For an unmarried person attempting to pay for care, there are a few options:

1) You can write a check, but few families can do this for any extended period of time.
2) If you’re lucky enough to have purchased long term care insurance that will pay your cost of care, or at least help in doing so.

But what about when those options are no longer available? If the insurance isn’t enough, or my loved one doesn’t have insurance and paying out of pocket is too much? What other options exist?
3) Medicaid. But you’ve got to qualify your loved one for it, and it is not necessarily a simple task. Rather, it’s not a difficult task as long as you know the rules of qualification, and play by them. It is for this reason that we at the Elder and Disability Law Firm have provided this article, with an overview of each step of the process, and retain staff whose sole purpose it is to help any family who enters our office in Kansas City needing to qualify for Medicaid to do so.

If the person whose care needs to be paid for, who needs to qualify for Medicaid is a single person, the state says that certain assets are exempt from what is considered “countable” and that everything else counts. These exemptions are: a house, a car, a prepaid funeral plan , $1500 cash value life insurance or term insurance, and household goods: furniture, clothing, appliances. All these things are exempt, but nothing else is—that means that checking accounts, bank accounts, IRA’s, bonds, stocks, mutual funds; anything else, counts in what is referred to as your “countable assets,” and the state says that once we’ve exempted what we can, the person looking to qualify must then spend the rest of their assets down. The number they have to spend down to depends on the state in which they live—for example, in Kansas assets must be spent down to $2,000 whereas in Missouri they must be spent down to less than $1,000.

Say there’s a single person with Alzheimer’s who needs nursing home care, and their countable assets amount to $100,000. Until they have spent their assets down to whatever the state has deemed the proper number, they will be considered to be using “private pay” for their nursing home costs, meaning that they must write a check/pay out of pocket. With something like $70,000 a year for care, it won’t take long to get that money spent down. Once they’re there, they file an application showing the state where the money was spent and what they have left. If everything is in order, the state will say that that person has qualified for Medicaid. Once the assets are down to those limits, the individual will then have to turn over their income, say social security or pension, and keep an amount as a “personal needs allowance” (which also varies by state; $30 in Missouri and $62 in Kansas) and also retain enough to pay their health insurance. Any funds that remain after these allocations are paid to the nursing home as a continuous copay. Rather than for married couples, specifically when only one person requires care, qualifying for Medicaid is fairly easy if you just know how to do it. Namely:

1) figure out what’s exempt
2) spend countable assets down to the limits set by your state
3) turn over income
4) keep whatever the state deems the amount to be for “personal needs allowance” and to cover the cost of your health insurance
5) the remaining funds go as a co-pay to the care facility

Veterans?
If the person served during a period of wartime, for at least 90 days, and were honorably discharged, and if they have very heavy costs of care, they may be eligible for an “improved pension” which might be a check every month from the VA, the amount will vary— but can be anywhere from just under $1,000 a month to 15 or 1600 dollars a month, and in that case those funds would also go towards cost of care.

We know that Alzheimer’s can be a debilitating disease, and when it takes hold, often it becomes necessary to seek nursing home care. Yet in married couples it is common that one spouse remains perfectly healthy while their partner declines; and in that case, only one of them needs that care. How can half of a married couple qualify for Medicaid? In short, they must go through a process called Division of the Assets.

Consider this: a couple is married, and the husband has Alzheimer’s. The wife has been his care giver, but it has gotten to the point that she can no longer adequately care for him and for herself, for any of multiple reasons. So she places her husband in a care facility, but then must figure out how to pay for it. In Kansas City, that cost, especially for memory care, can be anywhere from $6,000-$6,500 a month—sometimes more, and few families can afford to just outright pay upwards of $60,000 dollars a year. For a while, the couple can choose to “private pay” by simply writing a check to the facility with money they’ve already got. If the couple was fortunate enough to secure long term care insurance, that will go towards that cost of care for a while, but for most clients of the Elder and Disability Law Firm and others like them, what ultimately happens is that they come to a point that they can no longer pay that fee out of pocket. In those cases, they then go through a process to qualify one partner for Medicaid, through a process called Division of Assets.

Say our couple has $100,000 in the bank. The state would review the assets and would say certain things are exempt from what are called the “countable assets”, meaning that the monetary value of those things does not count against the ultimate amount that the state dictates an individual or couple can have. Namely these exemptions include a house, a car, a prepaid funeral plan for both spouses, $1500 cash value life insurance or term insurance, and household goods: furniture, clothing, appliances. All of these items are exempt, but everything else would count in the state’s review of the assets. The next step then is to put half of those total banked assets (in our case, half of $100,000) on the side of the spouse who needs care, the husband, and the other half on the side of the one who’s remaining at home, the wife. So the husband has, in this example, $50,000 of assets. He would have to spend that money down until it went (in Kansas) to $2,000 or (in Missouri) less than $1000. Once that money had been spent down, he would then be eligible for Medicaid and his wife would be allowed to keep her half of the assets and a certain amount of income.

Spend down? What is it okay to spend that money on?
Certain things are clear; the couple could always elect to pay the cost of the nursing home; that is definitely an acceptable expense to spend down with. But they might also consider, if the wife is still driving, trading in her car for a new or newer car. As long as this purchase or trade was made after the husband had already been placed in the nursing home and they/their legal assistance had already set that snapshot where the couple has started to spend down, everything they spend on the new car would come from the husband’s side and be a perfectly legal and viable part of that spend down. Another approved way to spend down is to complete any home improvement that can be done; fixing up the roof, new heating and air, new carpet or furniture—as far as the spend down rules go, it is absolutely okay to replace those things with new ones, and all of those costs would come from the husband’s side of the assets. Our couple should also determine if there is any debt to be paid off; is there a mortgage? Credit card? They can use the husband’s assets to do settle those debts. Have they pre-paid their funeral plans? If this was done before the division of the assets, then it was exempt. If it is done after the husband is placed and the division occurs, the funds would fall under the spend down guidelines. There are all types of things to consider when facing the prospect of spending down money in both a logical and legal way.

Once that money is spent down to the limit dictated by the individual’s state, for example $2,000 in Kansas or < $1,000 in Missouri, the wife is now considered the “community spouse” and she will be entitled to what the law calls a Minimum Monthly Maintenance Needs allowance of at least $1,750 a month. She’ll keep her income—whether that be social security checks, pension, whatever. And if that figure is greater than $1,750, she’ll just get to keep it. If her income is less than the $1,750 mark, she’ll get to keep enough of her husband’s incomes so as to be at the $1,750 per month level. If there’s anything left of his income after that, minus $62 in Kansas and $30 in Missouri and minus the cost of his healthcare, the surplus will be an ongoing copay to the nursing home.

Something else that should be considered—in our example, the countable assets for our couple totaled $100,000. But what if the assets in question amount to $200,000? or $300,000? $500,000? Would the healthy spouse always just get half that figure? Or in other words: What’s the most the community spouse can have?

Currently, the maximum amount that that person could retain would be $109,560—a number mandated by the federal government that changes year to year. So if the couple began with 300,000, it would have to spent down until it would split so that the at-home spouse would get their $109,560, and only at that time would the spend down of the other half of the assets begin. There are many planning steps that can be take in a situation like this one.

The bottom line is to consistently make sure of two things, and every step taken should be rooted in these:
1) Make sure that your loved one gets the care they need.
2) And make sure that as a family, you are never out of money or out of options

A frequently asked question of the Elder & Disability Law Firm is this one:

“Can I care for my mother, who has Alzheimer’s? Can she pay me?” It seems like a straightforward query, but it’s actually a fairly complex legal question, because there are so many different ramifications. First, if you’re intending to care for an Alzheimer’s patient yourself, it is important to know how. There is a resource center on our website, www.kcelderlaw.com, that can teach you how.

But as far as the initial question of parent care/child payment, we have to know how the state treats this situation from a Medicaid perspective. To understand what makes it so complicated, we must know a little bit about Medicaid. Prior to February 8th 2006, if someone made a gift (gave assets away), there were penalties, but they expired on a monthly basis. Then “The Deficit Reduction Act” was signed. Under that act, when someone gives money away, they are creating penalty periods which can last up to five years. You may be wondering, “how is this related to the question? I just want to know if I can care for my mother.”

It’s related because the state says that if you don’t have a care contract in place, then anything your mother/father/whoever pays you for care is considered a gift. As we just described, any gift can create Medicaid penalties for up to five years—which is why you need good legal advice if you are in a situation in which a parent is planning to pay you for your care.

First, you have to get a care contract the meets the provisions of the laws of your state. Once that is in place, the contract will spell out all the services you’ll provide, how much your parents can pay you—and there are some very detailed rules about this—but a rule of thumb is $10-15/hr, though this is an estimate that should be taken with a grain of salt because those rates can be more, less, and are even dependent upon the county in which you live.

The steps are easy: Get a care contract, good advice from someone who knows about the things you’ll be dealing with in drawing up a care contract, look into worker’s compensation insurance, and make sure everything is handled from a federal tax standpoint. These steps are required because if you examine the situation, what’s truly going on is that the parent is the employer, making the child the employee, and that means that the child must declare that income on their taxes, insurance, etc.

If the question is, “Can my bother pay me to take care of her?” The bottom line answer is, “yes,” but you have to jump through some serious legal hoops to make sure that it is set up just right. If you don’t, you run the risk of having the state Medicaid agency, in the even that down the road your parent needs care you can’t provide, say that “even though you work very hard for the money you were given, you didn’t set things up properly so these are considered gifts” and your parent won’t be eligible for Medicaid again for a good long while.

This is one of the questions most frequently asked of the attorneys of the Elder & Disability Law Firm. If a father’s got Alzheimer’s and his daughter wants to care for him, can she? It is possible, as long as they follow all the legal steps that are required. But what if it goes beyond that? If she moves in with her parents to provide care, are there any benefits for the caregiver? The answer is also yes—and it’s an exception to the Medicaid rule. If a person makes gifts (giving money or property away) they are usually setting up a five year penalty period, in which they would not be allowed to apply for Medicaid. But if a child moves in with a parent, and that child’s care keeps a parent out of a care facility for at least two years, under federal law that house can then be given to the child without any penalty.

What about tax consequences? The parents will have a cost-basis in the house, which is, by and large, the amount they paid for the residence. If the parents make a gift of the house to the child, whatever the cost-basis was will travel to the child. Whether or not there are things you can do with that are questions more for an accountant than an Elder Law attorney. The bottom line is that if a child’s care keeps mom or dad out of a care facility for two years, from a Medicaid perspective, their house can be gifted with no penalty. It is crucial to have very good documents in place before putting a plan like this into motion, because if the child has become eligible but either parent no longer has the legal capacity to transfer title, they would be stuck—it is another instance in which a powerful Power of Attorney can make all the difference.

But what if the child of an Alzheimer’s patient is disabled? Are there special provisions?

Consider the same situation from the previous example; a father has Alzheimer’s, but in this case there is no caretaker child, so the father needs Nursing Home care. Say that Dad’s got $100,000 in countable assets—the state says that he would have to spend that down to one or two thousand dollars before he’d be Medicaid eligible. In that case, if there is a disabled child in the picture, the parent could gift them their entire estate with no penalty whatsoever, which could be a very important planning technique. How that gift should be structured—whether it goes to the child outright, or is put in different trusts, etc—is beyond the scope of our practice specifically, but suffice it to say that it is possible to make an entire gift of the spend down to the child, protect the assets for the child, and qualify for Medicaid immediately. The key is to have good Powers of Attorney set so that if the parents lose the ability to make those decisions, the documents still allow for decisions to be made.

So far I have written many posts about caregiving, as well as reports helping you to understand that what you don’t know about paying for nursing home care could cost you everything. And you will continue to receive those Special Reports… they’re chock full of great information.

Now I’ve found, over time, that a lot of my clients get impatient… they want to get right to the heart of the matter. They want to know if there are ways to cut their nursing home costs right now. For others with a loved one with Alzheimer’s or memory problems who may soon need care, they want to know if there are steps they can also take to reduce the cost of care or to protect the family home or farm…

If that’s you, if you NEED ANSWERS NOW, click on the link below for a special offer:

www.learnmedicaid.com/hammond/get-answers-now/index.html

Hope I’ll be seeing you soon!

When it comes to Medicaid, each state does things a little bit differently. However, every state decides on a maximum number of assets that can be kept in the event that there is a husband and wife, and only one of them needs long term care.

It’s important to note that the rules are much more generous for a husband and wife, compared to a single individual who is applying for Medicaid. The federal government has established a maximum level of assets for husband and wife, the Community Spouse Resource Allowance, or CSRA. This is the amount of money that may be kept so that the healthy spouse can continue to live in the community. Medicaid refers to the spouse who is living at home as the “community spouse.” Please feel free to call our office at (913) 338-5713, and we can tell you what the current maximum CSRA is in our state.

Any assets that exceed the CSRA must be spent down on the ill spouse’s care. From the Medicaid department’s point of view, the ill spouse is referred to as the “institutionalized spouse” or the IS. The IS can have a modest resource allowance as well. That is typically no more than $2,000 in assets (call our office for the exact number). The couple may not have any assets exceeding the CSRA or they will be ineligible for Medicaid. That includes your IRA’s, your cash value life insurance, your CD’s, your brokerage account, your checking account – you are obligated to pay until your resources reach the limit that’s stated here, if those assets are classified as being available for spend down. Make sure you talk to an elder law attorney to see what you must spend down. We have seen many clients who have spent far more money than what was required to spend down at the time of the Medicaid application.

You may remember that previously, you learned that an irrevocable pre-paid burial policy is counted as unavailable. But the rules can be tricky. For example, say you have another life insurance product that you bought years ago, which has a face value (or a death benefit value) of $50,000. This same product has a cash value of $18,000. To the Medicaid department, that looks like $18,000 that you should cash in now to spend on your care. It doesn’t really bother them that your survivor spouse would be much better off getting the $50,000 death benefit at some future time. Nope, if you can get your hands on that cash, regardless of the withdrawal penalty or its future value, the Medicaid department says you need to get it now so you can spend it on long term care. All this has to happen before you will ever become one of those “qualified individuals” who is eligible for long term care with a nursing home benefit paid by Medicaid.

If you’re worried you have too many countable assets and you don’t want to lose your shirt paying for long term care, call (913) 338-5713 to schedule an appointment with one of our attorneys. We can show you your options. Let us show you how our services could benefit you and your loved ones.

Shortly, we’re going to talk about a much nicer subject: the exempt assets. Let’s see what you get to keep when applying for Medicaid!