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Part 8: “Medicaid Planning: What’s Acceptable; What’s Not”
Originally published February 14, 2010 in the Stamford Advocate
Copyright Julie Jason 2010. All rights reserved.
As many of you know, I am a proponent of financial literacy and in that role, I present to groups on many of the topics that I write about in this column. A few months ago, before I began this series on elder care, an attendee asked how to hide assets in order to qualify for Medicaid. That individual wanted to know how to game the system, something that is both unethical and illegal.
Ethical Medicaid planning has nothing to do with hiding assets and everything to do with protecting your family’s security under the regulatory scheme that Congress enacted and the states administer.
As Darrell V. McGraw, Jr., Attorney General of the state of West Virginia, stressed: ”Giving away property in the hopes of creating eligibility for Medicaid-funded long-term care, or to avoid Estate Recovery, is not unlawful, but (with a few exceptions), giving property away will create a period of ineligibility during which Medicaid will not pay for your long-term care.” (Ineligibility has to do with the 5 year look-back period that we discussed in this series.) See, “Medicaid Estate Recovery: What Seniors Should Know” (April 1, 2009) at http://www.wvago.gov/pdf/EstateRecovery.pdf.
As Nina Kohn, Associate Professor of Law, Syracuse University College of Law emphasizes, “People may need or wish to protect their resources and there are a number of ways in which the law empowers them to do that.”
The majority of people who find themselves in financial distress due to the enormous cost of long-term nursing care need to know their options working within the system. The best way to do that is to do lots of reading, considering whether long-term care insurance might be appropriate (refer to last week’s column on the Connecticut Partnership), and consulting with an elder law attorney whose values you share.
Just how do you find an elder law attorney you would want to represent you?
It’s best to talk to people in the know, such as nursing home facility directors, suggested Susan Welch, Director of Admissions, Nathaniel Witherell Rehab and Nursing Center of Greenwich. Or, ask agencies that are closely related to your situation, such as the Alzheimer’s Association, or Children of Aging Parents.
You will also want to go to the National Academy of Elder Law Attorneys (NAELA), website www.naela.org. Read the Q&A and research its database of members. NAELA is a member organization of attorneys who have an interest in elder law issues. The National Elder Law Foundation at www.nelf.org provides a list of elder law attorneys who have earned the “CELA” (certified elder lawyer) designation, which means they have passed an examination designed to demonstrate their knowledge and skills.
You can also turn to bar association committees, such as the Connecticut Bar Association’s elder law committee. Be aware, however, that membership indicates interest in the area, not expertise. (For example, I’m a member, but make my living as a money manager, not an elder law attorney.) The American Bar Association’s Senior Lawyers Division is another resource.
Interview potential attorneys about their experience in elder law matters, find out how they charge for their services, and importantly, get a sense of the strategies that they have used in cases that are similar to yours.
For example, a nursing home might tell an unmarried person: “Give us a mortgage on the house and when it’s sold, we’ll take our fee out of the proceeds of the sale,” offered elder law attorney, Joel Muhlbaum, of Stamford.
While this might sound like an easy way out of the financial problem, there are usually better options.
One attorney’s advice might be to spend equity down below a state’s threshold. One approach is to take out a home equity loan and using the money to purchase a Medicaid annuity, which is a “non-countable asset,” according to elder law attorney, K. Gabriel Heiser, author of “How to Protect Your Family’s Assets from Devastating Nursing Home Costs.” Non-countable assets are assets that you are permitted to keep while qualifying for Medicaid.
Another lawyer might suggest another approach.
“Put the house on the market, which will turn the house into an inaccessible asset, and then file the Medicaid application,” offered Muhlbaum. “Once you are approved, Medicaid will pay the bill at the Medicaid rate, which is approximately 40 to 45 percent lower than the rate you would pay privately (the “private pay rate”). That’s a tangible savings.”
When the house actually sells, the proceeds go to reimburse the state’s Medicaid program for the benefits paid on your behalf. If there is money left over, Medicaid benefits are suspended until you again spend down those assets (to $1,600 in the state of Connecticut).
What about giving the house away to heirs? Or, adding a grown child to the deed? It depends. Is the child taking care of the parent in the home? When will other assets be depleted? What about gift tax issues? (Both transfers will trigger the need to file a gift tax return, but not necessarily a gift tax liability.)
Each person’s situation is different, calling for individualized planning, explained Stamford elder law attorneys Sam Starks (Samuel J. Starks Law Offices), Richard Fisher (Cacace, Tusch & Santagata). Nothing is as straight forward as it might seem.
As you inform yourself of Medicaid rules, be sure to learn about how your state handles things. But, don’t stop there if you have someone in the family who may not be able to pay for a long nursing home stay at today’s prices, even if you think they may not be eligible for help. There are many tools and techniques that we did not touch on here. And, there is always the possibility that your lawyer will be able to advocate on your behalf at a “fair hearing” that you have a hardship case that needs to be treated differently, or to challenge an adverse finding.
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