LONG-TERM CARE: MEDICAID ELIGIBILITY AND PLANNING STRATEGIES – DEVELOPING YOUR INDIVIDUAL LEGAL PLAN

            As difficult as it is to think about, we are all getting older and will need help as we age.  Eventually some of us are going to need long-term care.  Most people can afford a brief stay in a nursing home but cannot afford to pay for months and years of care and must apply for Medicaid.  Medicaid is a federally funded, state run insurance program for the elderly, blind, and disabled who have little income and very limited assets.  Medicaid pays for a majority of all long-term expenses of the elderly in nursing homes throughout the United States.   There are ways to qualify for Medicaid but planning well before long-term care is needed is preferred. 

What is Medicaid Planning? 

            Medicaid planning is essential for the middle class. Qualifying for Medicaid is not automatic and is extremely complicated.  Primary considerations are how to become eligible, converting resources and assets into exempt assets, preserving your assets for loved ones (including your family home) and protecting the healthy spouse.  

            Only two percent (2%) of the nation’s households have a net worth over $2M.  As a Medicaid planning attorney, I work for the other 98%.  Effective Medicaid planning applies the laws and regulations regarding Medicaid eligibility to keep the healthy spouse out of poverty or to allow a Medicaid applicant who has worked his or her entire life, paid taxes, supported the Medicaid system, and played by the rules to pass on to the next generation some of the estate he or she has accumulated.

Income Limitations:

            South Carolina is an income cap state, meaning that in order to be eligible for Medicaid long-term care benefits there is a strict income limit. A person receiving Medicaid cannot have a monthly income over $2,313.00.  Any additional income above that limit may be transferred to the healthy spouse (up to $3,160.50 per month as a monthly allowance) or the additional income must be placed into an income trust. Monthly income includes wages, Social Security benefits, pensions, veteran’s benefits, annuities, SSI payments, etc.  Your spouse's income cannot disqualify you from Medicaid, no matter how much he or she earns. Unlike assets, which are treated jointly, income is treated separately for each spouse. 

Asset Limitations

            Medicaid divides your assets into two categories: Exempt and Countable.  Basically, all money and property, and any item that can be valued and turned into cash, is a Countable asset unless it is listed as exempt.  In South Carolina, Medicaid eligibility requires the person applying to have a maximum of $2000 in countable assets. 

            Exempt assets will not result in a denial of benefits. Examples of exempt assets include your home, your car and personal effects. There are also specific rules to protect the spouse remaining in the home who doesn't need long term care to prevent them from living in poverty. These rules allow the well spouse to keep to a certain amount of "countable" assets, which is over and above the exempt assets.

Disposing of Assets—Look Back Period

            Anyone applying for Medicaid long-term care benefits is required to disclose any and all assets sold, transferred, given away, or otherwise disposed of, during the preceding five years.  This five-year period is called the “look back period.”  In other words, you cannot give all your money to your children on Monday, qualify for Medicaid on Tuesday, and then move into a nursing home.  Hiding assets and funds in order to qualify for Medicaid is a federal crime—the cardinal rule is full disclosure. 

Transfer Penalty

            Medicaid imposes a penalty for the transfer of assets for less than fair market value during the look back period. The penalty imposed is the denial of Medicaid long-term care benefits for a certain period.  Not all asset transfers result in penalties.  Transfers for fair market value, to spouses of any value, and certain transfers to specified relatives are permitted without penalties. 

Spend Down Plan

            It is possible to legally rearrange your Countable assets (life savings) and convert them into exempt assets or income streams necessary to qualify for Medicaid.  An effective “spend down plan” always requires careful consideration.  Mistakes and overlooked strategies can result in having to pay more to the nursing home than you should have.  This is a complicated field most people only deal with once or twice in their lifetime.  Considering the average monthly cost of a nursing home in South Carolina is over $7,000.00 each month, there is a lot at stake.  You might want to consider using the money that would be lost to the nursing home to pay an attorney to advise you as to how you can protect your assets for your spouse and children.   

What should I do?

            It is never too late to plan and consider your particular situation and planning goals. Consulting with a qualified elder law attorney with Medicaid asset planning experience will help you to lay the groundwork and establish your Independent Legal Plan.  Doing so sooner rather than later will ensure that you and your loved ones are secure and well cared for should you become incapacitated and need nursing home care.

            The information contained in this article is not intended to provide legal advice.  Every situation is unique.  Whether you are single or married, in need of proactive planning or Medicaid crisis planning, the Law Offices of Deirdre W. Edmonds, PA can help you avoid the financial ruin associated with the high cost of long-term care.  Contact us today at (843) 232-0654 to start the process of understanding the issues surrounding Medicaid eligibility and to implement your Individual Legal Plan.   

(The information provided in this article is for informational purposes only and is of a general nature. The information should not be construed as legal advice. If you have any questions about the subject matter of this article or related matters, you should consult with a professional advisor. Michael S. Large is a member of the Law Office of Deirdre W. Edmonds, PA.  Michael has been practicing law since 1991 and is licensed to practice law in South Carolina, Pennsylvania and New Jersey.  Michael is an active member of the South Carolina Bar currently serving on the Vulnerable Adult Task Force and Elder Law Committee.  Michael is a member of the National Association of Elder Law Attorneys, Horry County Bar, and serves on the Board of Directors for Champion Autism Network.  The Law Office of Deirdre W. Edmonds, PA, is located at 1500 Highway 17 North, The Courtyard, Suite 213, Surfside Beach, SC  29575.  The Law Office of Deirdre W. Edmonds, PA focuses on estate planning, probate administration, probate and trust litigation, disability planning and elder law.  Contact Michael S. Large via Telephone: (843) 232-0654; Website: www.dedmondslaw.com; and Email: mlarge@dedmondslaw.com.)