I was speaking with a client recently regarding the aspect of potential long-term care planning. This client was very worried about not having enough money to pay for their long-term care costs and had begun to investigate the possibility of attempting to qualify for Medicaid later in life, should this become an issue.
Specifically, this client had questions about the income rules for qualifying for Medicaid.
The term Medicaid Planning and Elder Law can encompass a lot of different issues. Specifically, the Medicaid rules are very complex and must be followed specifically in order to engage in proper asset protection when it comes long-term care planning.
Qualifying for Medicaid
In order to qualify for Medicaid, you must be both income qualified and asset qualified. The general rule is that a person can receive no more than $2,250 in income per month and qualify for Medicaid from an income standpoint.
The asset rules, however, are different. In order for a person to qualify for Medicaid, a person can own no more than $2,000 in assets, home equity that does not exceed $572,000, one car, and life insurance face value that does not exceed $1,500.
This client asked, “Well, what if someone makes over $2,250 per month and has more than $2,000 in assets?” Unfortunately, this person does not qualify for Medicaid and would need to use other resources to pay for their long-term care, whether that is long-term care insurance or pay from their own resources.
This client then asked about retirement funds. Well, retirement funds may or may not counted as a resource for paying long-term care from a Medicaid perspective.
There are generally three rules when it comes to retirement accounts:
- If the person must terminate employment in order to obtain payment, the retirement account is not an available asset.
- If the funds are converted to an immediate annuity, the retirement account is not an available asset. However, distributions from the annuity are income and included in the income qualification analysis.
- If the person is receiving automatic regular periodic distributions (which must include all interest and some principal), the retirement account is not an available asset. However, again, the distributions are income and included in the income qualification analysis.
What does someone do who is not income qualified, is not asset qualified, and will not be able to fund the full length of stay in a nursing home?
The answer is to engage in Medicaid Planning with a Qualified and Experienced Elder Law Attorney.
Depending upon the situation, a person in this situation can protect their assets with a Medicaid Asset Protection Trust and protect their income stream from a Qualified Income Trust (or Miller Trust).
Although, with this type of planning, the key is to plan early. With this type of planning, there is a five year look back provision where Medicaid will assess a penalty period against you if you enter a nursing home facility prior to the expiration of the five years after assets being transferred to a Medicaid Asset Protection Trust.
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