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Frequently Asked Questions

 
     
     
     
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You’d be surprised by how many people take out home equity loans against their parent’s house to try to cover the cost of the nursing home. Is doing so really a wise move?

It’s absolutely a terrible move. Taking out an equity loan on your parent’s home almost always results in you paying more than you need to, often thousands of dollars more. The explanations are simple. Let’s assume you need nursing home care for your mom.

First of all, if your mom’s only asset is the house, that should immediately qualify her for Medicaid because her house is an exempt asset and will therefore not even be considered when determining her Medicaid eligibility. That means that you could have easily gotten Medicaid to shoulder the expenses of your mom’s nursing home care and you wouldn’t have had to take out a home equity loan.

Now, you might wonder if there’s really any difference since, under the Estate Recovery Rules of Medicaid, your mom’s estate would have to repay every penny of Medicaid benefits upon her death anyway. Well, there is a difference, and it’s huge. The state gets much better deals on nursing home rates than even the most underprivileged private citizen. This means that your family will actually be saving money for each month that Medicaid is taking care of your bill.

There is no reason to borrow against your mom’s house to pay for her nursing home care. The only time doing so makes sense is if the nursing home does not accept Medicaid. But even then, just selecting a different nursing home, one that accepts Medicaid, will be the better option. Most nursing homes accept Medicaid so you should not have any issues finding one.

NOTE: If your parent is living along, the house will only qualify as an exempt asset if its equity is $500,000 or less. However, this limit is removed if the spouse still lives in the house. Medicaid laws guarantee that the house will not be sold until after the death of the Medicaid patient. However, a lien may be placed on the house to make sure that it will be available to repay Medicaid when the time comes.
It’s completely understandable if your primary concern in choosing a nursing home is the cost. After all, depending on your state, the cost of nursing home care can be anywhere from $3,500 to $10,000 per month. With the average length of stay being 30 months, the total costs can be from $100,000 to $300,000. However, you need to make sure that the cost is not the only factor you take into consideration. You also need to check a nursing home’s ability to take proper physical and emotional care of your elderly family member.

You can start by checking out this Consumer Reports. This is an independent third-party website that you can rely on for objective information on the nursing home industry. It contains numerous articles about nursing home care and assisted living. Its information is far from complete but it will be more than enough to get you started on finding the right nursing home for your loved one.

You can’t go wrong with checking Medicare.gov. The most vital information on this site is whether or not a nursing home facility is ‘Medicaid Certified’. Though most nursing homes nowadays accept Medicaid, there are still many that don’t. You should try and avoid the latter and just choose one that accepts Medicaid. When paying privately, there’s always a risk that you’ll run out of money and cause the nursing home care for your family member to stop. With Medicaid, payment from you or your parent’s estate won’t be needed until after the Medicaid patient’s death.

Another amazing resource is CarePathways’ Nursing Home Inspector. This is a colossal database that contains detailed information on over 44,000 Medicare/Medicaid Certified nursing homes in the United States. You can gain full access to the information for just a small fee.

You can also buy The Baby Boomer’s Guide to Nursing Home Care. You can get used copies on Amazon for as low as $2.40 and brand new copies for $59. It details the many laws that provide protection to nursing home residents. It also gives advice on how you can get the best nursing home care for your loved one.

If you want to look at the other option, taking care of your loved one at home instead of a nursing home, you can check out the There's No Place Like (A Nursing) Home. It’s all about providing caregiving right in the comfort of home.

Regardless of which resources you use, make sure you still take the time to do follow-up phone calls to the facility and do at least one in-person visit. This will give you an idea of what’s happening behind the scenes that you can’t learn by simply doing some research online. Look for warning signs such as harried staff, cluttered hallways, unhealthy-looking food, etc. If you can, try and get a meal there yourself and eat together with the residents. Bring a checklist and don’t be afraid to ask tough questions.
The single biggest asset of people applying for Medicaid is usually the family home. This is why the question of “What’s the best way to title the house?” often comes up.

Let’s say your mom, the soon-to-be nursing home patient is married, the ideal scenario is to have the family home titled solely to the community spouse A.K.A. healthy spouse. If both spouses currently share the title to the home, you need to have the title transferred solely to the healthy spouse. You can do this easily by having both spouses sign the transfer of title. Complications may arise, however, if the ailing spouse is no longer legally capable to enter into agreements as your only option will be to have a court-appointed conservator apply for court approval. This process is both lengthy and expensive. This can be avoided if the ailing spouse has executed a power of attorney to give someone else, preferably you or one of your siblings, the ability to legally sign the deed on her behalf.

If your parents have added your name to the deed, that can lead to Medicaid disqualification as well. Unless specifically stated, the law assumes that each name on the deed has an equal share of the property. So if the deed is titled to both you and your mom, each of you will have 50% interest in the property in the eyes of the law. If the house is valued at $500,000, the law will treat it as if your mom gifted you $250,000. Such a large gift will be enough to disqualify your mom for the next five years after the gift was made.

The ideal remedy is to sign an agreement to remove your name from the deed to give your mom sole ownership of the family home. If your mom wants you to inherit the house, she can deed a ‘remainder interest’ to you instead. A remainder interest deed means that the current owner of the house keeps complete ownership of the house and the ownership will only be transferred to you upon her death. Another benefit of this is that even if you, the child, falls into debt, creditors won’t be able to come after the house as long as your mom is alive.

Selling the house may seem counterintuitive at first since doing so will convert the exempt asset into countable cash. However, this is sometimes the best solution since it enables your mom to distribute the cash in the form of gifts and use the remaining balance into a Medicaid-friendly annuity. Having a sudden inflow of cash also opens up access to other Medicaid planning techniques.

There are simply too many factors to consider that there can be no best answer to the question “How Do I Protect My Home and Still Qualify for Medicaid?” You need to take into account the total assets of the parents, the living expenses outside of the nursing home, the expected costs of the nursing home, the current state of health and life expectancy of each spouse, the current plan for the family home, the value of the house, and more.
  • A 2016 survey by Genworth Financial highlights the following statistics:
  • A private room cost an average of $253 daily, or $7,698 per month, or more than $92,000 per year
  • A private room cost an average of $225 daily, or $6,844 per month, more than $82,125 per year
  • The average nursing home stay is 835 days or more than two years
  • 24/7 In-home care costs $21 per hour, or $15,120 per month, or $183,456 per year


Different states also have different prevailing rates for nursing home care. For example, most nursing homes in Alaska charge around $600 per day while most of those in Shreveport, LA charge only around $120 per day.

There are currently almost 1,900,000 nursing homes in the US, most of which have anywhere between 50 and 200 beds each. Almost 1,700,000 patients are being cared for in these assisted living facilities, 46% of which are of ages 85 and above and 32% of which are of ages between 75 and 84. 72% of the patients are women.

The statistics above paint an alarming pattern – nursing home costs continue to escalate both from the increasing cost of stay as well as the increasing length of stay. This just makes planning for eventual nursing home care all the more important.

You have two options to choose from when it comes to paying for the soaring nursing home costs. These are getting long-term care insurance and applying for Medicaid.

Purchasing long-term care insurance should always be your first option. Contact Care Insurance Specialist and get professional advice on how to find the best deals. With expert help, you’ll be able to obtain a number of competing quotes. Study each one carefully. You’d be surprised at how much money you can save by getting a policy today as opposed to getting a policy 10 years into the future. You might think that saving or investing the money might be better than paying for insurance premiums. Unfortunately, that is not the case. The rise in the price of nursing home care is so fast that savings and investments won’t be able to keep up. Make sure you ask the specialist to run projections for you so you’ll have an idea of how much you’ll be spending if you buy a particular policy.

Medicaid serves as your second option if you think that purchasing long-term insurance is not feasible. Medicaid coverage is more limited compared to home care insurance. Medicaid is also vastly dependent on state and federal budgets so there is no certainty as to the state of its coverage in the future. As of now though, Medicaid coverage remains to be pretty good. The main advantage of Medicaid is the patient’s estate only needs to reimburse Medicaid after the patient’s death. The patient or his/her loved ones will not need to shoulder expenses relevant to the ongoing nursing home care.
Medicaid recognizes that the home is usually the biggest asset owned by the average elderly couple. Through a federal law update on January 1, 2006, family homes valued $500,000 or less are now disregarded when determining eligibility for Medicaid coverage. The new law even gives states the power to set a higher exemption of up to $750,000. Hence, you should check the prevailing limit in your state just to be sure. Moreover, the limit is completely voided if the healthy spouse continues to live in the house.

Let’s say my spouse is not staying in the family home, should I sell my home before I move to the nursing home even though it meets the exemption requirements? You shouldn’t. You can retain your qualification even after you’ve vacated the home to move into the nursing home as long as you’ve expressed your intent to return to that home. If you can’t make such expression, a family member can do so on your behalf. If you’re married and your husband still lives in the home, your qualification will remain whether or not you have the intent to return.

What if I’m not married and I’ve recently been admitted into a nursing home? Who should be responsible for the upkeep of my home such as paying real estate taxes, homeowner’s insurance, utility bills, etc.? You need to assign someone to do it. If you’ve purchased Medicaid insurance beforehand, the coverage should take care of the upkeep.

But what if I have passive income such as pension or investment earnings, can I use them? You can’t. To avail of Medicaid, you are required to turn over all of your income to the nursing home. It will be used to offset a part of the cost of your nursing home care. Medicaid will take care of the remaining balance.

Are there really no exceptions? There is one. If you can be reasonably expected to return to your home within the first six months of your stay at the nursing home, you can request to be permitted to use a limited amount of your earnings each month to pay for particular house-related expenses such as rent and mortgage.

What happens after the first six months are over? Generally, you only have two options. The first one is what most nursing home patients choose – entrust the family home to your heirs. After all, they will be the ones to inherit the house so they have every reason to protect and maintain it. You can even require your heirs to maintain accurate records of who paid for the upkeep of the home and when. You can then adjust their inheritance accordingly.

The second option is renting out the house and using the income to pay for the upkeep. The net proceeds, of course, go to the nursing home. This means that you can afford to make some extra expenses such as hiring a local management company to supervise the rentals and take care of any emergencies. Keep in mind that your main objecting for renting out the home is not to gain profit but just to support the upkeep of the house. So you can charge below-average rental fees to help ensure that the home will continuously be occupied. And don’t be afraid to make compromises if doing so leads you to get a responsible tenant.

Lastly, if by your calculations, the only way your estate can reimburse Medicaid after your death is by selling the house, then there is no need to bother with the upkeep at all. Just let the property go idle and forget about it.
The value of a principal home is almost always significant enough to get you over the maximum asset limit for Medicaid qualification. If Medicaid always counted the home in determining eligibility, almost nobody will be able to get Medicaid. To solve this dilemma, Medicaid has set ways in which you can have your home disregarded when it comes to determining your Medicaid qualification.

If the value of your home is $500,000 or less, it will be considered as an exempt asset even if you no longer live there. If your spouse still lives in the house, your home will be exempt regardless of its value. Having a disabled dependent living in the house will also remove the value limitation.

You also need to express your intent to return if you want the home to remain exempt. The said intent can be expressed by you, your spouse, or another family member. The best way to go about this is to write down your intent to return before you move into the nursing home. The written document will then become the proof of your intent to return. If your spouse continuous to live in the family home, expressing an intent to return will no longer be necessary for as long as your spouse remains in your home.

On the other hand, if you are single and your equity interest in your home exceeds $500,000, it will not be exempt and will definitely make you ineligible for Medicaid coverage.

Moving into a new residence such as an apartment or an assisted living facility before you move to a nursing home will also make you incapable of claiming the exemption for your home. The rationale behind this is that your last principal residence before moving into to nursing home would now be the apartment or the assisted living facility and not your family home. There are some states that allow a grace period of six months before they change your listed principal home from the family home to the apartment or assisted living facility but there is only a handful of them.

One key takeaway is that if you plan to move from your home to an apartment or an assisted living facility, you might want to consider selling your former principal home and appropriating the proceeds in a manner that will best ensure your care in the future. This can be extremely complicated and it’s best that you consult a professional Medicaid law expert before you make a decision.
Going for the cheaper options is common sense. However, there is always the danger of being too cheap. You don’t want to sacrifice too much for the sake of saving a few dollars. To illustrate, let’s take a look at the stories of Tom and Jerry. The two of them are neighbors in your average blue-collar working class neighborhood.

Tom has been taught the value of saving for as long as he can remember. If he does not have enough cash to pay for something, he won’t buy it. A luxury vacation for him is a simple visit to friends or relatives and sleeping in their guest bedrooms. He eventually married a woman who shared the same spending habits. Through the years, the couple managed to accumulate a significant but by no means huge financial cushion. They were able to fully pay off their house. And by delaying his retirement to until he was 70, Tom was able to increase the amount in the monthly checks he got from Social Security.

Jerry, on the other hand, was Tom’s polar opposite. Jerry loved taking risks and spent money whenever he felt like it. He believed in living life to the fullest with no care at all about tomorrow. He indulged in gambling, going to fancy resorts, taking extended trips, and other luxurious activities. She also eventually married someone who shared the same spending habits. They bought anything they wanted and had no qualms about maxing out their credit cards. They refinanced their home several times hoping to get a better deal each time. Jerry retired early with barely any savings and his fast living had taken a toll on his body.

Tom had a remaining balance of $300,000 after paying off the house. He and his spouse were clear of death and expected to pass their properties to their children as their legacy. Unfortunately, Tom suffered a freak accident that robbed him of his health. He had no choice but to move out of the family home and move into a nearby nursing home. Tom needed special care because of his injury and the nursing home charged him $7,500 each month. Ironically, his savings became a detriment as they cost him to be disqualified from Medicaid. The constant stress of eventually took its toll on the wife. She later died while Tom was still at the nursing home. Four years later, Tom’s savings have completely dried up and he was finally able to qualify for Medicaid. He managed to hang on for three more years. After his death, his only remaining asset, the family home, was sold by Medicaid for its estate recovery. And in the end, Tom’s children inherited nothing from him.

Jerry was quite healthy, all things considered. However, he was later diagnosed with having Alzheimer's disease which caused him to be moved into a nearby nursing home that specialized in caring for patients with Alzheimer's. The cost was a staggering $250 per day but since Jerry barely had anything under his name, Medicaid took complete care of the bill. After all, the government had no choice. Jerry was broke. After his death, the house was sold by Medicaid for its estate recovery. His wife used the remaining proceeds to pay off her remaining credit card debt. And just like her husband, she died penniless.

Tom and Jerry lived two different lives. Tom lived a life of frugality while Jerry lived a life of excess. And yet, in the end, both of them died penniless. So does this mean that you shouldn’t bother saving because it doesn’t matter in the grand scheme of things? No! Tom could have avoided such a tragic end to his story had he properly planned for Medicaid.

A professional Medicaid law attorney would have been able to help Tom preserve his life savings and protect his house. But Tom was too thrifty to pay a lawyer and considered legal advice a luxury he didn’t need. He was too cheap for his own good. If he had a good Medicaid plan, he would have maintained his assets in a way that he still qualified for Medicaid and he would have been able to leave behind a decent inheritance for his children.
Medicaid Estate Recovery is when the state demands reimbursement from the estate of the recently deceased Medicaid patient for all the nursing home payments Medicaid has made on behalf of the patient. This happens shortly after the death of the Medicaid recipient and is usually accomplished by selling the recipient’s home and using the proceeds to cover the reimbursement.

Is there a way to prevent Medicaid from performing estate recovery? Each state has its own laws for Medicaid estate recovery limitations. You should take the time to learn them before you get Medicaid coverage. Let’s take a look at the most common reasons your estate can become exempt from estate recovery:
  • You were under the age of 55 when you received Medicaid benefits other than nursing home care.
  • You are survived by a spouse, a child under age 21, or a blind or totally and permanently disabled dependent. Keep in mind, however, that in some states, Medicaid is allowed to enforce estate recovery if the surviving spouse dies or the concerned child reaches the age of 21 within the statute of limitations. In most states, the statute of limitations for Medicaid estate recovery is one year. However, there are some states that have a shorter statute of limitations so you should check to make sure.
  • Enforcement of the estate recovery will cause undue hardship on your surviving family members. One example of this is if your estate is comprised mainly of a working farm and sale of the farm will put your surviving family members out of work.


There are also limitations that can prevent Medicaid from selling your home as part of its estate recovery. These are:
  • One or more of your siblings were living in the house for at least one year prior to your admission to the nursing home and those siblings still continue to live at your home.
  • You have a son or daughter who was living with you at your home to provide care for you for at least two years before you got admitted into the nursing home and that son or daughter continues to live at your home.
Having your estate pay for every dollar Medicaid has spent paying for your nursing home care seems scary, right? It might lead to your children not inheriting anything from you. There are ways to avoid this harsh rule of estate recovery. You just need to be proactive and create an estate recovery plan that is appropriate for you.

The first thing you should do is to check whether or not your state limits estate recovery to probate estates only. If it does, that will be great news for you! This means that Medicaid will not go after your non-probate assets after your death.

A probate asset is an asset that is owned solely by you. A non-probate asset, on the other hand, is an asset with a beneficiary designation or an asset that is held as a joint tenant with right of survivorship. Assets in the name of a Trust or with a trust named as the beneficiary are also classified as non-probate assets.

Common assets with beneficiary designations include life insurance policies, 401(k)s, IRAs, annuities, and assets with a pay-on-death (POD) or transfer-on-death (TOD) designation. Such assets will pass directly to the named beneficiaries after your death. Your assets held as joint tenants with rights of survivorship (JTWROS), on the other hand, will pass directly to the surviving joint owner after your death. Keep in mind, however, that when it comes to Medicaid, assets titled in the name of a living trust will be classified as countable assets even if they are normally exempt were they not in trust.

Let’s say you only own one car. This makes it automatically exempt from Medicaid since Medicaid allows each recipient to exempt one car of any value. However, if this car is probate, it will become countable when the state enforces estate recovery. You can make the car non-probate by titling it in joint names with your daughter. The car will then be officially titled as “Thelma Smith and Louise Smith, JTWROS”. Since Louise is your daughter, sole title to the car will pass to her outside of probate. This will allow the car to escape estate recovery after your death.

You can do the same thing to your other assets. However, you need to make sure you get professional advice from a Medicaid lawyer first. Doing the same with certain assets, such as the family own, might cause your disqualification from Medicaid. For example, let’s say you have sole ownership of a house valued at $500,000. Adding the name of Louise on the deed will be treated as a $250,000 gift to your daughter which will make you ineligible for Medicaid coverage for five years after the gift.

Adding the name of Louise to the deed of your home also comes with risks. The biggest risk is if your daughter goes broke and creditors go after her. Since she legally owns 50% of the house, creditors can go after your home. You might end up being on the streets because creditors had your home sold so they can take 50% of the proceeds as a settlement for Louise’s debts.

Some states allow you to add another person to the deed without considering the act as a gift from you if the additional person’s share of the equity value is less than yours. The maximum value you can allocate depends on the state so make sure you consult an attorney for help.
You’d be surprised by how many families of Medicaid recipients get shocked when they receive Medicaid’s demand letter for estate recovery. Many people just assume that their worries were over the moment their loved one qualified for Medicaid coverage so they get caught off guard once they learn that the Medicaid recipient estate needs to pay the state for every dollar paid out on the patient’s behalf.

The process of seeking reimbursement from the estate of the deceased recipient by Medicaid is called estate recovery. The federal law known as OBRA '93 requires every state to seek estate recovery from all Medicaid-receiving residents, following their deaths. In essence, Medicaid is not really a government handout but just an interest-free loan.

Now, before you get all scared, Medicaid will not go after the properties of the recipient’s loved ones even if the patient’s estate is not enough to make for a full reimbursement. Most states even only go after the recipient’s probate assets and not even look at the probate ones. So let’s say your mother died at a nursing home and Medicaid has been paying for her bills for five years, if your mom’s estate is made up solely of non-probate assets, the state will take nothing.

Your mother’s probate assets are those assets that are owned solely by her. Her non-probate assets, on the other hand, are those that come with a beneficiary designation or are held as a joint tenant with right of survivorship. Her non-probate assets also include those that are in the name of a Trust or with a trust named as the beneficiary.

Examples of assets with beneficiary designations include life insurance policies, 401(k)s, IRAs, annuities, and assets with a pay-on-death (POD) or transfer-on-death (TOD) designation. Such assets will pass directly to the named beneficiaries after your mom’s death. Her assets held as joint tenants with rights of survivorship (JTWROS), on the other hand, will pass directly to the surviving joint owner after her death. Keep in mind, however, that when it comes to Medicaid, assets titled in the name of a living trust will be classified as countable assets even if they are normally exempt were they not in trust.

A few states, however, exercise expanded estate recovery. Expanded estate recovery can include joint property, life estates, living trusts, and any other asset in which the deceased nursing home resident had any legal interest at the time of death. Sounds contradictory to common law, right? Unfortunately, execution of expanded estate recovery has been challenged in the court of law numerous times and expanded estate recovery has almost always been sustained.

To make sure you are prepared for whatever happens after your mom’s death, consult a legal expert that can fully explain to you the prevailing laws in your state.
If you want to qualify for Medicaid, you should not have more than $2,000 in countable assets and the combined countable assets of you and your spouse should not exceed $101,540. If there is an excess, you should get rid of it. Simply spending away the excess countable assets is the most exercised option due to its simplicity. Gifting is another alternative but it will cause you to be penalized with a certain period of Medicaid ineligibility. The last and most complicated option is converting countable assets into non-countable assets. Medicaid annuity is one such asset.

Medicaid annuity is an arrangement between you and a commercial entity, usually an insurance company, in which you give a lump sum of money in exchange for a regular stream of payments back to you. You will need to name the state as the beneficiary of the annuity up to the amount of Medicaid benefits paid on your behalf during your lifetime.

Let’s say you are a 70-year-old female who plans to move into a nursing home. But you can’t qualify for Medicaid because you exceed the countable asset limit by $100,000. So you decided to sell all the excess assets and transfer $100,000 to an insurance company in exchange for a monthly annuity payment of $800 for the rest of your life. Disregarding inflation, you’ll recoup the $100,000 after 10 years.

But what if you don’t expect to live for another 10 years? If, for example, you die after 3 years, that means you’d have recovered only $28,800 out of the $100,000. You can avoid this by getting an annuity that has a ‘guarantee period’. The insurance company will continue to make payments after your death as long as the guarantee period is not yet expired. Continued payments will be made to the state until your Medicaid balance has been fully paid. The remaining payments will then go to your family members or designated recipients. If the cost of Medicaid exceeds the total annuity payments, your family will get nothing.

Insurance companies often offer guarantee periods in exchange for slightly lower monthly payments. In this case, getting a guarantee period of 10 years might lower your annuity to $700 per month. Keep in mind, however, that you cannot avail of a guarantee period that is longer than the average life expectancy of your age and gender if you want to qualify for Medicaid. In your case, a 70-year-old American female is expected to live up to 85 years old. This means that you cannot get a guarantee period of more than 15 years.

Medicaid annuity gives you the option to not outright spend your excess countable assets just to meet the qualification criteria. The annuity is considered income on your part so it will go directly to the nursing home but that does not mean it’s pointless. Remember, the nursing home takes control of all your income and deducts it from the amount that gets billed to Medicaid. If you receive a total annuity of $35,000 before your death that will mean the state will demand $35,000 less during estate recovery.

As you can see, investing your excess countable assets into a Medicaid annuity makes much more sense than just spending them for the sake of spending. Figuring out the right terms for your annuity is more complicated than it seems though. So make sure you get the help of an annuity and Medicaid law expert before you commit to an annuity policy.
Trimming your countable assets down to $2,000 or less is necessary if you want to qualify for Medicaid. You can do so by simply converting the excess assets into cash and then spending it. Many, however, consider doing so to be quite wasteful.

Another option is giving away the excess assets as gifts. However, this is only viable if you don’t think you’ll need Medicaid anytime soon as gifts will incur a Medicaid ineligibility penalty period. The penalty period is calculated by dividing the amount of gift by the ‘penalty divisor’ that the state sets every year. The divisor is usually set based on the average cost of nursing home care in the state.

The last alternative is considered the best but also the most complicated – convert your excess countable assets into non-countable assets. One way of doing so is selling the excess assets and then using the proceeds to purchase Medicaid annuity.

There is a new route that is gaining popularity, the ‘half-a-loaf’ approach. Here’s how it works. Let’s assume you need immediate nursing home care but you still have excess countable assets can be sold for $100,000. After selling them, you gift half of the proceeds, which is $50,000 to your children and invest the remaining $50,000 in a Medicaid annuity. Then, you should apply for Medicaid immediately even though you know you will get denied.

Assuming the penalty divisor in your state is $5,000, it’ll mean that your gift of $50,000 will make you ineligible for Medicaid coverage for the next 10 months. You need to get an annuity arrangement in which the monthly annuity payments you’ll receive will be enough to cover for your nursing home expenses for the next 10 months.

Since you are broke when you applied for Medicaid after gifting $50,000 to your children and using the other $50,000 to purchase annuity insurance, the penalty period will immediately start counting down. After 10 months, you’ll be eligible for Medicaid.

So what did you gain from going to all this trouble? You were able to gift your children $50,000 in exchange for delaying your Medicaid coverage for 10 months. Just remember that each state has its own set of Medicaid laws that can make doing the half-a-loaf strategy much more complicated. Make sure you get an attorney specializing in Medicaid and annuity to advise you on the best way to implement the strategy.
Let’s say your mother is a widow with no savings and her only asset is a home valued at $300,000 and she had just entered a nursing home. Is there really any difference between outright selling the home and getting Medicaid? The end result is the same, right? The house will just get sold off regardless.

Selling the house will be a mistake. Keep in mind that it is not even guaranteed that the state will sell your mom’s home following her death. After your mom dies, the state will send you a demand for state recovery. It is only when you can’t pay that the state will demand the payments to be made by your mom’s estate which, in this case, is solely the house.

So, continuing the example, let’s say the cost of your mom’s nursing home care is $5,000 per month and she only lives for one more year. That would mean that her estate will only owe Medicaid a total of $60,000. As the surviving family members, you will be given the choice to repay that $60,000 yourselves. If you do so, the state will no longer need to sell the house.

If you can’t or won’t shell out the $60,000, the state will sell the house but will only take the $60,000 owed to it and give the remaining proceeds of $240,000 to you who are your mother’s heirs. It is then up to you to decide how you will divide the $240,000 among yourselves according to your mom’s will.

Let’s look at the opposite end of the spectrum. Let’s say your mother lives for another 15 years. That will put her total Medicaid bill at a staggering $900,000. However, there is really nothing for you to worry about. The state can only enforce estate recovery on your mother’s assets so the state can only take the net proceeds from the sale of the house and nothing more.

Another reason why getting Medicaid coverage is better than selling the house to privately pay for the nursing home care is that the state gets a discounted rate from Medicaid-qualified nursing homes. The discount can be as high as $50%. This means that a nursing home will charge Medicaid at a lower rate compared to a private individual. Since, during estate recovery, the state will only go after the actual amount billed to Medicaid on your mom’s behalf, your mom’s estate will ultimately be the final beneficiary of the discounts.

Selling the house will also result in an influx of cash that will most likely disqualify your mother from getting Medicaid coverage. So there will be no turning back if you decide to sell the home and just pay the nursing home in a private capacity. To make sure you fully understand your options, make sure you seek expert advice from a lawyer who specializes in Medicaid.
A new Medicaid Annuity Rule was signed into law in December 2006 as part of the Tax Relief and Health Care Act of 2006. It changed the term used to refer to the purchaser of annuity insurance from ‘annuitant’ to ‘institutionalized individual. The law also made it clearer which annuities are designed to help in Medical planning.

Let’s say you are a wife who continues to live in your family home (thus making you the community spouse) and your husband has recently been admitted into a nursing home. You can have the option to buy annuity insurance for your wife without having the insurance classified as a countable gift to your wife. All you need to do is name the state as the beneficiary of the annuity insurance up to the amount of Medicaid payments that the state will make on behalf of the institutionalized individual (your husband).

It is strongly advised that purchasers of annuity insurance demand that a guarantee period is included in the policy. The guarantee period will require the insurance company to keep making annuity payments even after your husband’s death. For example, if your policy has a guarantee period of 10 years and your husband dies after only three years, the insurance company will continue to make annuity payments each month for the remaining seven years.

The new law comes into play when the current assets of your husband at the time of death are not enough to cover the cost of Medicaid during estate recovery. Keep in mind that the state cannot sell the house because you, the community spouse, still resides in it. With the old law, the state will be forced to settle with the total amount of annuity payments it has already received and the remaining annuity payments will go to you. However, with the new law, the state will be entitled to receive future annuity payments until the balance has been fully paid.

In addition, if you die before the guarantee period of the annuity insurance is over and before the annuity payments have fully reimbursed the state, the new law gives the state the power to continue to collect from the annuity proceeds. Before the new law, the deaths of both you and your husband would have made your heirs the new recipients of the annuity payments.
So what happens if you’re currently living in a nursing home under Medicaid coverage but then your husband dies leading to you receiving a life insurance payout of $100,000? Unfortunately, that payout will cause you to go over the $2,000 countable asset limit and will therefore disqualify you from Medicaid. The law requires you to report receipt of the insurance payout after which Medicaid will notify both you and the nursing home that your Medicaid eligibility has been revoked.

You’ll regain your Medicaid eligibility once you’ve disposed of your surplus countable assets to once again go below the $2,000 limit. The most obvious option is simply using the life insurance payout to pay for your nursing home bills until it’s all spent and you can reapply for Medicaid. The better alternative is getting the help of a Medicaid expert in creating an asset protection plan that will allow you to make the most out of the insurance payout.

There are several ways you can convert $100,000 cash into non-countable assets. For example, if you currently do not own a car, you can use the payout to buy one. Medicaid allows each recipient to exempt one car from their countable assets. The only requirement is that the car will be used for the transportation of you or another household member. There is no limit to the value of this exemption. You can then use the remaining balance to purchase a prepaid funeral & burial plan so that your surviving family members will not have to bear the financial burden of your funeral and burial. This also comes with no value limit.

If the life insurance payout is so large that there will still be a huge portion of it left even if you buy a car and a funeral & burial plan, the best recourse is to get expert advice. Hire an expert to lay down all the available options for you.

But what if while you are in the nursing home, your husband receives a life insurance payout due to the death of a brother? This will not have any bearing in your Medicaid eligibility since the said payout will be classified solely as your husband’s income.
Retaining a ‘life estate’ to transfer their home to their children is one of the most common pieces of advice Medicaid recipients will hear from their attorneys. What does this exactly mean and what are the possible repercussions of making such an arrangement?

Normally, if you want to pass your home to your children, you’ll just sign the deed over to them. However, this can be really dangerous. You are in effect surrendering all your rights to the home. Your children will have full ownership of the home thus giving them the power to kick you out.

Even if your children don’t kick you out, transferring the deed to them can still lead to you becoming homeless. Let’s say you have three children and your eldest son ends up accumulating a lot of debt due to a business going bankrupt, a costly divorce, etc., the creditors can go after the home since your son is a part owner of it. They can demand that the home is sold so they can use the eldest son’s share of the proceeds to pay for his debts.

A better option is transforming your home into a life estate with your children having ‘remainder interest’. This means that the deed of the house belongs to your children but you retain all the rights to the house for as long as you live. This also means that the home cannot be sold off as long as you’re alive. Creditors will not be able to go after the home even if one or more of your children fall into debt because the home still belongs to you.

Ownership will pass to your children at the time of your death If you’re married, the transfer of ownership will only happen once both you and your spouse have passed away. Keep in mind though that such arrangement is final. Even if you make other arrangements to give the rights to the house to someone else, those will be disregarded in favor of the life estate agreement. Giving your home a remainder interest will also reclassify it from a probate asset to a non-probate asset. This means that it will be protected from estate recovery in most states.

Lastly, giving your children a remainder interest is valued as a smaller gift compared to outright transferring the deed of the home. Since the gift will be smaller, you’ll have a shorter penalty period during which you will be ineligible for Medicaid. The value of the gift will be equal to the value of the remainder interest. The value of a remainder interest depends on the table published by the federal government. Here are some sample values:
  • If you are 70 years old, you’ll retain a 61% interest in the life estate while your children get a remainder interest of 39%.
  • If you are 80 years old, you’ll retain a 44% interest in the life estate while your children get a remainder interest of 56%.


So, if your house is worth $300,000 and you’re 70 years of age, setting up a life estate will leave you with a $183,000 retained interest and your children will get a remainder interest of $117,000. Assuming the penalty divisor is $5,000, you will incur a Medicaid penalty period of 23.4 months ($117,000/$5,000) which is 36.6 months shorter than the 60-month (5-year) penalty period you’ve had incurred if you just outright transferred the deed of the home to your children.
 
     
     
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A nursing home stay is inevitable unless you are one of the few wealthy enough to afford a 24/7 caregiver. Since you know it’s coming, you should do your best to prepare for it. You should start planning no less than 10 years before you expect you’ll need nursing home care. There are several ways to protect your assets so that the costs of nursing home care won’t siphon your life savings. One of the most favored of such techniques is the creation of an ‘irrevocable trust’.

As its name implies, the terms of an irrevocable trust cannot be revoked, amended, or changed once it’s been signed. Unlike a Living Trust that is classified as a countable asset because of its revocability, an irrevocable trust is considered a non-probate asset. Setting up an irrevocable trust is often quite complicated considering the many factors that need to be considered. So make sure that you get the help of an attorney to make sure you iron out the terms properly.

Transferring assets into an irrevocable trust is classified as a gift to that trust so you will incur the usual penalty period along with a lookback period. Let’s say you’ve created an irrevocable trust and transferred $200,000 into it thus leaving you with less than $2,000 in countable assets that qualifies you for Medicaid coverage.

If the state you live in has a penalty divisor of $5,000, you will receive a penalty period of 40 months ($200.000/$5,000). In other words, you will be barred from receiving Medicaid assistance for three years and four months.

Transferring assets into an irrevocable trust also slaps you with a lookback period of five years. If you apply for Medicaid during the lookback period, your associated penalty period will be refreshed and reinstated. Going back to your case, even if four months and 11 months had already passed since the creation of the irrevocable trust, applying for Medicaid will reset your penalty period back to 40 months. You should just wait one more month to let the lookback period expire.

The primary disadvantage of putting all your excess countable assets into an irrevocable trust is you’ll be left unable to pay for nursing home care if you get admitted into one sooner than you expect (before both the penalty period and the lookback period are over). This means you will have no choice but to have your family members shoulder the financial burden of your stay at the nursing home.

So when is the best time to apply for Medicaid? You have two choices. You either apply for Medicaid immediately after establishing the irrevocable trust or wait for the lookback period to lapse.

If you apply for Medicaid immediately after making the gift to your irrevocable trust, the lookback period of five years will be immediately replaced by the penalty period of 40 months. This means that you’ll be eligible for Medicaid after three years and four months. This is the ideal approach if you think that you might need nursing home care before the lookback period expires.

If you are confident that you won’t need nursing home care until after the lookback period expires, you can just wait for the lookback period to be over before you apply for Medicaid.

Keep in mind that all the above-given examples are for the most basic scenarios. If you want to formulate an irrevocable trust strategy that perfectly suits your circumstances, you’ll need the help of an attorney specializing in trust funds and/or Medicaid.
Living trusts are often promoted as the "cure all for whatever ails ya". But, putting your assets in a living trust can cause big problems if you later try to qualify for medicaid.

-- By K. Gabriel Heiser, Attorney

"Living Trusts” is nothing new and you probably have an idea of the supposed benefits it can offer you. It is quite tempting to go for a trust that you can create and fund during your life. It gets even better when it gives you the power to alter and nullify it to your liking. Yes, it is useful but do you need it? Is it still going to assist you when you apply for Medicaid? This trust can be beneficial for you depending on the situation and under the right circumstance.

Applying for Medicaid while having a Living Trust is tricky. Everything titled in the name of the Living Trust is treated as an available asset. Say you have a house that is exempted up to $500,000 if it is in your Living Trust, it loses its exemption. Same deal applies to your car and other personal properties that you have. This situation calls for you to place all your properties into your own and out of the Trust because this can cause ineligibility in your Medicaid application.

Assets such as bank accounts and investments can be countable whether it is titled under the Living Trust or in your name. This only gets debatable as a benefit if you are single because you have to spend these assets for Medicaid qualification.

If you think that you will be interested or will be requiring Medicaid assistance in the future and you are single, it is not advisable for you to spend cash to pay an attorney to create a Living Trust. There is no sense since you will just be withdrawing all your trust assets back into your own name to qualify for Medicaid.

On the other hand, if you are married, you can make use of the Living Trust. In a state like Colorado, they inexpensive and simple probate procedures. There is only little benefit when a Community Spouse (i.e., the spouse not in the nursing home) have assets titled in the name of a Living Trust.

There are certain things that a Living Trust cannot allow that a will can. You can set up a trust for the Community spouse to be funded after death. It doesn’t count against a dead spouse’s Medicaid eligibility but it holds assets n=benefitting the nursing home spouse.

If you are planning for Medicaid eligibility, skip the Living Trust as it is only useful for your general estate planning purposes.

K. Gabriel Heiser is an elder law and estate planning attorney with over 25 years of experience. He authored the annually updated practical guide for the layperson book entitled “How to Protect Your Family's Assets from Devastating Nursing Home Costs: Medicaid Secrets. You can visit Medicaid Secrets for more information about this book. You can also visit Medicaid Trust to read more about the pitfalls of using a living trust for Medicaid planning.
So let’s say you come from a wealthy family and you are 100% sure that even your parents will leave behind a hefty sum of assets after their death, is there a way that you can prepare for your inheritance? There are a few options and, in most cases, the best resort is the establishment of an inheritor’s trust (also known as irrevocable trust).

Most wealthy parents just leave their assets behind for their children to inherit. If this is what your parents are planning to do, your inheritance will end up being included in your taxable estate. Hence, it will be vulnerable to claims by creditors, divorcing spouses, etc.

The obvious option is approaching your parents to tell them that they should contact the family lawyer to draft up a trust to hold your inheritance. Unfortunately, more often than not, parents are unwilling to do so because of a variety of reasons such as reluctance to pay the lawyer, unwillingness to deal with the complexities of trust, a simple lack of motivation to alter their will, etc.

If your parents don’t want to do it, you should take the initiative and contact a lawyer to draft a trust for you that contains simple provisions that will be beneficial for you. After the draft for the trust is complete, you now just need a small amendment on your parents’ wills so the terms of the trust can take full effect.

Assuming your name is Jane Doe and that you’ve established your trust in June 01, 2018, simply ask your parents to add this sentence to their wills, “'Notwithstanding anything in this instrument to the contrary, any time a distribution is indicated to be distributed to my son, Sam, it shall instead be payable to the Sam Jones Irrevocable Trust dated June 01, 2018, to be held as provided therein.”

This simple alteration will barely cost your parents any money since any lawyer can make the changes quite easily. It also does not require any major involvement from the parents.

Now that you’ve established an irrevocable trust acknowledged by your parents:
  • It will be excluded from the child's taxable estate
  • It will be outside the child's probate estate
  • It will be protected from lawsuits, creditors, and divorcing spouses
  • It can still be controlled and managed by the child, who can serve as trustee (although even greater protection will result if the child is not a trustee, or is a co-trustee)
  • It can still allow the child to decide how the remaining trust assets will pass after the child's death


In effect, you have just set up a trust but your parents are the ones funding it thanks to the small alteration in their will or living trust. This will allow you to keep your inheritance secure.
It is dangerous to put off signing your will, trust, or power of attorney for too long. By the time you finally decide to do it, it might be too late and you’re no longer legally competent to sign such documents.

At the earliest sign that you realize you are having trouble keeping up with your bills or dealing with medical establishments, you should immediately start working on your will, trust, and/or power of attorney and then signing them as soon as possible. This will make it easier for your adult child to take over for you, the aging parent.

Do not make it difficult for your child just because of your pride. Many aging parents who end up losing their legal competency to sign documents before they can sign all the important paperwork do so because they don’t want to admit they actually need help. Making matters worse is many caretaking children are reluctant to bring up the topic due to the fear of offending their aging parent. Hence, the reluctance of both parties often leads to mutual procrastination.

It is for the best if both parties are aware of when someone is legally competent to sign documents and when someone isn’t. One of the most common misconceptions is that someone automatically loses legal competence to sign a will after being diagnosed with Alzheimer’s disease. This is false. A person with Alzheimer’s has the legal capacity to sign a will as long as the following criteria are met at the time of signing:
  • He knows the natural objects of his bounty (i.e., is aware of his spouse and children if any)
  • He comprehends the kind and character of his property (i.e., knows approximately his net worth and what kind of assets he owns)
  • He understands the nature and effect of his act (i.e., realizes that it is indeed a will he is signing, and what that means)
  • He is able to make a disposition of his property according to a plan formed in his mind


It is the responsibility of the lawyer to determine that his client who has Alzheimer’s meets all of the four requirements listed above. If the lawyer believes that the client is incapacitated, the lawyer may decline to prepare the will.

The requirement for being recognized as capable of signing a power of attorney is more lenient. The individual only needs to prove that he is capable of understanding and appreciating the extent and effect of the document. Hence, someone may be found competent to sign a power of attorney while also being found ineligible to sign a will.

A trust is considered more like a contract than a will but the requirements generally vary depending on the state. In some states, the capability to sign a trust has the same requirements as that of signing a will. On other states, meeting the same criteria as that of signing a power of attorney is enough. Consult an attorney just to be sure.

You should not confuse the mental capacity to sign a document with the physical ability to sign one’s name. All that is needed for a person’s ability to sign his name to be recognized as a witness. If the individual is physically unable to sign, he can even direct another individual to sign on his behalf.

Aging is a natural part of a person’s life cycle. Don’t run away from it. Have conversations with family members and tell everyone to speak up if they think it’s time that the will, trust, and power of attorney of the aging family member be signed.
You want to assist your disabled family member, but don't want your financial help to disqualify him or her from a government program like social security or medicaid. So, how can you do it?

-- By K. Gabriel Heiser, Attorney

Do you want to help a family member? Do you have a loved one or a close relative with a disability? Of course, you want to reach out and extend a helping hand. And yes, you have options. You can make an outright gift, say a trust, ensure that you share a portion of what you own.

Some disabled individuals are provided with government benefits like SSI (Supplementary Security Income) or Medicaid. Additional assets can disqualify an individual from programs but you can take a non “means-tested” program such as SSDI (Social Security Disability Insurance). With this, you can be guaranteed that affected by the recipient’s assets or income. You can assist a family member during lifetime or through a will. It a simple but sure way of letting them receive an outright gift.

You can leave your gift inside a trust. You can utilize a Special Needs Trust or Supplemental Needs Trust. This is a “means-tested” benefit that a person may not require today but can use in the future. You can protect an individual’s government benefits by acquiring a trustee for the trust of the beneficiary. You will let the trustee take over the money - invest or distribute it accordingly to your beneficiary’s needs.

You can use an “inter vivos” trust to supplement without replacing government benefits. You can make the trust revocable or irrevocable and you can serve as a trustee or allow another person to act as a trustee with this fund that you can create today and fund with money and assets straightaway. As regards the distribution of the trust assets, it is your choice if you want to retain the power or not. Making your trust irrevocable means having its own federal tax I.d. number setting up the tax either to you, trust itself or the beneficiary. Basically, every decision you make influences the trust’s income tax and income tax treatment. You can also opt for a “testamentary trust” that doesn’t have a separate trust document. This trust will be funded upon your death, arranged within your will with the terms of the trust included.

It is essential for you to find an experienced estate planning or elder law attorney that will draft such trust for you given the variety of rules that govern each state. You have to ensure that your attorney will be familiar with both federal and state programs. There are benefits for your family member under these programs and your attorney should be able to tap into it information such as the process of how a trust work, each trust option’s various income, and estate tax ramifications, and guiding to through your main goal.

Here are distributions examples that will not cause the beneficiary to lose or have decreased government benefits:
  • new car
  • services of attorney/accounting
  • alternative health treatments
  • TV and DVD player
  • pass to public transportation
  • camera
  • computer hardware, software, internet fees
  • classes and courses
  • fitness equipment
  • musical instruments
  • non-food grocery items
  • vacations
  • utility bills
  • physician specialists not covered by Medicaid
  • dental work not covered by Medicaid
  • physical therapy not covered by Medicaid


There are numerous benefits that your family member will benefit from with the use of this trust. What was mentioned is only a tip of the iceberg of the many ways that you can give a better and fuller life for a family member without the fear of disqualification.

K. Gabriel Heiser is an elder law and estate planning attorney with over 25 years of experience. He authored the annually updated practical guide for the layperson book entitled “How to Protect Your Family's Assets from Devastating Nursing Home Costs: Medicaid Secrets. You can visit Medicaid Secrets for more information about this book. You can also visit special needs trust for more about disability planning.
So let’s say you come from a wealthy family and you are 100% sure that even your parents will leave behind a hefty sum of assets after their death, is there a way that you can prepare for your inheritance? There are a few options and, in most cases, the best resort is the establishment of an inheritor’s trust (also known as irrevocable trust).

Most wealthy parents just leave their assets behind for their children to inherit. If this is what your parents are planning to do, your inheritance will end up being included in your taxable estate. Hence, it will be vulnerable to claims by creditors, divorcing spouses, etc.

The obvious option is approaching your parents to tell them that they should contact the family lawyer to draft up a trust to hold your inheritance. Unfortunately, more often than not, parents are unwilling to do so because of a variety of reasons such as reluctance to pay the lawyer, unwillingness to deal with the complexities of trust, a simple lack of motivation to alter their will, etc.

If your parents don’t want to do it, you should take the initiative and contact a lawyer to draft a trust for you that contains simple provisions that will be beneficial for you. After the draft for the trust is complete, you now just need a small amendment on your parents’ wills so the terms of the trust can take full effect.

Assuming your name is Jane Doe and that you’ve established your trust in June 01, 2018, simply ask your parents to add this sentence to their wills, “'Notwithstanding anything in this instrument to the contrary, any time a distribution is indicated to be distributed to my son, Sam, it shall instead be payable to the Sam Jones Irrevocable Trust dated June 01, 2018, to be held as provided therein.”

This simple alteration will barely cost your parents any money since any lawyer can make the changes quite easily. It also does not require any major involvement from the parents.

Now that you’ve established an irrevocable trust acknowledged by your parents:
  • It will be excluded from the child's taxable estate
  • It will be outside the child's probate estate
  • It will be protected from lawsuits, creditors, and divorcing spouses
  • It can still be controlled and managed by the child, who can serve as trustee (although even greater protection will result if the child is not a trustee, or is a co-trustee)
  • It can still allow the child to decide how the remaining trust assets will pass after the child's death


In effect, you have just set up a trust but your parents are the ones funding it thanks to the small alteration in their will or living trust. This will allow you to keep your inheritance secure.
Depending on what type of life insurance you have, it may or may not be counted for purposes of qualifying for Medicaid. Find out which type counts.

-- By K. Gabriel Heiser, Attorney

Medicaid coverage is a complex topic that usually overwhelms a lot of people. There are various rules and exemptions that are involved to qualify for Medicaid. If you are single, your assets cannot exceed $2,000 and $101, 540 if you are married to be able to cover your nursing home stay with Medicaid coverage qualification. Not all of your assets are “countable” for these purposes and your home, car and personal property are the biggest exemptions.

You can own a life insurance and it is exempted. Only life insurance policies with a total face value that exceeds $1,500 will be countable along with the "cash surrender value" as per the rule states.

Please note these terms:
  • Cash surrender value – Also known as “cash value” is the amount sent by the life insurance company upon policy cancellation
  • Face value – beneficiary payout by the company if you died and as long as the policy is still in effect


You can keep $1,000 policy with $800 cash value as it will not count towards your $2,000/$101,540 limit.

A term policy with a face value of $100,000 is completely exempted because by definition a term policy has no cash value. To keep it in effect, you or another family member need to pay the yearly premium.

The choice is upon you whether you want to retain or cancel an existing policy. If you have unstable health and may be uninsurable, it is best to keep the family to give assistance to your family members when you die.

Let your children purchase your policy and keep it in effect (with the payment of the annual premium) if and when the total face values exceed $1,500 and your countable assets put you over Medicaid qualification. In Medicaid rule, it is not the insured or the beneficiary who matters – it is the policy owner who matters. At any time, the owner can cash in the policy which is similar to you doing so. You will not have the power to cash in, cancel the policy and without count against you once your child is already the owner.

Sometimes not all options are the best solutions like in the case of assigning your child a policy as a gift. As a part of an overall plan, it makes sense but it will cause a penalty period in so many cases.

No cash value means no count against you. Single pay, non-cancelable, no cash value "life insurance"is the recent company advertisements. With minimal underwriting, everyone is ensured to qualify to buy one with children as the usual beneficiaries.

Medicaid agency may deem a purchased asset which you have no control of as a gift. You did not accomplish converting cash into non-countable form if that is the case so it is better to steer away from this product type unless proven effective as advertised.

K. Gabriel Heiser is an elder law and estate planning attorney with over 25 years of experience. He authored the annually updated practical guide for the layperson book entitled “How to Protect Your Family's Assets from Devastating Nursing Home Costs: Medicaid Secrets. You can visit Medicaid Secrets for more information about this book. You can also visit Life Insurance Trust to learn more about how to avoid paying taxes on life insurance.
There are pros and cons to reverse mortgages in any situation. However, if you may soon need to apply for medicaid -- there are additional things to take into consideration.

-- By K. Gabriel Heiser, Attorney

"Reverse mortgage" is a way to "unlock" equity in homes and pay for a better lifestyle, as pitched benefits to many senior citizens. There are circumstances where this makes sense. Like when your spouse needs to move into a nursing home.

Conventional mortgage forces you to make payments by setting aside cash every month. If you borrow a lump sum of money from a bank or mortgage company, you need to write them a check to each month to partially repay the loan. Your house will be foreclosed on by the bank if you fall behind in payment.

In "reverse mortgage," as long as you live in the house, you just receive a monthly check from the bank or mortgage company but you never have to pay them back. Until neither spouse is living in the home, no repayment is needed is the loan is made to a married couple.

The loan is repaid plus interest in this case and the house will be sold if the family members cannot pay the loan off. The bank cannot come after the family members for the shortfall if the loan amounts exceed the sold house's net proceeds.

You can benefit from a reverse mortgage if:
  • you fall short of monthly cash
  • if you don't have the cash to give your children or grandchildren and you would like to make lifetime gifts
  • you want to have a medical treatment your health plan or Medicaid does not cover
  • you want to go an extended vacation
  • you have a spouse who needs to move into assisted living
  • you love the idea that you don't have to repay loan during your lifetime so long as you live in your house


Since your life expectancy is shorter, you can borrow more the older you are. The amount you borrow is dependent on your age house value and the current interest rate. The amount that you borrow decreases as the interest rates rise. If you are single, a reverse mortgage will not be sensible if you may soon need nursing home care. you will have to repay the loan as soon as you move out of the house. The cash that has been protected by the home exemption will be exposed and your house will have to be sold. To make a person qualify for Medicaid, you have to figure out what to do with that cash.

A reverse mortgage can give additional income to the healthy spouse who remains at home while the other spouse stays in the nursing home. Under Medicaid rules, monthly incomes, in this case, are not counted as income. This is beneficial to the healthy spouse who receives the nursing home spouse's income.

It is best if you have a consultation with a reverse mortgage specialist or financial planner before jumping into decisions. Check with an elderly attorney before you sign any contract if you and/or your spouse will be needing nursing home care in the future.

You can take a look at the information provided by the Federal Trade Commission (https://www.consumer.ftc.gov/articles/0192-reverse-mortgages) or the AARP (http://www.aarp.org/money/credit-loans-debt/reverse_mortgages/) for more information on reverse mortgages. Enter your information into this useful online calculator to see how much you can borrow http://reversemortgagealert.org/reverse-mortgage-calculator.

Editor's note: This flowchart from American Advisors Group is a good starting point to see if you qualify for a reverse mortgage.

K. Gabriel Heiser is an elder law and estate planning attorney with over 25 years of experience. He authored the annually updated practical guide for the layperson book entitled “How to Protect Your Family's Assets from Devastating Nursing Home Costs: Medicaid Secrets. You can visit Medicaid Secrets for more information about this book. Medicaid Rules and Reverse Mortgages
Medicaid planning is complex and the rules are constantly changing. Something that worked for your neighbor may or may not work for you. You need to talk to an experienced elder law attorney. Here's why.

-- By K. Gabriel Heiser, Attorney

Medicaid planning is an area that you don't want to do-it-yourself. There are some clients who come up to elderly attorneys saying that they have already done some Medicaid planning when they just actually got tips from their neighbors and are just afraid of perceived expensive lawyer fees.

Firstly, every situation is different. Your situation is different from that of your neighbor's and those ways may not even matter to you. Each and every factor such as income of your neighbor's parent, cost of a nursing home in question, his parent's health and life expectancy are all different from yours and will change the Medicaid issues advice and approaches applicable to your case as advised by an experienced elderly attorney.

Secondly, because the laws change ever so frequently, the advice of your neighbor to you that made sense before may not be ideal to you now since the rules of the game have changed. It pays to know the rules that are why it is important to stay updated. if you applied a month earlier, following a gift, you will have disastrous financial consequences for the Deficit Reduction Act of 2005 on February 8, 2006, that the Congress passed. This "lookout period" penalized gifts made a certain number of months before a Medicaid application and was extended from 36 to 60 months.

Thirdly, yours and your neighbor's family situation are different. he may or may not be aware of this but there are important exclusions or safe-harbors that may apply to your particular family situation and your neighbor might not heard about this. An example of having a sibling who is defined as "disabled" by the Social Security Administration. Making that gift to a trust for the benefit of a disabled child (of any age) is an exemption to the general rule and causes disqualification from Medicaid benefits for a period of time.

Fourthly, there are major differences from state to state in many of the Medicaid rules that most people are unaware of. The federal government set the basic framework of the entire Medicaid program. There are many rules that are required to be similar in every state but each state is also allowed to set its own rules within certain limits. What may have worked for your neighbor's mother in Florida won't fly be applicable for a case in Colorado.

Fifthly, your neighbor's mother utilized the "imaginative" asset shifting technique and it worked one time with one caseworker but not all parents are lucky enough with that technique. You need an attorney to help you assess the risks, consequences, and decide on an informed decision just in case the technique fails. Medicaid planning is complex and complicated. It is not like asking your neighbor's advice about what is the best computer or car to buy, you follow through and you get the best results. Medicaid planning is way more than that, take your neighbor's advice if you will but proceed at your own peril.

K. Gabriel Heiser is an elder law and estate planning attorney with over 25 years of experience. He authored the annually updated practical guide for the layperson book entitled “How to Protect Your Family's Assets from Devastating Nursing Home Costs: Medicaid Secrets. You can visit Medicaid Secrets for more information about this book. We feel similarly about do-it-yourself living trusts.
You've probably heard the term "elder law." But, what really does an "elder lawyer" specialize in. What's meant -- By the term?

-- By K. Gabriel Heiser, Attorney

Attorneys who currently specialize in elderlaw used to work as estate planning, disability, or government benefits attorney before the relatively new field of "elder law" or "elderlaw" existed.

The National Academy of Elder Law Attorneys (www.NAELA.org), founded in 1988, is the only national organization devoted to elderlaw that focuses on the legal needs of the elderly. Elderlaw was recognized by state boards as a separate specialty and a legal knowledge distinct category.

If you are an attorney and has the desire to work with the elderly and the disabled then you have to gain a working familiarity with the following:
  • federal and state government benefits programs for the elderly and disabled, such as Medicaid, Medicare, SSI, and SSDI
  • the law of wills
  • the law of trusts
  • real estate law
  • the rights of spouses
  • contract law
  • intestacy rules
  • estate tax
  • income tax


There are spreadsheet creation and complex calculation involved in benefits planning so you have to be really good at Math.

You also must be able to communicate as an elderlaw attorney with a senior who is not as sharp as he or she once was in explaining intricacies of a complex and byzantine system of rules, regulations, and laws to the entire family.

Lastly, an elderlaw attorney should be a good psychologist. The attorney should be great in finding out the best solution that suits the particular dynamics and cultural background of the client's family rather than what the lawyer might choose “best” for himself. It is a great asset to an experienced elderlaw attorney to work with multiple generations while still clearly representing the actual "client."

K. Gabriel Heiser is an elder law and estate planning attorney with over 25 years of experience. He authored the annually updated practical guide for the layperson book entitled “How to Protect Your Family's Assets from Devastating Nursing Home Costs: Medicaid Secrets. You can visit Medicaid Secrets for more information about this book.

Here's a good place for you to look for an Elder Law or Medicaid Attorney.
When considering hiring an elder care lawyer, the question is not so much: "Can I afford him or her;" but rather: "Can I afford not to hire an elder care attorney."

-- By K. Gabriel Heiser, Attorney

It is admirable if you could search for information online to find free forms and advice that you need with regards to elder law and Medicaid planning. You might be worried about the high costs of lawyers but opting to gather information on your own is not the best way to go.

A simple mistake can ripple to a big one like in the case of you finding a power of attorney online that you have your parent sign. You feel good about it since you might have gotten it free or at least $10 thinking that you saved big on legal fee. The problem with this “generic” power of attorney form is that there are several critical provisions that were omitted. Your mother might already be incapacitated by the time that you need her to sign a new power of attorney form to use and get fixed. You will end up spending thousands of dollars to hire an attorney to represent you in a guardianship/conservatorship proceeding rather than paying only $150 or so for an attorney's fee for the preparation of his top-of-the-line durable general power of attorney, which you should have taken from the start.

Medicaid planning is another example where they say you can protect your money by asking your father to give away his assets so that he’ll be “poor” when he applies for Medicaid. But there are recent changes in the federal laws regarding calculation of penalties which you were not aware of. You could have saved half or even all of your father’s money had you properly and carefully had Medicaid planning with an attorney to save your father from disqualification from Medicaid eligibility for many months or years.

Methods in Attorney Billing Elder care attorneys don’t charge the same amount or even use the same method to calculate their fees. There is the traditional charge by the hour method of billing and there is charging 1/10 of an hour increments x their hourly rate, which most attorneys use. Inexperienced attorney charges less than experienced ones but they usually take longer to figure out what to do and do it. So, it is your call whether to invest in someone who has spent many years concentrating in this area of the law or pay the education of the less experienced lawyer.

Charging a flat fee for a given project is the second billing method. It has its advantages to both client and attorney. The client knows up front how much the cost to pay [is and will be less mindful of the time spent. For the attorney, he might be rewarded for efficiency and his unpaid hours may be compensated for crafting effective forms that solve his client's problems.

The combination of the first and second method of billing is the third approach which is $X for the following documents or legal work, which includes a maximum of Y number of hours. The idea is for the attorney not being stuck working for free if something comes up after the project gets started, or the client is extremely demanding, requiring multiple changes to documents, asking a zillion questions, etc.

Exact figures might be impossible to be given to you by the attorney but you have every right to ask and at least find out the hourly rate and what other similar cases cost for the legal work. $1,000 save is nothing compared to spending $10,000 several years from now by just going for the hourly rate and what other similar cases have cost. You should always keep in mind to consider the experience and expertise of the attorney that you want to hire.

K. Gabriel Heiser is an elder law and estate planning attorney with over 25 years of experience. He authored the annually updated practical guide for the layperson book entitled “How to Protect Your Family's Assets from Devastating Nursing Home Costs: Medicaid Secrets. You can visit Medicaid Secrets for more information about this book. Go to choosing an estate planning attorney for more about elder care lawyer or estate planning attorney fees.
When considering whether to make a gift, people often confuse the gift tax exemption with the medicaid gift rules. Here's a great article explaining this.

-- By K. Gabriel Heiser, Attorney

The details are a little hazy but there are some exemptions for gifts that you might not be aware of. Just think of it as this, "I thought there was a $10,000 per person exemption for gifts, so there would not be a Medicaid penalty. No?"

You should not confuse a gift tax exclusion with a Medicaid gift exclusion.

Whenever you gift to another person money or equivalent that exceed a total of (currently) $13,000 per year, it is a “taxable” gift under federal gift tax rules. The confusion lies at this figure being pegged at $10,000 when the exemption actually increases every few years to reflect inflation. If you make 2 gifts of $7,000 to the same person in the same calendar year, you will be pushed over the limit. Since the “clock” resets to zero every January 1, you can make one gift of $7,000 on December 31 and another the next day on January 1 so you will not be pushed over the limit. This means that your second gift is in the next calendar year.

Having a taxable gift only matters to a person whose lifetime taxable gifts eventually exceed $1,000,000, which a client applying for Medicaid doesn’t have. It is just an obligation for you to file a federal gift tax return if your gifts to one person in a calendar year exceed $13,000.

If you are married, you can file the federal gift tax return to consent on a "split" of the gift. One of the spouses can gift a person $20,000 but each spouse if only treated as having given a $10,000 gift that will not be a taxable gift to either spouse. Having the marriage alone will not “split” the gift, you have to file the federal tax return to do so.

You have to note that only Connecticut and Tennessee still impose their own separate state gift taxes: CT exempts the first $2 million, but TN taxes gifts to an immediate family member that exceed $13,000/year. There are no state gift taxes to the rest of the states so you are all set if you live outside those two states and you're under the federal limit.

What about Medicaid? Unfortunately, there is no exemption of any kind for a gift when figuring Medicaid penalties as a general rule. It is all the same if you give away $50,000 to one person or $10,000 to five people. Starting on the day you apply, the total amount of gifts made within the last five years will be divided by the average cost of a nursing home in your state will be tallied up by Medicaid people to come up with the number of months of Medicaid ineligibility.

For gifts to a spouse, or to a trust for a blind or disabled child, or of a gift of your home to certain people, etc; there are no exemptions. Any gift you made within the five-year period before you applied for Medicaid like cash gifts to family members may cause a period of Medicaid ineligibility.

K. Gabriel Heiser is an elder law and estate planning attorney with over 25 years of experience. He authored the annually updated practical guide for the layperson book entitled “How to Protect Your Family's Assets from Devastating Nursing Home Costs: Medicaid Secrets. You can visit Medicaid Secrets for more information about this book.

Here’s an article about Gift tax.
Statistics show that one-third of us will live in a nursing home at some point in our lives. And, that number is increasing as we live longer and longer. So, we need to plan for how those nursing home expenses will be paid. This article discusses how and when to do that.

-- By K. Gabriel Heiser, Attorney

With a ratio of 1 out of 3 people spending an average stay of over 2 ½ years in a nursing home in one’s lifetime, when should you start planning?

We all want to leave this earth in the most decent way possible by playing the odds that you will not need a nursing home, stay independent or die in your sleep. That will be so nice but you just don’t know when your health will take the turn for the worst with a longer lifespan. So, when do you really need to start planning? Here are the stages broken down.

Power of Attorney You should have a comprehensive durable power of attorney ("POA") signed that will continue to be effective even if you become incapacitated. This is the time that you need it most and it has to include the specific authority to make gifts for Medicaid planning purposes so that your state law would allow gifting. You can give the power to your spouse (if competent,) or to one or more of your children to act as your “agent” with the POA to act on your behalf.

For long-term planning, it is important for you to sign a good POA to allow your agent to do all Medical planning for you in the unfortunate case of you having a stroke or needing nursing home care.

Gifting program Signing a POA alone doesn’t mean that you could just sit back and relax because there are many other things to do. There are Medicaid planning techniques that require you to transfer assets into a trust or outright to children. You can protect your transferred assets by making the transfers sooner so that the 5-year period will be over. any such gifts made within 5 years of the date you apply for Medicaid can cause a period of ineligibility or a so-called "penalty period" under the current rules.

Long-term care policy consideration If you think about it, 5 years is quite a long time. You can never say what happens to your health during those times and this is where it is considerable for you to purchase a long-term care policy that can cover you for 5 years in case you need it. your agent under your POA could make the transfers if you suddenly needed long-term care in a nursing home and during the penalty period, the policy got you covered.

Legal consultation It is best for you to sit down with an experienced elder law attorney and go through all your options when you or your spouse are heading to nursing home care due to health issues such as stroke, early dementia, beginning Alzheimer's. Be sure to bring your powers of attorney, your wills, living wills, deeds, etc., that the attorney can review to make his "diagnosis” after careful considerations in your health, your age, your assets, family situation, and the current state of the law. You may be required to set up an irrevocable trust and transfer certain assets into it, purchase a Medicaid-friendly annuity, re-title the home, purchase long-term care insurance, etc. The fees of an attorney will seem cheap ones he saves you even a month’s bill in a nursing home given that a nursing home in the U.S. is now over $75,000 per year in average cost.\

K. Gabriel Heiser is an elder law and estate planning attorney with over 25 years of experience. He authored the annually updated practical guide for the layperson book entitled “How to Protect Your Family's Assets from Devastating Nursing Home Costs: Medicaid Secrets. You can visit Medicaid Secrets for more information about this book.
Here's a problem we'd all like to have -- too much money. But, if you are well off and are already concerned about possible estate tax; what do you do with new money you might inherit from your parents? Maybe an inheritor's trust is a good option.

-- By K. Gabriel Heiser, Attorney

We can never have too much money. there are clients who are parents and have a fairly large amount of money and the same goes for their children. The deal is the money will be included in the taxable estate of the child and also be subject to creditors, divorcing spouses, etc. if the parents will just give their money to the child as an outright gift under the parents' wills or living trusts.

If you are the child, the idea is to go to your parents and suggest to talk to the lawyer to draft up a trust to hold your inheritance. Because the idea of the trust has complexities and your parents might just keep putting it off since it requires them to pay a hefty amount of money. What you can do is to hire your own lawyer to draft the trust with the provisions beneficial to the client. When it is done, you can go to your parents and say that you want them to go to their attorney and make a simple change. Ask them to add the following sentence to your wills (or living trusts, as the case may be): 'Notwithstanding anything in this instrument to the contrary, any time a distribution is indicated to be distributed to my son/daughter, (YOUR NAME), it shall instead be payable to the (YOUR NAME) Irrevocable Trust dated August 14, 2006, to be held as provided therein.’

Your parents are more likely to agree on this as it is simple and would require little involvement, thought and cash for your them to let their lawyers deal with it.

You will have these following benefits and your inheritance will now flow directly into the trust created:
  • it will be excluded from your taxable estate
  • it will be outside your probate estate
  • it will be protected from lawsuits, creditors, and divorcing spouses
  • you can still control and manage as a trustee (although even greater protection will result if you are not a trustee or a co-trustee)
  • it can still allow you to decide how the remaining trust assets will pass after your death


An "Inheritor's Trust" is also called an "Irrevocable Trust." You can read more about it at Irrevocable Living Trust.

Your trust will be protected as the years go by having your parents fund it by a small change in their will or living trust so that you can still receive your inheritance.

K. Gabriel Heiser is an elder law and estate planning attorney with over 25 years of experience. He authored the annually updated practical guide for the layperson book entitled “How to Protect Your Family's Assets from Devastating Nursing Home Costs: Medicaid Secrets. You can visit Medicaid Secrets for more information about this book.
 
     
     
  Marriage  
 
 
     
 
Before "tying the knot" at an advanced age, think carefully about how that could affect you or your potential spouses' medicaid qualification if one spouse eventually has to go to a nursing home.

-- By K. Gabriel Heiser, Attorney

Marriage is a happy moment. It is a terrific event but having elderly relatives at ages 75 onwards getting married seem to be a different thing.

Let’s face it, somewhere down the road one of the spouses will eventually be needing nursing home care. regardless of how long the marriage is, the spouse still residing in the community is legally responsible for paying the costs of nursing home care for the other spouse. That will be $150,000 for a national average nursing home stay of 2.5 years with monthly costs of more than $5,000.

If you are the spouse who is staying at home, you will be able to protect a certain amount of money. You can also save money from a nursing home bill by qualifying your spouse in the nursing home for Medicaid. Currently, that amount is $99,540, plus the house, car, and personal property in Colorado. If you and your spouse have a total of $400,000 savings as a married couple, only $99,540 will be protected even if you are the one who had that share of the money. All the rest after that goes to the Spouse’s nursing home care bill.

There is a prenuptial agreement that allows each spouse to do whatever they want to do with the assets they brought into the marriage. There are also agreements there that state that there is no legal obligation for you to pay for the long-term care of your spouse but Medicaid laws for most states disregard this. The pre-nuptial contract is useless for Medicaid planning purposes and is only completely enforceable and legal for all other purposes.

Happiness is so expensive. You can’t stay single and live in sin. You have to get married, be happy and in the end, pay for it. But there is still something you can do to stay as a happy couple and protect your assets. You and your partner can each establish an irrevocable trust and transfer all but $100,000 into that trust. the money outside the trust will be the only money at risk in the case any of you goes into the nursing home. This should be approached very carefully and properly drafted by your attorney as the transfer into such a trust could result in a period of disqualification from Medicaid.

Money is truly the root of all evil. How simpler life would have been if there wasn’t money involved.

K. Gabriel Heiser is an elder law and estate planning attorney with over 25 years of experience. He authored the annually updated practical guide for the layperson book entitled “How to Protect Your Family's Assets from Devastating Nursing Home Costs: Medicaid Secrets. You can visit Medicaid Secrets for more information about this book.
Common law marriages are less and less common in the United States today. But, they are still around. This article explains what a common law marriage is and some of the consequences of one.

-- By K. Gabriel Heiser, Attorney

Way back when the population was still spread out and justices of the peace and clergy were harder to find, “common law” marriage is present. This concept is having a man and a woman considering themselves as husband and wife living and dealing with the public as such so the law would recognize them.

Fast forward to today, there is still and only about a dozen states who still recognize a common law marriage. a common law marriage valid in any one of these dozen states will be recognized as a legal marriage in all of the other states under the U.S. Constitution's "full faith and credit" provision.

There is only facts and circumstances test to recognize whether a couple is married for the purposes of the state law (and hence federal law, which follows state law on this determination) since there is no piece of paper to justify it.

Here are some of the factors that judges look at to determine if you are a couple married at common law if:
  • You live together
  • You let the general community hold you as married couples
  • You have an exchange of wedding rings
  • You attend holiday celebrations and family gatherings together
  • You travel together
  • You file income taxes marked as married individuals
  • You complete medical records as married
  • You share domestic responsibilities


Here are some factors that your common law marriage is weighed against:
  • The other person only refers to you as “boyfriend/girlfriend” or “partner” to emergency medical personnel
  • When applying for a mortgage, your partner fails to indicate that she was married
  • You only let a small circle of friends and co-workers but not the general community know that you are married


  • People are particularly persuasive to a court in making this determination because tax returns are signed under the penalties of perjury

    This is important because there are many legal consequences, rights, and responsibilities that depend on a determination of marital status such as:
    • If you are the surviving spouse, you are entitled to a certain percentage of a deceased spouse's estate if the spouse died without will; if declared to be unmarried, that you will get nothing
    • You are entitled to a certain percentage of your deceased spouse's estate if the spouse had a will but omitted or left little to you which is called an "elective share" and could be as much as 50% of your deceased spouse's estate
    • Only a legal spouse can claim the unlimited marital deduction, saving thousands of dollars in estate taxes, with larger estates
    • Filing income taxes as "married filing jointly” is only for legal spouses Certain rights and access to medical records under federal and state law are given only to legal spouses
    • Entitlement of the legal spouse to the Social Security payments of a deceased spouse.


    There is an advantage if you are determined as married since your nursing home partner's assets are the only ones counted. this protects an unlimited amount of your assets instead of spending it down to your disabled spouse in the nursing home to qualify her for Medicaid coverage.

    There are both advantages and disadvantages of common law marriage. The legal determination of whether there was or was not a common law marriage is necessary for important monetary and other benefits. But to end all questions, it is best for both of you to head downtown and sign the contract so you are considered officially married.

    K. Gabriel Heiser is an elder law and estate planning attorney with over 25 years of experience. He authored the annually updated practical guide for the layperson book entitled “How to Protect Your Family's Assets from Devastating Nursing Home Costs: Medicaid Secrets. You can visit Medicaid Secrets for more information about this book.
Everyone knows that second marriages are complicated when it comes to inheritance issues. Here's how you can ensure the children of your first marriage receive the assets you desire.

-- By K. Gabriel Heiser, Attorney

The goal in second marriages is to protect your legacy so that a portion of your assets stays “on your side” while still benefiting the second spouse. The fear is there in second marriages that if you passed on first and leave your assets to your spouse, he could get remarried or simply decide for whatever reason not to leave your child/children anything upon his death. In cases where the children can be his, hers or yours together, this concern is very dominant.

There are ways where you as the surviving spouse can benefit while guaranteeing that whatever is left will pass in accordance with the wishes of the first spouse to die.

Contract to make a will
Based on a written contract signed by both of you, you can have a will that leaves everything to the surviving spouse but then divides between both sides of the family that cannot be later changed. The will may continue to be unchanged with the assets becoming depleted by the time the spouse dies and, in the risk, that the surviving spouse marries, get sued or get divorced.

Testamentary Trust for the Spouse
You can insert a trust within your will or within a living trust for the surviving spouse. The surviving spouse cannot withdraw all the trust assets because of the limits in distributions but he can be the sole beneficiary of the trust. Entitlement to all the trust income plus discretionary distributions of principal for maintenance and support or at least medical emergencies would be generally given to the spouse.

For further protection, you can have someone other than your spouse to be the trustee or have a co-trustee with your spouse. Depending on you, trust divides among your children or however you want it to pass, in the event that your spouse dies. These are the advantages of this approach:
  • following your spouse's death, your spouse has no ability to alter your intended distribution of assets
  • your assets are protected against claims of a divorcing new spouse if your spouse remarries
  • the new spouse will not be able to demand a portion of your assets as an "elective share" (see below) upon your spouse's later death if your spouse remarries trust assets during your spouse's lifetime or after death cannot be touched by the creditors of your spouse


Elective Share
You have to consider the "elective share" statute of your state for any of the above solutions. No matter what your will says, a certain percentage of your estate must pass to your surviving spouse as the law guarantees. Generally, it is between 1/3 and 1/2, and some states prorate the percentage depending on how long you've been married. That percentage varies from state to state. However, this statute can be overridden by a prenuptial/post-nuptial agreement or a will with a properly worded contract.

K. Gabriel Heiser is an elder law and estate planning attorney with over 25 years of experience. He authored the annually updated practical guide for the layperson book entitled “How to Protect Your Family's Assets from Devastating Nursing Home Costs: Medicaid Secrets. You can visit Medicaid Secrets for more information about this book.
 
     
     
  Spouse  
 
 
     
 
We know that a community spouse generally does not have to pay out of his or her income for the nursing home expenses of the spouse on medicaid; however, can the nursing home spouse pay part of his or her income to the spouse at home? Yes, here's how: -- By K. Gabriel Heiser, Attorney

There are cases where a nursing home spouse is well taken care of with the bills covered by Medicaid but the home spouse doesn't have the means to pay for the bills. There is no need to worry as there are ways to make it work in this situation.

When the nursing home spouse is under Medicaid, there is no need for the spouse living at home or in the community (also known as "community spouse") to pay anything towards the nursing home. There is no need for the community spouse to contribute one dime to the care of the nursing home spouse even if that community spouse receives a Social Security of $1,200/month and a pension of $4,000/month.

There is a "Minimum Monthly Maintenance Needs Allowance" or MMMNA that the Federal government resets every year on July 1 to keep up with inflation. This 2006 figure is currently $1,650 monthly. If you turn the above situation around, the nursing home spouse should give a contribution to the community spouse.

If you are the community spouse with only $900/month Social Security check, you can receive money from your nursing home spouse, who for example receives the $1,600/month pension check. You will be entitled siphon off a minimum of $1,650 - 900 = $750 per month from her check since the rest of her check, which is $859 is paid monthly to the nursing home and Medicaid picking up the nursing home expenses balance.

It will definitely be helpful and a great relief for you to get such assistance from your nursing home spouse. If in case, the amount that you are getting is not enough, there is another way to get more money monthly from your nursing home spouse.

There are various ways for you to increase your income allowance coming from your nursing home spouse under the federal rules. You can get an automatic increase up to the maximum MMMNA of $2,488.50 (this figure changes annually on Jan. 1 of each year) if you have shelter expenses that exceed a certain amount.

The amount costs for your rent or mortgage payment, condo fees (if any), real estate taxes and homeowner’s insurance, and either the standard utility allowance (currently between $198 and $546, depending on the state) or, if your state does not use such an allowance, the actual cost of utilities (heat, electricity, gas), exceeds 30% of the MMMNA, i.e., $495 in 2006, that is your "excess shelter allowance" (ESA). In some states, you are even permitted to use the higher of the standard utility allowance or actual cost of utilities when calculating whether or not you qualify for the Excess Shelter Allowance. On this point, you have to check your own state's regulations.

If you have a total of $2,155 from shelter costs were $1,000/month, then his $1,650 MMMNA may be increased by $1,000 - 495 = $505/month, then it is okay since that amount is still under the maximum permitted MMMNA of $2,488.50.

If the above mentioned is still not enough to cover your prescription costs and thinking of needing home health care too then you can request a Fair Hearing before the state Medicaid agency. You can also ask that the monthly payments from your nursing home spouse be increased.

You as the community spouse can continue to live a comfortable life by shifting more income from your nursing home spouse who is receiving Medicaid coverage, with the proper advice from an elderly law attorney.

K. Gabriel Heiser is an elder law and estate planning attorney with over 25 years of experience. He authored the annually updated practical guide for the layperson book entitled “How to Protect Your Family's Assets from Devastating Nursing Home Costs: Medicaid Secrets. You can visit Medicaid Secrets for more information about this book.
Most know that to qualify for medicaid, the nursing home resident can't have more than $2,000 in countable assets. But, what if the medicaid recipient has a spouse at home. How many assets can that community spouse keep? -- By K. Gabriel Heiser, Attorney

It is a common notion that a nursing home spouse cannot own more than $2,000 in cash or other "countable" assets in order to qualify for Medicaid coverage of a long-term stay in a nursing home. For married couples, there is the question of how much the community spouse (spouse still residing at home) will retain if the other spouse is going to the nursing home. A combination of both federal and state Medicaid laws are needed to determine this amount. ( Regardless if the assets are titled in the sole name of the nursing home spouse, the Community Spouse, or jointly in both names, it doesn't matter for this purpose.)

Based on what you couple own when the other spouse first enters the nursing home for a continuous period of at least 30 days, the Community Spouse can retain 50% of all of the countable assets of both spouses as per the rule.

Only one-half of the total amount of the couple's assets, up to $109,560, but with a minimum of $21,912, can be protected by the community spouse as permitted in most of the states. The community spouse can retain all assets if the total is under $21,912. The Community Spouse retains $21,912 if their total assets are between $21,912 and twice that amount (i.e., $43,824). The community spouse can retain half if the total is between $43,824 and $219,120. Finally, the community spouse is limited to protecting $109,560 if the total is over $219,120.

Some additional examples are as follows: If you as a couple has a total asset of $30,000, $15,000 is half of that and is less than the floor amount. If you are the community spouse, you can protect $21,912 but the balance must be "spent down" before the Medicaid qualifications of the nursing home spouse.

The Community Spouse can protect the full 50% amount of $50,000 if your couple's assets total is $100,000.

If your couple's assets total is $300,000, the Community Spouse's protected amount is limited to $109,560.

The states that follow the above rule are known as "50% states." There are lenient states that allow the community spouse to retain 100% of their couple's combined assets but only up to $109,560. if your couple's total assets are $150,000, $109,560 of that is protected by the community spouse. (The 2009 amount is $109,560 and this figure annually changes to keep up with inflation.) The nursing home spouse can keep up to $2,000 in cash after the Community Spouse's share is set aside. This is applicable in all states but to qualify the nursing home spouse for Medicaid, the couple's assets balance needs to be eliminated somehow.

All "excess" assets over the limits should be "spent down" and even the state Medicaid administration department will tell you that. the simplest way to qualify is if it is a small amount. The couple can give away the excess but it will cause the nursing home spouse a period of disqualification from Medicaid eligibility.

You as a couple can buy a new care, improve your house, purchase Medicaid annuity ad others to convert some or all of your excess from "countable" to "non-countable."

It is easy to make mistakes, miss a recent state Regulation or Agency Letter and be confused with the technical options, resulting to costing you thousands of dollars that is why it is important that you seek the skills and advice of an experienced elder law attorney.

K. Gabriel Heiser is an elder law and estate planning attorney with over 25 years of experience. He authored the annually updated practical guide for the layperson book entitled “How to Protect Your Family's Assets from Devastating Nursing Home Costs: Medicaid Secrets. You can visit Medicaid Secrets for more information about this book.
What happens if my spouse leaves me out of his or will once I go on medicaid? Do I have to take advantage of my state's spousal statutory will rights? What if I don't?

-- By K. Gabriel Heiser, Attorney

In New Jersey law (like in most states), no matter what the will of the first spouse to die is, one spouse cannot disinherit the other spouse. There was a recent case in NJ where the husband died but the wife is still living in the nursing home. If the first spouse to die left everything to the children of a first marriage, there is a legal right that allows the surviving spouse to "elect against the will," meaning she wants to get her "statutory share." She must file a piece of paper in the court that indicates that she rejects the will. Depending on the state where the couple lived in, the statutory share is usually between 1/3 and 1/2 of the deceased spouse's probate estate.

The nursing home spouse in the NJ case did not elect against the will of the deceased husband who left all of his property into a trust for her benefit but the distributions that went to her in the discretion of the trustee. Getting 1/3 of the property outright is better than the deal that the wife got.

Since the surviving wife did not elect her 1/3 "statutory share" on the deceased husband's estate, the funds were treated as a gift to the children from the wife. If you do not avail of your legal rights to access funds then in Medicaid rules, the funds will then be considered as gifts. For some period of time, the gifts will even cause the wife ineligible for Medicaid coverage. The value of the estate she did not get will determine the length of time she will be penalized for the deemed gifts.

The court did not buy the wife’s argument that her lifetime interest in 100% of the husband's property was worth more than 1/3 of the same property outright. In the court ruling, it is not important whether the election was advisable or not, it matters whether or not the wife made the election.

If you are the one in this situation, you can do something to avoid this. You can satisfy your wife’s elective share to her by giving her the minimum amount necessary. The balance can then be left either to the children or in a trust for the wife’s benefit. She will still have too much money after the husband’s death that will disqualify her from Medicaid for a short period of time.

Your wife can then follow the planning ideas discussed in this blog once she gets the money. Your wife can protect 1/6 of your estate, which is at least of that money. That deal is better than being disqualified from Medicaid benefits for twice as long for deeming to have gifted an entire 1/3 of her elective share.

You might be thinking about having a prenuptial agreement to solve their problem. Pre and postnuptial agreements are completely legal in most states but are ignored in Medicaid rules. If you deem that you will be needing Medicaid coverage for nursing home expenses, then it is best to seek the advice of someone who understands the ins and outs of Medicaid rules such as an experienced and expert attorney in this field.

K. Gabriel Heiser is an elder law and estate planning attorney with over 25 years of experience. He authored the annually updated practical guide for the layperson book entitled “How to Protect Your Family's Assets from Devastating Nursing Home Costs: Medicaid Secrets. You can visit Medicaid Secrets for more information about this book.
A will is not really necessary to pass down your assets to your children after your death. However, having a will comes with important benefits that make it worth the cost.

The most obvious benefit is that with a will, you can name the persons whom you would like to handle your estate after your death. Depending on which state you live in, this individual can be referred to as the ‘Executor’ or the ‘Personal Representative’. This person is tasked to file the original will in court accompanied by your attorney. He will also be responsible with gathering and protecting your assets, paying off your outstanding debts, filing your tax return, and finally, distributing your remaining assets in accordance with your directions as stated in the will.

Without a will, the power to choose an Executor for your estate will be left solely to the presiding probate court judge. Since the judge does not know your immediate family members as well as you do, he might end up choosing someone not qualified. Your surviving family members might also end up fighting each other for the position of Executor.

The will is also the only way that your property can be distributed in a way that contradicts the default inheritance rules of your state. Each state has a statutory will that goes into effect if the deceased person did not live behind a will. In most states, all your assets simply go to your spouse. If you don’t have a surviving spouse, your assets will be distributed equally to your children.

Here are some of the most common reasons why you need a will:
  • You don't want to leave everything to your spouse.
  • You want to leave more to one child than another.
  • You have minor children and want to hold back their access to your money until they are at least age 25 or 30.
  • You'd like to leave $10,000 to your alma mater or your church or temple.
  • You want to "cut out" one of your children.
  • You'd like to leave money to a family member in a way that is protected against lawsuits, creditors, and divorcing spouses.
  • You'd like to leave a small sum to each of your grandchildren or a daughter-in-law.
  • Your parents are living, you have no spouse or children, and you want your assets to go to your siblings and not your parents.


Here are some of the most common instances when a will is not needed:
  • Your estate is relatively small and you're happy with how your estate would be divided and distributed under your state's intestacy laws.
  • You've completely avoided probate by using "P.O.D.," "T.O.D.," joint ownership with right of survivorship, a trust, or beneficiary designations on all your assets.
  • You're content having all your assets be immediately distributed to your heirs, regardless of their age or ability to handle money.
  • You're not overly concerned with who will handle the affairs of your estate after your death.


In the end, it can be as simple as weighing the cost of having your will prepared to the cost of your wishes not getting carried out. Sometimes, even the shortest of wills is better than no will at all.
A common misconception is that you can't own your home and qualify for medicaid. So, people often will think they should give their home to their child and then apply for medicaid. This could be a bad idea and is probably not necessary.

-- By K. Gabriel Heiser, Attorney

You as a parent can transfer your home to your child by signing a deed that transfers the complete title. You have to ensure though that you are very sure and you understand fully the ramifications of the signing the deed.

You have no state gift tax to worry about even if this is a taxable gift. You don't have a federal gift tax to worry about also if the total gifts in your lifetime don't exceed $1 million.

You are now at the mercy of your child who owns the house since it no longer belongs to you. The issue does not lie in the fear of your child kicking you out of the house but instead on your child being sued or having the child exceed auto insurance policy limits in case of injuries. You also have the concern of your child being divorced since the divorce rate is high. once you have signed the deed, the house is really an asset of your child and creditors can now easily boot you out or foreclose "your" house.

There is a "penalty period" that impacts your Medicaid eligibility if you or your spouse deed your home to one or more of your children. You will have a period of disqualification from Medicaid which length will be dependent on the value of your house. There is a "penalty divisor," which is a figure set by each state and is roughly equivalent to your state's nursing home average cost. The state uses this formula: the amount of gift [divided by] penalty divisor = # of months penalty.

Example: If your state "penalty divisor" is $5,00 and you deed your house worth $150,000. $150,000/$5,000 = 30. That means you will be disqualified for the next 30 months even if you apply for Medicaid the next day or anytime prior to five years from now. The gift of the house will be ignored and you will be out of the 5-year "lookback" period if you waited at least five years and applied for Medicaid.

Your penalty period increases to 70 months of your house were worth $350,000. You would definitely want to wait to apply for Medicaid given that case until after the expiration of the 5-year look-back period. You would be faced with a 70-month penalty period if for some reason you forgot and actually did apply before the 5 years were up. The length of the penalty has no upper limit.

There are future blogs that will discuss the exceptions to this rule that will allow a house transfer without causing penalty. K. Gabriel Heiser is an elder law and estate planning attorney with over 25 years of experience. He authored the annually updated practical guide for the layperson book entitled “How to Protect Your Family's Assets from Devastating Nursing Home Costs: Medicaid Secrets. You can visit Medicaid Secrets for more information about this book.
We know that a community spouse generally does not have to pay out of his or her income for the nursing home expenses of the spouse on medicaid; however, can the nursing home spouse pay part of his or her income to the spouse at home? Yes, here's how: -- By K. Gabriel Heiser, Attorney

There are cases where a nursing home spouse is well taken care of with the bills covered by Medicaid but the home spouse doesn't have the means to pay for the bills. There is no need to worry as there are ways to make it work in this situation.

When the nursing home spouse is under Medicaid, there is no need for the spouse living at home or in the community (also known as "community spouse") to pay anything towards the nursing home. There is no need for the community spouse to contribute one dime to the care of the nursing home spouse even if that community spouse receives a Social Security of $1,200/month and a pension of $4,000/month.

There is a "Minimum Monthly Maintenance Needs Allowance" or MMMNA that the Federal government resets every year on July 1 to keep up with inflation. This 2006 figure is currently $1,650 monthly. If you turn the above situation around, the nursing home spouse should give a contribution to the community spouse.

If you are the community spouse with only $900/month Social Security check, you can receive money from your nursing home spouse, who for example receives the $1,600/month pension check. You will be entitled siphon off a minimum of $1,650 - 900 = $750 per month from her check since the rest of her check, which is $859 is paid monthly to the nursing home and Medicaid picking up the nursing home expenses balance.

It will definitely be helpful and a great relief for you to get such assistance from your nursing home spouse. If in case, the amount that you are getting is not enough, there is another way to get more money monthly from your nursing home spouse.

There are various ways for you to increase your income allowance coming from your nursing home spouse under the federal rules. You can get an automatic increase up to the maximum MMMNA of $2,488.50 (this figure changes annually on Jan. 1 of each year) if you have shelter expenses that exceed a certain amount.

The amount costs for your rent or mortgage payment, condo fees (if any), real estate taxes and homeowner’s insurance, and either the standard utility allowance (currently between $198 and $546, depending on the state) or, if your state does not use such an allowance, the actual cost of utilities (heat, electricity, gas), exceeds 30% of the MMMNA, i.e., $495 in 2006, that is your "excess shelter allowance" (ESA). In some states, you are even permitted to use the higher of the standard utility allowance or actual cost of utilities when calculating whether or not you qualify for the Excess Shelter Allowance. On this point, you have to check your own state's regulations.

If you have a total of $2,155 from shelter costs were $1,000/month, then his $1,650 MMMNA may be increased by $1,000 - 495 = $505/month, then it is okay since that amount is still under the maximum permitted MMMNA of $2,488.50.

If the above mentioned is still not enough to cover your prescription costs and thinking of needing home health care too then you can request a Fair Hearing before the state Medicaid agency. You can also ask that the monthly payments from your nursing home spouse be increased.

You as the community spouse can continue to live a comfortable life by shifting more income from your nursing home spouse who is receiving Medicaid coverage, with the proper advice from an elderly law attorney.

K. Gabriel Heiser is an elder law and estate planning attorney with over 25 years of experience. He authored the annually updated practical guide for the layperson book entitled “How to Protect Your Family's Assets from Devastating Nursing Home Costs: Medicaid Secrets. You can visit Medicaid Secrets for more information about this book.