Many people are afraid that they, or their parents, will end up in a nursing home because the family can’t provide the greater level of care they require as they get older. Not only does this mean losing the autonomy of living at home but it means spending all, or a significant portion, of one’s lifetime of savings. Although Maryland indicates that the average cost of nursing care in Maryland is $6,800.00, a typical nursing home in the Maryland and D.C. area can cost over $150,000 a year. For many people this cost means that their savings will quickly run out and they will have to rely on long term care insurance or government programs such as Medicare, Veteran’s Benefits, or Medicaid. If someone can afford to pay themselves one advantage is that they are likely to gain entrance to the nursing home of their choice rather relying on a facility that may have only a limited number of Medicaid set-aside beds. Medicaid planning can help protect your financial assets for your spouse, children, or other heirs.
People who do not need immediate need of long-term care are in the best position to maximize their protected assets by spending down, distributing, or protecting their assets before Medicaid’s five (5) year look back period begins. “Spending down” means spending all of your money to get below the $2,500.00 asset limit that Maryland has set for someone to be eligible for Medicaid benefits. In “spending down” their assets, a Medicaid applicant can protect their savings by spending them on non-countable assets. These expenditures may include: prepaid funeral expenses, paying off other debts owed, home, auto, or other repairs, purchasing a vehicle, paying for medical care, or other legitimate or expected expenses.
The look back period is the time in which Medicaid will look back to review your assets to see if you are immediately eligible for benefits or are under a penalty period before benefits will be paid. Medicaid planning can help avoid, or decrease the length of, a “transfer penalty” period. The length of the transfer penalty is calculated by dividing the amount transferred by the average monthly cost of nursing home care in your state which, in Maryland, is $6,800.00. For instance, if the applicant transferred $68,000.00 dollars within the last five years, the transfer penalty period would be ten (10) months. ($68,000.00/$6,800.00 = 10 months).
Even if there is a transfer penalty period, Medicaid planning can help you cure and reduce that penalty, and save up to almost half of your assets, through a variety of techniques including “gift and return”. Under this strategy, money is given away to individuals who can voluntarily return it to cure up to almost half of the penalty period. Be very careful to consider any such transfer as the individuals to whom an applicant transfers money are under no obligation to return it. Even children whom might be otherwise trusted absolutely can lose money due to misfortune, divorce, bankruptcy, or lawsuit. If the money is not there to return, an applicant may have little or no legal way to recover the money and be stuck with a longer transfer penalty.
Annuities are also good financial tools for spouses of nursing home residents applying for Medicaid benefits. An annuity is a financial contract whereby the community spouse pays a certain amount of money to an insurance company which pays a monthly check to the community spouse.
Whether you are considering purchasing an annuity, a gift and return, or spend-down strategy, the best bet is to consult with a Medicaid attorney who can advise you on how you can save a lot of money and provide longer and better care for you or your loved one.
For a free consultation or a quick response to your questions regarding Medicaid Planning, contact Timothy Leahy below: