U.S. Government statistics show that over 70% of persons over age 65 will need some form of long term care in their lifetime and 40% of all persons over age 65 will spend some time in a nursing home. The average stay is 30 months (two and one half years.) In southeast Michigan a 30 month nursing home stay would typically cost over $360,000. Paying for long term care is typically done by paying with your own funds, with long term care insurance or by qualifying for a government entitlement known as Medicaid.
The rules to qualify for Medicaid constantly change and the changes make it more difficult to qualify. The firm regularly practices in this area and has done so for over 30 years. The firm helps families to obtain Medicaid coverage for either home care, the medical portion of assisted living care or nursing home care for their loved ones. Typically, qualifying for Medicaid involves gifting assets to a spouse and or children and converting excess assets to income.
Medicaid has different income rules for home care and nursing home care. To qualify for home care only the gross income of the individual needing care is counted. The current income cap is $2,742.00 and if the individual needing care has income in excess of this amount, they will not qualify for home care.
With married couples Medicaid has rules about home much assets may be kept for the spouse who is not in a nursing home (the community spouse). All countable assets (homestead is excluded) of both spouses are counted. The community spouse may keep one half of the couple’s countable assets up to a maximum of $148,620.00. If a married couple has assets below $250,000.00 and also has equity in their home the home should be in a Trust to increase the assets the community spouse may keep.
If a couple has assets excluding the family home in excess of $300,000.00 there will be a spend down required of all assets in excess of $148,640.00. However, there are a number of options to reduce the spend down depending on the couple’s situation.
There is no one size fits all planning option for everyone. Each planning option has a pro and a con to be evaluated depending on a particular family’s needs, goals, and asset composition.
In evaluating planning options many factors have to be considered including minimizing any income tax consequences. Gift taxes are usually irrelevant because of the lifetime gift tax exemption equivalent of eleven million dollars. Trusts may be used as a tool to hold gifted assets for any person who needs funds to be managed for them. Finally, a special type of deed known as a Lady Bird Deed is usually recommended so that the family home can escape a claim by the State of Michigan under the Medicaid probate estate recovery process.
As of 2023 something known as the rule of halves is still permissible. This allows a gift to children of approximately one half of a parent’s assets. The other half of the assets are retained by the parent, are converted into an income source and are used to pay the nursing home monthly until the Medicaid penalty period is over. Once the penalty period is over Medicaid pays the cost of the nursing home in excess of the patient’s monthly income.
If you are facing the unfortunate situation where your spouse or one of your parents are entering a nursing home or are already residing in a nursing home or need home care or assisted living care please call our office for a consultation.
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