Finance - HL 232 (1)

Helpful miscellaneous articles regarding our retirement plan and planning.  Like you, I review my retirement nestegg and plan from time to time.  Recently, I went though some continued education for some credentials I maintain and it occurred to me that we all could use a review about these issues.  So with your help, we will share and post articles and info that may be helpful and of interest to many of you in this section.

Long Term Care in the form of Assisted Living or Skilled Nursing is expensive.  Most people have three ways to pay for this very real eventual cost.  One way is through saved personal assets, another through at least in part through insurance, and the last is via Medicaid.  If the last is even a potential for you or someone you know then the following may be of interest. Keep in mind one of the most important facts and that is the government uses a 5 year lookback and without planning this can be an asset killer. 

Medicaid Planning:

How You Can Keep Assets And Still Become Medicaid Eligible

How can you keep assets and still become Medicaid eligible?

The number one question from people who need to get a loved one eligible for Medicaid

is: How can we keep assets? Fortunately, if you do some careful planning, there are a

few ways to increase the assets that an applicant can keep.

What assets can you keep whether you are single or married?

The Medicaid laws that apply to a single person are very different than the Medicaid laws

that apply to a married person. However, there are some laws that apply to both a single

person and a married person. Regardless of whether you are single or married, generally

speaking, you can become Medicaid eligible and keep the following assets:

􀂙 Your home

􀂙 One vehicle

􀂙 Personal belongings

􀂙 Prepaid irrevocable funeral contract

􀂙 Life insurance with a combined face value of $1,500 or less

􀂙 $2,000

These are known as “exempt assets”. Your other assets (“non-exempt assets”) have to be

“spent down” before you can become Medicaid eligible. To determine how best to

maximize your assets, the first thing we look at is whether you own exempt assets, and if

not, whether it makes sense to obtain exempt assets. For example, do you have a prepaid

irrevocable funeral contract? If not, we generally recommend that you purchase one.

As another example, we discuss the condition of the home. Does it need a new roof?

Does it need a new furnace? If so, we generally recommend that you purchase those

items for the home so that the value of the home is increased.

What additional assets can you keep if you are married?

If you are married, Michigan law provides that the “stay at home spouse” or “community

spouse” may keep additional assets that equal the lesser of one-half of your non-exempt

assets (sometimes referred to as your “counted assets”) or $109,560 (this is the amount

for 2009; however this amount changes annually). The great news is that we can help

you keep the balance of your assets that exceed the amount that Michigan law determines

the stay at home spouse can keep. We do this by creating a trust that is called a “solely

for the benefit of” trust. This is an irrevocable trust that is solely for the benefit of the

stay at home spouse. The monies transferred to the trust are paid out to the stay at home

spouse annually based on the life expectancy of the stay at home spouse.

For example, if a married couple has $300,000 in non-exempt assets, the stay at home

spouse would retain $109,560 outright. The balance, $190,440 is transferred to a solely

for the benefit trust for the benefit of the stay at home spouse. Let’s assume that the stay

at home spouse is an 80 year old male: the Michigan Medicaid laws provide that based

on his age, the trust will pay out over 7.62 years, which equals $24,992 per year.

What additional assets can you keep if you are single?

If you are a single person who needs to become Medicaid eligible, you are faced with a

dilemma: You can keep your home, but, you only have $2,000 to maintain your home.

Where does the money come from to pay the property taxes, the home owners’ insurance,

the utilities, etc.? Fortunately, there is a way that you can gift approximately 50% of

your non-exempt assets and still become Medicaid eligible. This is accomplished by

purchasing a short-term Medicaid compliant annuity.

In simple terms, you can give away approximately one-half of your non-exempt assets,

and purchase a short-term Medicaid compliant annuity with the other half. The applicant

is Medicaid ineligible for the period of time that the annuity pays out. During this period

of ineligibility, the monthly annuity payment, social security payment, and pension (if

applicable) are used to pay the cost of the applicant’s nursing home care. Once the

annuity is fully paid out, then the applicant is Medicaid eligible. The approximately 50%

that is gifted (to a child or children, or whomever the applicant desires) can then be used

to cover the costs of maintaining the home, or anything else for which you want to use

the monies.

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(As with any of these informative articles, anyone who needs someone to talk to about

this very subject contact me and I can direct you to a knowledgeable advisor).

 



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