The cost of senior care strains many family budgets to the breaking point. You want to offer your loved one the best care possible, but cost is a major factor in determining the facilities that will work for your family. To help make senior care more affordable, there are several payment options to consider. It’s important to keep in mind, however, that a number of these options are available only for seniors and families who have taken the time to think ahead and plan according to their upcoming needs.
Medicaid is a joint federal and state health care safety net for low income seniors, children and disabled citizens. Since it is funded by both the federal and state governments, there is much variation from state to state as to what is covered and who is covered. Discover how it works with Senior Planning.
The amount of the Medicaid lien corresponds to the amount of money Medicaid had paid for the care and needs of the deceased Medicaid recipient during their lifetime.
Below we’ve provided an example to better illustrate the way it would play out in real life circumstances.
Say a deceased Medicaid recipient owned a property with $100,000 of equity. If the Medicaid recipient resided in a skilled nursing facility for 11 months, Medicaid would have paid approximately $110,000 with the average monthly Medicaid rate at nearly $10,000 a month. With this situation Medicaid would acquire full ownership of the property since they have paid more than the $100,000 of equity in the home to recover some of their losses.
If the Medicaid recipient was in a skilled nursing facility for approximately three months in which Medicaid paid out about $30,000, Medicaid would place a lien on the property for $30,000 and recover the money once the property sold. The remaining $70,000 would be left to the heirs.
Heirs may sell the home and use the proceeds to satisfy the Medicaid lien or if the wish to keep the home, they may payoff the lien with their own personal funds.
The holiday season is just around the corner. So tradition entails gift giving to family and friends. For many, gifting $14,000 according to the IRS’s Gift Tax Exclusion is the perfect holiday gift. The annual Gift Tax Exclusion is the total sum of money per year that an individual may gift to an unlimited number of people without having to file a gift tax return or pay any gift taxes. Married couples may combine their annual exclusions, allowing them to gift $28,000 to each recipient.
While gifting is certainly allowed according to the IRS, Medicaid views gifting differently. No monies may be gifted within the five years prior to an applicant’s Medicaid eligibility date. Should Medicaid identify gifts or transfers when scrutinizing the financial history of the applicant, a Medicaid penalty will be assessed. The penalty will disqualify the applicant from Medicaid benefits for a period of time corresponding to the amount of care the gifted monies would have provided.This calculation is made using the CT Medicaid (Title XIX) penalty divisor rate of $11,851.00 per month.That would mean that if an individual gifted $11,851.00, they would would have one month of ineligibility for Medicaid benefits.
Seniors must exercise caution when gifting to family and friends, as they may be jeopardizing their Medicaid benefits.
Understanding Life Insurance Policies And How They Relate To Medicaid
When an individual is applying for Medicaid and has assets that exceed Medicaid’s resource limit, a Medicaid spend-down is necessary. Assets in excess of the allowable amount must be spent down in order to achieve financial eligibility. Some kinds of life insurance policies are included in the spend-down with a few exceptions. Below is a breakdown of what needs to be liquidated in order to be eligible for Medicaid.
There are two popular types of life insurance policies that have different effects on the Medicaid application process.
Term Life Insurance Policies:
Term Life Insurance Policies have premiums that increase as the individual’s age increases. These policies only carry a death benefit. They are also referred to as protection policies; their purpose is to assist the beneficiaries in the event of the policy holder’s sudden death. Since there is no current cash value in term policies they are not considered an asset according to NJ Medicaid guidelines. These policies may remain active and will not impede one’s Medicaid eligibility. Once an individual is on Medicaid he/she will have minimal assets and may not have the money to cover the monthly premiums. Some beneficiaries choose to cover the monthly premiums so that they can ultimately benefit from the death benefit once the Medicaid recipient passes.
Whole Life Insurance Policies:
Whole Life insurance policies generally have fixed premiums, death benefit and cash value reserves. These policies may be liquidated at any time. Being that they carry a current cash value, they are not exempt from the Medicaid spend-down and must be liquidated in order to meet Medicaid’s financial eligibility requirements. There is one exception to the rule! If the Whole Life Policy has a face value of less than $1,500.00, regardless of the cash surrender value, it is exempt from the Medicaid spend down and may remain open and active. “Face Value” is the original death benefit amount on the day the policy was purchased, prior to the policy holder making monthly premiums. While the policy is active it will accumulate cash value from the premiums as well as dividends from reinvestment money. The cash value may exceed the original death benefit (or Face Value). Once the policyholder passes, the beneficiaries will then be able to claim the total death benefit from the policy.
In order for an individual to be eligible for Medicaid, there are financial standards that need to be met. Many Medicaid applicants will have to spend some of their assets in order to meet Medicaid’s financial threshold. There are a few excludable resources that are exempt from the Medicaid spend down. These assets can be retained by the Medicaid applicant and will not impede Medicaid eligibility. An individuals personal possessions, a prepaid irrevocable funeral trust, and a special needs trust for a disable child are just a few excludable resources when applying for Medicaid.
Today we will discuss utilizing a special needs trust with the excess “spend-down” money. When a Medicaid applicant has a disabled child, a special needs trust allows the transference of assets from a parent to the child without jeopardizing the child’s government benefits.
Special needs trusts are also referred to as “supplemental care trust”. These trusts supplement the disabled child’s Supplemental Security Insurance (SSI) and Medicaid benefits. The money in a special need trust may only be used for specific items or services. The trust is meant to supplement and not pay for basics such as food and shelter. Some things that may be purchased through a special needs trust include:
• Home modifications to assist the disabled • Medical treatments and equipment not already covered by government assistance programs. • Education and recreation equipment • Computers • Musical instruments • Sports equipment • Travel expenses • Prepaid funeral
When a parent creates a special needs trust for a disabled child, he/ she chooses a trustee. A trustee is an individual or institution who manages the assets in the trust. The trustee’s responsibility is to follow the terms and guidelines outlined in the trust as well as transferring the funds from the trust to the beneficiary or disabled child. A trustee can be a family member, attorney, bank or anyone that one chooses to assign as a trustee.
The trust restricts the beneficiary (or disabled child) and parent access to the assets in the trust. Only the trustee would have accessibility to the funds and therefore it’s considered an unattainable asset for both the parent and disabled child. To summarize, the Medicaid Applicant who transfers assets to a special needs trust for a child will not incur a Medicaid penalty. Additionally, the recipient will not jeopardize the government benefits which they receive.
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SPS specializes in helping applicants with the Medicaid process. Find out more info about Medicaid in your state
The Medicaid application process sometimes requires legal advice and the assistance of an attorney. Senior Planning Services does not provide any legal advice or services.
You may wish to consult with an attorney concerning your Medicaid application.
