How do you legally spend down assets before going on Medicaid?

Here's what our legal and medicaid expert Gabriel Heiser says about spending down to medicaid:

https://www.agingcare.com/articles/elderly-parent-qualify-for-medicaid-136276.htm

My father is going to be entering a nursing home and I want to help my mom retain as much of their funds as possible - is there any quick way for us to move some of her funds so they are not included in the "snapshoot"? Pay more towards the principle of her home? What if I loaned her money so it appeared that she had more in the bank at the "snapshoot"? Can she pay me back with my fathers portion as part of her spend down? Thanks for any advice.

tporvotst - I'm assuming your ? is geared to having Medicaid pay for your dad's care, my answer is based on that. If your dad is hospitalized and needs to go into a NH, Medicare will pay for a small # of days if he was in the hospital prior. Medicare site has details. After that & other than that, NH are either private pay, LTC insurance or Medicaid. None of this has a quick fix. For couple's, day 1 of "institutionalization" is the key date for finances, the "snapshot" day.

If your parents have assets they are expected to do private pay @ the NH or "spend down" assets to get to their state's asset ceiling to be Medicaid covered.

For Medicaid all the regulations are state specific even though it is a federal program. Most states have the max monthly total asset of about 2K for individuals. For couples it's different. Your mom would be considered a "community spouse" as such the asset ceiling is higher and is limited to one half of the couple's joint assets. In some state's it's up to $109,560 (in 2011) max & $ 21,912 minimum in "countable" assets. In other states it's lower.

All assets are counted against these limits unless the assets fall within the short list of "noncountable" assets: personal possessions, 1 vehicle (regardless of value, as long as it is used for transportation of the applicant or spouse), their principal residence, provided it is in the same state in which the individual is applying for coverage & the house may be kept with no equity limit if the Medicaid applicant's "community spouse" lives there; prepaid funeral plans and a small amount of life insurance.Over that they must “spend down”.

“Spend down” – means get assets (excluding homestead, etc.) under the state’s Medicaid asset ceiling. If they have a home, prepay for utilities, cable, insurance, repairs. If your mom is planning on staying at the house, spending down by doing repairs or paying off the mortgage, is often a super good plan.

For spouse's there's other issues, like how to deal with income if she still works or if she never worked and her only income is his SS &/or retirement and she need's to get a MMMNA - minimum monthly maintenance needs allowance. (Say that 3 times fast!) These are all sticky, you'll likely need someone to work with you in figuring that out like an elder care attorney. The MMMNA is based on your state's AVERAGE and seem to be on the low side and often the community spouse will have to do an appeal to the state for more MMMNA or get a court order for spousal support to get more monthly support.

There can be no $ or assets gifted to others. If anything is sold, it needs to be done at fair market value. If you don't there will be a "Transfer Penalty". The penalty is pretty severe and is for the period of time during which the person transferring the assets will be ineligible for Medicaid. The penalty period is determined by dividing the amount transferred by what Medicaid determines to be the statewide AVERAGE private pay cost of a nursing home in your state.

So if the average monthly cost of care is 5K, and dad transfers a property worth $100,000, he will be ineligible for benefits for 20 months.For couples, getting rid of the extra car is often the glitch as they give it to one of the kids for free and then have a Kelly blue-book based penalty for the value of the car. Property ownership is recorded by the state so it's easy for the Medicaid worker to do a cross check for registration. So that 20K car is 4 mo. penalty. Also keep in mind they sign off on a authorization form within the Medicaid application that the state can access any banking or investment records too. My point is don't try to get cute and hide/move stuff. There is no quick fix.

All these issues are sticky to begin with and with the "community spouse" issue it's super sticky, IMHO you'll need to hire an experienced lawyer to help.To begin your search for the best lawyer for the job, contact the local bar association and ask whether it has a lawyer referral service that includes those who specialize in elder law. You can also contact the National Academy of Elder Law Attorneys for a referral to its members in your area.

I know it can seem daunting. My mom's Medicaid application with the supporting documentation was over 100 pages - mainly because of all the pages of her funeral, burial & term life policy. I am pretty OCD when it comes to paperwork, and we still had glitches in her application. If your parent's have their records together, you can probably do an asset evaluation in a long weekend to see where they stand and how much $ needs to be correctly spent down and then see the attorney. If you are facing a short time frame then alot of this you will just have to walk through with your mom. Good luck & keep a sense of humor.

It would be best to see a lawyer about this so that you do everything legally. Otherwise it looks illegal. For other people my advice is to do this plenty early, like 5 years before so that you don't have this problem.

I agree that you'll need to consult a lawyer or an estate planner who understands and has considerable experience with Medicaid.

Some things to consider spending down on are those that will benefit your mother as she remains in the community. Thing she can pay ahead to reduce costs later are good choices. Pay off consumer debt, if any. Repairs or upgrades to the home -- things that it will make it easier for her to stay there (like a wlak-in tub) should be considered. How old is the furnace? Water heater? Is this a good time to trade in the car(s)? Prepaid funeral expenses for both parents make sense.

Again, see a professional to get this done correctly.

Ahead of my grandfather needing to be placed in a nursing home, my grandparents long-time attorney had advised of the need to spend down in prep for Medicaid qualification for him. Like "jeannegibbs" suggested, we set out to make improvements in my grandparents home that would make things easier and safer for my grandmother who would be the only one living there once he went to a NH. The improvements ended up being pretty significant since its an old house and once they opened up the walls numerous "code related" improvements were mandated. Long story short, during the Medicaid qualification process, the work in the house was still in progress but our case worker advised us every step of the way with regards to the spend down and the reporting of payments to the contractor and such. We made her furniture purchased on her credit card which worked to her advantage as far as the spend down was concerned the only drawback was we had to make these purchases by a certain period of time as there is/was a time limitation on when the drawdown minimum had to be reached in order to qualify. Thankfully we were able to finally get my grandfather qualified (he was already in the NH) but unfortunately he did pass away 2 months after qualifying. We did learn that Medicaid paid the majority of his funeral expenses, which was something we had no idea was part of Medicaid.

Now I have a larger issue of my grandmother now being in a NH and we are in the middle of the qualification process for her BUT its sooooo much more complicated now because of having to transfer everything into her name in order for my grandfather to qualify, so while bank accounts and the like are not the issue, selling her house in a frozen market is. There are no exceptions for Medicaid qualification, applicants cannot own a home/property. I might start a separate thread in this regard cause I'm almost at my wits end.

What do you mean applicants can't own a home? A home and a car are exempt, aren't they?

When my grandfather was being qualified, assets such as cars and property were able to remain with the living spouse and everything had to be transferred out of his name and into my grandmother's. Now that we are trying to get my grandmother qualified, we were told that she is not permitted to own a home AND qualify for Medicaid (and there are no exceptions) so we must sell the house as well as any other properties in her name. Not sure if it makes a huge difference, but we are in New Jersey.

After my grandfather passed away, at which point my grandmother was a year or so into being diagnosed with Alz/Dementia, we met with her attorney to move everything out of her name and into a Trust which would provide some level of "protection" of her assets after 5 years or so (the infamous "5-year lookback".) Unfortunately, her condition worsened long before reaching the 5-year mark so its the same as if she still owned everything. Also, apparently not every Trust will protect ones assets so if anyone is considering moving theirs or a loved ones assets into a Trust, definitely make sure your attorney is aware of the laws for whatever state you or your loved one reside in.

When my 88 yr. old father's condition became terminal, the family lawyer suggested that my father leave "nothing" to my mother in his will. All would go to the children. That way my mother would qualify for Medicaid right away, because she would be a "pauper" as my mother saw it. She didn't like the idea, so we didn't do it. Mom (disabled for 6 years) has been alone in the house with private pay caregivers 5 hours a day for almost 3 years. At 91, she has Hospice & she wants to die in her own home, but is afraid of being alone at night. We may have to hire overnight care. $$$ !!!! There still is some money in the bank, probably enough to see her through. Were we wrong in not encouraging Mom to go along with the lawyer's suggestion? She does complain about the amount of $$$ that is paid out for her care at home, but at least she'll get her wish. (She really wants "us"/family to be there every day "in case", but we are all over an hour away.) Hospice will let us know when we need to be there full time, so I'm told. Mom won't die a "pauper".

rknox905, following the lawyer's advice would have enriched the kids some, and allowed taxpayers to fund your mother's care. She apparently wanted to pay her own way, and there were resources available to do that. I guess the "right" or "wrong" of the decision depends on your philosphy and priorities. Since the decision was made and can't be unmade, I suggest that you simply make peace with it.

Shai - about NJ, a Medicaid applicant CAN own a home if it is their principal homesteaded property at the time of the application and it is excluded from the asset list. This is from NJ site: "Excludable resources include, but are not limited to, a home which serves as a principal residence of a spouse or other dependent relative (if a home is not occupied by a dependent relative and the period of institutionalization is expected to be six months or less, the home may also be excluded), life insurance which does not exceed $1,500 in face value, burial spaces, and burial funds not exceeding $1,500 (less excluded cash surrender value of life insurance and/or funds held in an irrevocable burial arrangement), one automobile to the extent that its current market value does not exceed $4,500, and one wedding and engagement ring."
www.state.nj.us/humanservices/dmahs/clients/medicaid/medicaid_program_eligibility.pdf

That being said, my best guess is there is something about your gran's assets, her medical condition or how property is titled or were transferred that is keeping her from being qualified. When your granpa went on Medicaid, your grandma was considered the "community spouse" as such she was allowed to keep the home and a % of their other assets (% depends on how each state does Medicaid). As long as she was living there it was exempt as she was the community spouse.

TRUST: If during that time she wanted to put it into a LIVING TRUST she could. In a living trust - all assets must be placed in a trust. The title on the house deed and ALL other assets would change to reflect the trustee ownership. You or whomever would be the successor or grantor in the trust. If you do this – must be done by an attorney and it needs to be maintained too -then you don't need to worry as LT doesn’t go to probate. Probate is how states enforce MERP lien or claim on assets, like the homesteaded property, after the Medicaid reciepeint dies. So in theory, Living Trust = No MERP. If she did the trust over 5 years ago, it's clear. If it's within the 5 yr lookback, then there is a penalty for the transfer, again the % & $ penalty depends on your state. So maybe that's the problem.

MEDICAL CONDITION: For Medicaid, they need to qualify BOTH financially and medically. Now if her medical condition is such that she does not have a reasonable degree of "right to return" (to her home), then the exempt homesteaded property becomes unexempt. In TX, if they just have dementia and other low level health care problems then they still have a reasonable "right to return". But if they are basically in the NH ICU, not mobile, not cognitive at all, then they really have no reasonable "right to return" so the exempt property can become unexempt and after 6 months of being in this condition & on Medicaid they become private pay. That 6 month window is probably the amount of time that the property can be expected to sell in. (LOL since the reg's were written like in the go-go years of real estate when houses sold in days!) So maybe this is happening with your gran.

PROPERTY TITLE: Property laws depend on each state rule of law. Medicaid
then has to follow whatever that is for each state in how Medicaid views assets.
It could be the title on the property is the issue or it doesn't have a homestead declaration. Therefore it is NOT their home. Maybe this is your gran's case?

For us, my mom, who is in a NH, has continued to maintain her home as her principal residence, it is and always has had a homestead exemption which she renews every year and she has a "reasonable right to return". When she dies, the house will be subject to MERP - Medicaid estate recovery- as a class 7 claim against her estate when it goes to probate. That just what is it if you have them getting Medicaid for NH, it's only fair IMHO. One of my high school buds had her mom moved to a CCC years ago but kept the house BUT her mom did not renew her homestead exemption, changed her drivers license, etc. so when she had to go into a NH, they had to sell the house as it wasn't exempt. While the house was listed, she qualified for Medicaid but after the act of sale they got a letter telling them $$$ of the proceeds had to go to state Medicaid program.

JeannieGibbs is spot on about how this is a personal & community philosophy issue. How one qualifies for Medicaid & how Medicaid estate recovery is done gets to the heart of the issue of who should pay for long-term care -- the public through the tax-supported Medicaid program, or users of long-term care through their personal resources, including those remaining after death. Amounts collected from Medicaid recipients' assets in life or their estates through MERP are not insignificant in absolute terms. They do, however, pale next to total Medicaid $$$$ spending for long-term care. Sadly, if they live long enough, they will eventually run out of $ if they are in a NH, unless they are in the "1%".

Thanks for the detailed info igloo572!! In my grandmother's case, with her now being completely bedridden and on a feeding tube with advanced alzheimer's, there's absolutely no expectation that she will ever return to her home and there's no one else living there (my mom and grandfather used to live there but passed away in 2008 and 2009 respectively). And like you've mentioned, all assets; home and properties have been transferred into the Trust but yes, its the 5-year lookback thats the problem as we are only about 2.5, max of 3 years in at this point so that pretty much negates any possible exclusion of any of her remaining assets. At this point, where we were continuing to pay her bills (she does have a few credit cards as well as utilities, and her health insurance) with her social security, a few months ago, we were advised by the NH that we had to turn over her social security to cover her expenses (room & board). When I explained that she had other bills and such to pay including those associated with her home until it got sold (utilities and property taxes), I got the usual schpeel about she's not permitted to own a home and there are no exclusions. I explained that I clearly was aware of what she was and wasn't permitted to own but seriously I'm not sure if they expected that the day it was determined that she could not return home, we were miraculously able to close on the sale of her house, which is a major headache in this market as everyone knows. But I have been using her social security to pay her room and board at the NH and her health insurance and everything else is being paid with whatever monies she had/has in her account which are dwindling quickly to the point where I'm going to have to contact her attorny to discuss her options regarding these financial obligations that soon she will not have monies to cover and I have my own obligations and cannot possibly cover her bills and mine.

Shai - Sad isn't it. She has no "right of return", that probably the main issue on the house. You should check to see if NJ MERP allows for a home maintenance recovery claim OR ask the attorney how you can do your own claim against the estate in probate for whatever you have paid for gran's care or property or against her assets now.

Medicaid is so maddening as each state has it's own rule of law, especially in how they do probate and probate is usually how Medicaid enforces MERP.

I’m familiar with TX & comments below are based on TX:MERP in TX is done as a “claim” in probate as it is a debt of the estate. Most states do NOT do it this way and MERP is a “lien”. In TX claims against the estate are classified in order of payment: class 1 is funeral, burial; class 2 maintenance of the estate; MERP is down the list @ class 7; credit cards & other unsecured are class 8 (fat chance these get paid). This is why it's super importante to know your state's law.

In TX credit card debt cannot ever be a lien on a home, so most people with a lick of sense and just have SS or other protected retirement (anything federal and TX has lots of military retiree's) just don't pay on cc debt as the cc companies have no recourse other to send letters or be a PIA. Find out what it is in NJ as you might not want to pay on gran's CC debt if that is the case. That $ might better be spent on things for her care.

But back to $ your spending...Once they are in a NH there is no $ as ALL money less personal needs allowance is paid to NH. Someone paid for everything for moms empty house. Who paid insurance, taxes, yard work, other stuff? In TX, anyone who paid can file for recoup (AR) of their $, which will be deducted from the MERP total. Also if you spent $ on care BEFORE she went into the NH that kept her from going into the NH, that $ can be deducted too. MERP needs to get a letter from anyone who is going to file a AR claim. So if you paid taxes,insurance & home health care; SIL paid utilities, cable; & nephew paid yard work, all 3 of you have a AR claim with MERP. I have a file with receipts and copies of all checks I've written on everything for my mom's house so when the day comes, I can let TX MERP know that I will file my own recovery claim against my mom's estate.
Because of how TX law is written for property rights, MERP recoup % is very low.

See what's what for NJ. Personally I wouldn't wait till the $ is gone to contact an attorney, sooner is probably better. Whatever you do, do NOT ever sign your name without putting "Jane Smith as POA for Grannie Smith". Good luck.

wow. this is scary. I am 60 yrs old and looking at these things so can plan now