Common Medicaid Misperceptions
Not a week goes by without people calling in a panic because they are suddenly faced with the need for a nursing home for a spouse who has had a sudden debilitating event such as a stroke or a terrible fall breaking a hip. They are naturally very worried about the future for the spouse, and are also very fearful that they will be left destitute.
The first question is, “Am I going to lose my home?” It is common popular wisdom that the “state is going to take my home.” And it is totally wrong. If one spouse needs Medicaid (Title 19) the house can be put into the name of the healthy spouse, called the “community spouse” and the house will be an exempt asset. The state will not take it, and will not put a lien on it. So that misperception causes fright or a weeks of anguish before the true store is known. But in order to “save” the house, it is necessary to put it into the name of the healthy spouse, and that is where trouble can arise. If the sick spouse cannot sign a deed, the healthy spouse must have a durable power of attorney, with gifting powers, that allows transfer of the house to the healthy spouse. Without such a power of attorney, it will be necessary to go to probate court and have a conservator appointed to sign the deed.
Another question is, “Are they going to take all of my husband’s income? I won’t have enough to live on.” This time the answer is not quite as clear, but in most cases, some or all of the sick spouse’s income will be diverted ( in other words, given) to the healthy spouse. It works like this. The state says a healthy spouse should have a minimum monthly needs allowance of $1,891.25, plus an additional amount to pay for house taxes and house insurance and possibly a mortgage. The maximum is $2,841 per month. So if the formula results in the healthy spouse needing $2,841 per month, and the healthy spouse only has social security of $1,200 per mouth, the state will allow her to keep the difference from her husband’s security, pension, and other income.
Another misperception is that Medicare will pay for long term care. Medicare pays for many things, but long term care in a nursing home is not one of them. It is Medicaid that pays for long term care.
Almost everyone also asks, “Isn’t it true that you can give away $13,000 per year to all your children?” This misperception comes about because there is a federal gift tax rule that says you can give away $13,000 per year to as many people as you want. But the truth is this is an IRS gift tax rule, and it has no connection to the Medicaid rules, and any gift within 5 years of applying for Medicaid will likely result in a penalty.
Probably the most damaging bad information is that it is too late to do anything if someone is already in a nursing home. This could not be further from the truth. In almost all husband and wife cases, the Medicaid rules allow all kinds steps to be taken to protect assets for the healthy spouse. And for a single person there may also be many exceptions to the rules, such as allowing a transfer to a disabled child, or to a child who has cared for a parent.
These are only a few of the commonly held beliefs that go around. The way to avoid falling into a trap of thinking nothing can be done, or doing the wrong thing, is to seek accurate counsel from a knowledgeable elder law attorney. It may not only set your mind at ease, it may save you the nest egg you have worked so hard to keep.