Rumors, fears, and casual conversations about Medicaid often lead to false and erroneous beliefs that deter a family from seeking help paying for home care, or nursing home care. One common belief is “the state will take everything”. In fact the state does not take anything. What it does do is make people spend their assets in accordance with the Medicaid rules until they are eligible. For example, a person living at home could pay off a mortgage, could buy furniture or a lift chair, could do prepaid funerals and could make improvements to their home. These are only a few examples of what the rules allow for a spenddown.
Another myth is that “all our money has to be spent”. Although a single person has to reduce assets below $1600 in Connecticut, there are numerous rules that allow all kinds of assets to be kept. If that person is not in a nursing home, he is entitled to own a car for medical transportation. He can keep his house if living there and all personal property is exempt. For a married couple, the healthy spouse can keep half of their combined assets, up to a limit in 2019 of $126,420. If assets exceed that amount there are often many options to preserve the rest of the family assets. One example is that if the couple living is in an apartment, the healthy spouse could buy a house to live in, and then the house would be exempt and that amount of money would be saved.
A third myth is that nothing can be given away or a person would be ineligible for Medicaid for five years. This is completely untrue. Five years is merely the time period that state workers look back to see if assets were given away. To repeat, it does not mean that a person cannot be eligible for five years. It does result in a period of time that the applicant will be ineligible for Medicaid. That time period is called a penalty period and is calculated by dividing the amount given away by the average monthly cost of a nursing home. In 2019, that number is $12,851, so if a person gave away $12,851 that would result in a penalty of one month that Medicaid would not pay for care. If that person gave away twice that much that penalty period would be twice as long, and so forth. But after that time, Medicaid would be granted if the assets were properly spent down.
A very dangerous belief is that assets are protected if they are in a living trust. The word “living” trust simply means it is created while the person is living. The vast majority of such trusts are revocable. If a trust is revocable, it means it can be revoked and taken back, and if so, the state quite logically says it is still yours, so it does absolutely nothing to protect the assets from the Medicaid rules. There are specific types of irrevocable trusts that can be done to protect assets, but they must be irrevocable and satisfy strict rules.
The last myth that today’s article will discuss is that once a person is in a facility, it is too late to do Medicaid planning and protect assets. This is simply not true. There are numerous rules that may allow protection of assets, even if the person needing care is already in a nursing home. For example, a married couple could transfer all the assets to the healthy spouse, who could then use the spousal rules to preserve some or all of the couple’s assets. Other rules allow transfers at the last minute to a child who has lived with the parent for two years, and given care that kept the parent out of the nursing home for those two years. Still another rule allows transfers to a disabled child at any time, without disqualifying the parent.
There are so many rules and regulations that contradict the common Medicaid myths that this article could go on and on and use up several pages of this newspaper. The important thing to take away from this article on common Medicaid myths is that believing myths can lose families tens of thousands of dollars. Get advice from people who know the laws and rules, both for preplanning and last minute emergency planning. That advice may not only put your anxiety to rest, but it may save your life’s savings.
Attorney Stephen O. Allaire is a partner in the law firm of Allaire Elder Law, members of the National Academy of Elder Law Attorneys, Inc., with offices at 271 Farmington Avenue, Bristol, CT 06010, (860) 259-1500, or on the web at www.allaireelderlaw.com.
If you have a question, send a written note to Attorney Allaire at Allaire Elder Law, LLC, 271 Farmington Avenue, Bristol, CT 06010, and he may use your question in a future column.