A certain percentage of the elderly are going to be faced with a health care problem
that requires payment for long time care. Those services are not cheap, even if in the home, instead of an institution. What long range planning can you do so that your family is prepared for a sudden medical event such as a stroke, or gradual debilitation due to physical or cognitive decline?.
Scuttlebutt, gossip and secondhand information on Medicaid rules is often partially or totally wrong. That can cause panic in families facing the need for long term care at home or in a nursing home care. Even worse, wrong information can result in loss of family life’s savings and less care for a loved one and it can create a totally false sense of safety leading to great financial loss.
A family recently called with a problem that could have been avoided. The husband was in a nursing home on Medicaid (Title 19) and his wife was living at home with the assets she was allowed to keep. The nursing home had steered them to a company to do the paperwork for the Medicaid application. They did not seek legal advice from an elder law attorney who would have advised them on what other steps needed to be done, such as the wife doing a new will. She did not do a new will, and her old one left everything to her husband. The house, and her life savings went to him. Since he is on Title 19, the State of Connecticut has a legitimate claim against everything that went to him. This is a terrible result that did not have to happen.
Trusts are used for planning during lifetime and after death. They can be used to protect assets, avoid probate, manage money for children who are too young to handle money themselves. In addition, they can shelter assets if VA aid and attendance or Medicaid are needed and can save on inheritance taxes for those who have taxable estates.
Those who do not deal with tax laws and Medicaid rules on a regular basis usually have a misunderstanding on gifting rules, because the tax laws and Medicaid rules are totally different. Gift tax laws as of 2022 state that gifts up to $16,000 per person per year do not count as a taxable gift. If a parent gives $17,000 in one year to a child, the gift has exceeded the $16,000 limit by $1,000, and in theory theory the $1000 is countable as a gift. But the gift and inheritance tax law Connecticut has an overall $7.1 million lifetime exception. That means the excess gift of $1,000 will be subtracted from the persons $7.1 million lifetime exemption and should bring a smile to almost everyone reading this, because very few people gave more than $7.1 million in assets. In short, there is no tax on that gift unless the total of countable lifetime gifts and transfers after death exceed $7.1 million.
Medicare and Medicaid sound alike, but the two programs should not be confused. After age sixty-five everyone automatically qualifies for Medicare. It’s a federal health insurance program. There are deductibles, and monthly premiums are deducted from social security payments. It can pay for hospitalization, doctors, prescriptions, and rehabilitation. It does not pay for long term care. Unless you can qualify for Medicaid (Title 19) you will have to pay for long term care yourself. That can quickly wipe out assets and at nursing home costs can approach $18,000 a month. So how do you qualify for Medicaid?
