We meet with families on a regular basis who face long term care issues, but make decisions based upon an incomplete understanding of the laws and rules concerning Medicaid. For example, we often hear that information has been passed along by friends and relatives who faced the same issues, but those friends and relatives navigated the Medicaid system in another state. While Medicaid is a federal program, it is administered on a state level and it’s the state laws that impact its administration.
Also, different rules apply for a single person and a married couple. We often find that a family is making decisions based upon the rules, but as they would relate to a person of a different marital status. Below are the answers to the most common misconceptions about Medicaid benefits that we encounter:
I have to spend all of my assets in order to get Long-Term Care Medicaid.
Some assets (including a home, a vehicle, certain burial plans, and a small amount of life insurance) are not countable assets when applying for Medicaid. A married couple can keep approximately half of their assets, up to the current maximum of $119,220.00, and still qualify for Medicaid. In addition to these basic exemptions, extensive planning opportunities are available that allow applicants, both married and single, to protect a more substantial amount of their assets.
I can “hide” my assets and then apply for Medicaid.
Intentionally providing false information on a Medicaid application is fraud, for which there are civil and criminal penalties. Our legal services include handling the Medicaid application for our clients, including dealing with the State of Michigan and Department of Health and Human Services (DHHS), which is the agency that processes Medicaid applications. Whenever we file a Medicaid application, we fully disclose the facts. None of the legal planning involves hiding anything from the government, and full and honest disclosure is critical. Due to technological advances it is quite easy (and legal) for the IRS, Social Security, the Department of Health and Human Services, and other government agencies to share information about your property and assets.
One should never go into the asset protection planning process thinking that it will be possible to “hide” money or transactions. There is no need to “hide” your assets as there are many strategies available to legally protect your assets and still qualify for Medicaid benefits.
My home will have to be sold if I go into a nursing home.
Most families we meet with are relieved to learn that the home does not need to be sold in order to qualify for Medicaid benefits. While the home can be protected, there are financial challenges facing the homeowners. The home of a Medicaid recipient is a non-countable asset, provided the value of the home is less than $552,000.00 (in 2015). This means that a single individual who has $2,000.00 or less in countable assets and who owns their home can qualify for Medicaid benefits to pay for their nursing home care costs.
However, this is not as good as it sounds since the nursing home resident will be required to pay all of their monthly income toward the cost of their care. This means that the income will not be available to pay the real estate taxes or other expenses of maintaining the home. If the home is rented, the rental income can be used to pay the expenses of maintaining the property, but a portion of that rental income will also be paid to the nursing home each month toward the cost of care.
I can give away $14,000.00 per year.
This misconception is actually based on a federal gift tax law that has nothing to do with Medicaid laws. In Michigan, a person will be disqualified from Medicaid eligibility if they give their assets away within five years of applying for Medicaid (called the look back period). Currently, for every $8,084.00 a person gives away, they will be disqualified for Medicaid eligibility for one month. This is also broken down by day (currently, for every $270.00 given away, they will be disqualified for one day). Ultimately, the gift will result in a penalty period, during which time Medicaid will not pay for the nursing home costs.
The penalty period will not begin until after the individual is receiving long term care, is asset eligible, and submits an application for Medicaid benefits. Therefore a $14,000.00 gift made within the look back period will cause a penalty period of approximately one month and twenty-one days, during which time Medicaid will not pay for the cost of care. Even though the IRS will not impose a tax on this gift, there will be significant consequences for Medicaid eligibility.
I can only spend down my assets on nursing home expenses.
If long term nursing home care is needed and Medicare and insurance benefits have been exhausted, you will need to pay all of the nursing home bill until you qualify for Medicaid benefits. One option is to spend down your assets on a number of items that benefit you or your spouse. However, there are many other options available under the current Medicaid laws to speed up the Medicaid qualification process and protect your assets without simply spending down.
A joint bank account that has my child’s Social Security Number as the primary number will not be counted as my asset for Medicaid eligibility purposes.
This is simply not true. A bank account with a Medicaid applicant’s name on it will be considered to belong entirely to the Medicaid applicant, regardless of whose Social Security Number is associated with the account and regardless of whose name appears first on the account.
Becoming eligible for Medicaid benefits can be difficult. With that in mind, SSR Law Office is here to help you navigate through all of the false information and not only ensure the correct choices are being made, but also give you peace of mind. Contact us today at (586) 239-0871 for your free consultation.