the Department of Public Welfare’s conclusion that the income in the trust was an available resource that she renounced without cause. When she appealed, the court held that because she had access to assets available for her support, but transferred those assets without receiving fair value for them, she was ineligible to receive LTC benefits for a specified penalty period.
As illustrated in the example above, one of the best ways to qualify for Medicaid or other similar government benefits is to protect your assets years in advance. To be eligible for Medicaid in Colorado, an applicant may only own $2,000 worth of countable assets. This threshold seems low, but many assets qualify for exemptions. Subject to restrictions, primary residences, cars, household goods, and personal effects are not counted in determining Medicaid eligibility.
All other assets, including cash, savings, checking accounts, and retirement accounts are generally non-exempt. When these resources exceed $2,000, applicants can engage in a Medicaid “spend down,” or a financial strategy to reduce total assets and meet the eligibility requirement. When Medicaid planning is done in advance, there are many tools available to minimize the assets that will be spent on a nursing home or other forms of long-term care in the future. It is important to consult with an attorney about these options to ensure that your planning complies with all applicable restrictions and requirements.
For instance, some asset transfers, like purchases of annuities, life estates, or the trust dissolution in the Schell case, are penalized because of the Medicaid look back period. Medicaid requires an applicant to disclose all financial transactions he or she engaged in during a specific period of time, and imposes a penalty on individuals who transfer assets during that period simply to meet eligibility. The length of the penalty depends on what was transferred. For example, in Colorado, every $7,854 given away during the five years before applying for Medicaid creates a one-month period of ineligibility.
In order to plan for the the high cost of nursing homes or other forms of long-term care, contact one of our attorneys and learn about some of the smart steps you can take to protect your assets now.