If one member of a couple requires nursing home care, the state, through its Medicaid program will pay for that care provided the nursing home spouse has no more than $2,000 in his or her name. The well spouse can have no more than approximately $109,000 in his or her name. The couple can own one residence, but no second home or time shares will be allowed. The couple can own one automobile unless a second car is necessary for transportation of the nursing home spouse (for instance, a specially equipped handicapped van, etc.). Our task at hand, therefore is to safeguard any assets in excess of this amount so that we can qualify the ill spouse for Medicaid benefits without forcing the couple to spend their life savings or go broke in the process. For simplicity's sake, this guide will deal with a couple who has one residence.
Do Not Add Your Children's Names to Your Home or Bank Accounts.
Many people think doing this will safeguard the asset. This is not true and, if done incorrectly, may expose your assets to liabilities of your child, be it a divorce, bankruptcy, or a lawsuit.
Every One Should Have A Properly Drafted Durable Power Of Attorney
Most Powers of Attorney that people now have are insufficient to meet the demands of estate planning and Medicaid planning. If your Power of Attorney is more than 3 years old, have it reviewed by a qualified attorney immediately. In Massachusetts, there are 4 critical powers that every Power of Attorney must contain; (1) the ability to gift; (2) the ability to gift real estate; (3) the ability to self deal and; (4) the ability to do Medicaid or government assistance planning. Sadly, most Powers of Attorney lack these critical powers.
With Advance Planning Most Assets Can Be Protected
If you have time to prepare (and by time I mean five years), a properly drafted Irrevocable Trust can be used to shield most, but not all, assets from nursing home costs. Be very careful, because once assets are placed in an Irrevocable Trust for a period of five years, they are not considered your assets if you require long term care. But make sure there is a way to take assets out of the trust if an emergency arises within the five year time period or if you need the assets back for living expenses.
If Long Term Care is Unexpectedly and Suddenly Needed, A Couple Can Still Safeguard Assets
If a sudden need for a nursing home stay arises, if, for instance a spouse has a stroke and is incapacitated or for some other reason cannot act for themselves, a Power of Attorney can act to save the couples assets. The Power of Attorney signs all the couples assets over to the well spouse, including the family home, leaving the ill spouse with no more than $2,000 in his or her name.
What To Do If The Well Spouse Has Over $109,000.00 in His or Her Name.
Once all assets have been transferred to the well spouse, we now need to make sure the well spouse has no more than $109,000 in his or her name. If the well spouse's assets exceed that amount, then a particular type of an annuity can be purchased which will allow the well spouse to convert the excess assets into income, bringing the excess assets below $109,000 and meeting the threshold for Medicaid eligibility.
Now, Redo the Well Spouse's Estate Plan
Since most Wills, Trusts, Durable Powers of Attorney and Health Care Proxies name the spouse as a beneficiary or responsible party, the final step is removing the ill spouse from all legal documentation, placing a child or some other trusted person in the ill spouse's place. Remember to check all beneficiary designations on IRAs, life insurance, annuities and the like to ensure that children, not the nursing home spouse, are the beneficiaires.
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