In our final installation, Elizabeth A. Anderson, Esq. and Mike Henley, MD, conclude their conversation on Medicaid and tackle the big issue of a Medicaid spend-down.
MH: Can one still own a house and be on Medicaid?
EAA: Yes, a home is generally considered an exempt asset, but the Medicaid applicant must live in the home or have “intent to return,” and the home’s equity interest must be less than $636,000. If a community spouse lives in the home, these criteria do not apply, and the home is considered exempt. Real estate can be tricky, though. If the community spouse sells the home, moves into a care facility, or dies, the home could become subject to estate recovery after the Medicaid participant dies.
MH: After someone dies, can Medicaid make a claim to all remaining assets, or do they follow a formula? If there is real estate or say valuable collectibles (e.g., coins, antiques…) could Medicaid claim part or all of it?
EAA: Medicaid allows for estate recovery. Medicaid is sort of like a loan. If the Medicaid recipient has the means to pay back Medicaid, then Medicaid has the right to collect. Generally, when an individual is on Medicaid, they have spent down their assets. The only asset left to collect from is usually the home. If the home is no longer considered exempt, Medicaid can place a lien on the property in order to be paid back. Medicaid can only recoup what it spent, so if there is a balance remaining after Medicaid is paid back, those excess funds will pass to the next of kin.
MH: The bottom line is that I want to be able to leave some type of inheritance to my family. How can I do so legally and avoid Medicaid’s requirements of a maximum of $2,000 in assets?
EAA: There are a few tools we use in estate planning to shield assets from long term care. Those tools work best when we have the luxury of time. We can gift money or place funds into various types of irrevocable trusts if we can wait more than five years to apply for Medicaid. As long as the asset is gifted or placed in an asset protected trust outside of the five-year look-back period, the person who created the trust will not be penalized for those gifts. If a client cannot wait five years to apply for assistance, then we may need to look at other tools such as life care agreements, Medicaid exempt annuities, and irrevocable funeral/cremation accounts.
MH: What happens if someone on Medicaid inherits money or real estate? Do they get kicked off Medicaid?
EAA: They can definitely get kicked off if those inherited funds are not spent down below the Medicaid threshold by the end of the month the funds were received. This is why an appropriate estate plan is so important. If you want to leave an inheritance to anyone who is currently eligible for Medicaid or is likely to become eligible and is under the age of 65, it is imperative that they do not inherit these funds outright. Through the use of a Supplemental (Special) Needs Trust, an individual can inherit and remain eligible for their government assistance programs. If a Supplemental Needs Trust is not created then, typically, the Medicaid participant is kicked off of their benefits and they will be forced to spend down.
MH: Are there any useful websites or books about Medicaid that you would recommend?
EAA: Unfortunately, most websites are too general to provide specific guidance and, as the Medicaid thresholds change yearly, many resource books become quickly outdated. With this in mind, I recommend you go directly to the source. Check out your state’s local Medicaid website. They are full of helpful information.
MH: Thank you for your time. Is there anything you would like to add to our conversation?
EAA: Don’t be afraid to ask for help. Medicaid is complicated and there are many rules to consider. This is especially true if you are contemplating protecting assets from long term care. Consult a local Medicaid eligibility specialist or attorney who specializes in this field.
While we hope that you or a loved one never has to face these difficult long term care choices, we are so grateful for Elizabeth’s knowledge on the subject so that she can guide our clients through these Medicaid processes.
(This information is based on an interview of Elizabeth Anderson with The Analyst for an article in the “Beyond Water…” column of the technical journal, which is available at AWT. Content is copyrighted (2022) to Elizabeth Anderson and MD Henley & Associates.)
©2022, Elizabeth A. Anderson, The Law Network, P.C. ©2022, MD Henley & Associates.