This week I met with a client and had a conversation that I have had at least a thousand times (or it felt that way). The client (we will call her Jean) was power of attorney for her mother, who was a widow. Jean had just placed Mom in a nursing home. During the admission conversation the social worker told Jean, “Well, you will need to list the home for sale right away.” Questions about selling the home were on Jean’s list of things to discuss with me. Jean had made a call to a realtor who was coming out the next week to go through the home.
Sigh. Another case of bad information by the nursing home social worker. The truth is that a person does not have to sell his or her home to qualify for Medicaid. The home can be exempted from the Medicaid asset limit as long as the person “intends” to return home, even if that intent is only subjective, not realistic. Selling the home is often the OPPOSITE of what you should do, because if you spend down all other resources and still have the home, you can receive Medicaid. If you SELL the home, you need to spend the additional amount you received from the sale before you will qualify.
There are some practical concerns that come with a decision not to sell the home, such as how to pay for the ongoing expenses such as insurance. Those should be discussed with an experienced elder law attorney to come up with a plan.
It’s not Jean’s fault she was bamboozled by the nursing home social worker. When it comes to Medicaid eligibility, the biggest source of misinformation leading people to make bad financial decisions are the social workers in the nursing home or assisted living facility. The next worst are the Medicaid caseworkers themselves. Third in line are neighbors, family and friends. I don’t blame this third group and luckily, most people I meet with will relay the family /friend information with a hint of skepticism so they already know not to completely trust what their friends and family say. The sad thing is, most people DO trust nursing home social workers and, like Jean, have already taken steps down the wrong path before they get to our office. At least in Jean’s case I was able to tell her to put the realtor on hold until we had a handle on the situation.
It’s time to clear up some of the myths that I hear frequently from clients. Here is an excerpt from a handout that I give when I explain the Medicaid rules to laypeople at community presentations.
MEDICAID MYTHS And Practical Pointers
“Medicaid planning,” or getting help paying your family member’s nursing home costs or home-based long term care costs through the Medicaid program, is not a do-it-yourself project. Unfortunately, people are often steered in the wrong direction by friends, family members, social workers, medical personnel, or case workers. Here are some of the more common “Medicaid myths” that make the process so baffling.
MYTH: I have to use up everything I own to get Medicaid. In fact, you don’t have to be completely destitute to get Medicaid. For example, in most cases, you don’t have to sell the home. You can also keep some funds, personal items, a car, funds for burial, business assets, and some life insurance. In cases involving a married couple where only one spouse needs care, the assets that can be kept are even more generous. It is also sometimes a myth when nursing homes tell a married couple that you must spend down to $50,000.
MYTH: I have to sell my home to qualify for Medicaid, or, the State will take my home if I apply for Medicaid. As explained above, you do not have to sell your home to get Medicaid. In most cases, the home is not counted as an asset as long as you live in it, or if you intend to return home (even if this intent is not reasonable from a practical standpoint). And, it is not true that the state will “swoop in” and take your home away from you once you are on Medicaid. The state does not take your home while you are alive, even if you no longer live there.
MYTH: If I give away assets to family or friends, I won’t ever qualify for Medicaid. It is true that some transfers of assets disqualify you from getting Medicaid for a period of time, and this area is something to be extremely careful about. The value of the assets and the timing of the gifts determines how long you will be disqualified. However, certain transfers will not disqualify you. Sometimes it depends on who receives the assets; other times, it depends on the type of property you are transferring. For instance, you typically will not be penalized for transferring property to your spouse. If you are single, you can even transfer your house to your child if that child has cared for you and lived with you in that home for two years or more. The point is, not all transfers cause problems with getting Medicaid — ask an experienced elder law attorney what rules apply.
MYTH: I have to wait five years after giving anything away in order to be eligible to get Medicaid. Medicaid rules do penalize some transfers of property, and the Medicaid agency will ask if asset transfers were made within the past five years. The government does not want people “planning to be poor.” But the length of time you have to wait to be eligible isn’t always five years. It depends on five things:
- First, was this the kind of transfer that’s penalized? (See above).
- Second, when was the transfer?
- Third, what was the value of what was transferred?
- Fourth, what is the formula for calculating the penalty period? Wisconsin figures out how much it costs, on average, to pay for a day of nursing home care. They then divide that figure into the value of the asset that was given away in order to come up with the penalty period.
- Fifth, even if the transfer would otherwise cause a penalty, are there any exceptions to the rule that apply to this situation?
That being said, it is important to remember that under current laws, this penalty will not start until you are in a nursing home and otherwise eligible for Medicaid, and apply. This means that if you do receive a divestment penalty, it will be imposed at the time where you are already ill, and probably unable to financially afford your care during the penalty period. And this could mean that you are actually going longer than five years before you are eligible for Medicaid. So under the current law, in many cases you might want to wait five years after making gifts, before you apply. It is particularly important to talk with someone who knows the ins and outs of this law before you take any action regarding gifts.
MYTH: I can keep all our marital property and my inherited property when my spouse gets Medicaid. Medicaid rules generally consider all the assets in either spouse’s name when one spouse enters a nursing home. However, there are certain property protections for the at-home spouse. Those protections are based on a percentage of the couple’s “countable assets,” which generally consist of savings and investments, real estate and things like excess life insurance. In Wisconsin the range for 2018 is between $50,000 and $125,600. There are also other rules that will completely exclude certain property, such as the retirement assets of the at-home spouse. It is important to remember that with careful planning, the amount an at-home spouse can keep can be maximized.
MYTH: If I put my property in my spouse’s name, I will be eligible for Medicaid. No. See above.
MYTH: I can “protect assets” by giving them to my kids who will pay for my care if I need it. This is, in my opinion, the biggest myth of all. Unfortunately, many lawyers who do Medicaid planning, even good lawyers, also promote this myth. The hard truth is that giving assets away does not “protect” them. It gives them away. They are no longer yours. No matter how trustworthy your kids may be, when the assets are in their hands, those assets are subject to any misfortune that may befall your children such as divorce, accident, or their own unexpected disability. While there is some asset transfer planning that may be appropriate based on your wealth, life priorities, preferences, and risk tolerance; and while that planning could involve making gifts to your children if you choose to do so after weighing all the options and consequences, you must always understand that a gift is a gift.
MYTH: Medicaid rules that applied to my neighbor when he went into a nursing home will also apply to me. This area of the law has changed quite a bit in the last few years, so don’t assume the rules that applied to your neighbor are still in effect. For example, under federal Medicaid law, there’s no longer a three-year look back period for transfers of assets. As of 1/1/09 in Wisconsin, it is five years.
MYTH: If I enter a nursing home as a private pay resident, in order to use up my assets before I can get Medicaid, I can only “spend down” my assets on medical or nursing home bills. This is wrong for several reasons. First, you are allowed to keep certain limited property, as we discussed earlier. Second, you may be able to protect some of your assets — by buying certain non-countable assets or by making certain transfers to family members, for example. Federal law prohibits nursing homes from telling you this myth if the facility is Medicaid certified. Unfortunately, some nursing homes try to force people to stay as private pay, since the rate is usually higher than Medicaid reimbursement rates. A nursing home CANNOT prevent you from applying for Medicaid if you are financially eligible.
MYTH: My power-of-attorney agent automatically has the power to take property out of my name, if I ever need Medicaid. Wisconsin requires that you explicitly include a “gifting power” for your agent in your financial power of attorney document, in order for your agent to be able to retitle your property. If you want your agent to be able to transfer assets to provide more for your spouse and/or children, in particular, you should say so in your power of attorney.
MYTH: I can only give away $15,000 per year under Medicaid rules. This is a double myth! This refers to a federal gift tax rule that has nothing to do with Medicaid law. We’re talking apples and oranges here! A gift of $15,000 per year will probably trigger a Medicaid penalty, unless an exception applies.
Remember, these are all myths. And keep in mind that the answers given above are general rules. Consult an experienced attorney to determine how the Medicaid rules apply to your situation.
- Money is good: the more funds you have, the more options you have in terms of your care.
- Read the Contract: Make sure to carefully read any admissions contract to a long term care facility. Even though the nursing home cannot prevent you from applying for Medicaid when you are financially eligible, more and more often there are other clauses that could create potential liability if you or your agent do not read them carefully. Have a lawyer review the contract.
- Do not tell a nursing home social worker or Medicaid caseworker that the person applying for Medicaid does not intend to return home. Remember that the exemption of the homestead only applies if the individual intends to return home, no matter how unrealistic that is. In almost 30 years of practicing elder law, I have only met a handful of people who truly did not ever want to return to their home. Most people do. So, that seemingly offhand question from the nursing home social worker or Medicaid caseworker “She’s not going home again is she?” should be responded to carefully, with a clarification that the resident intends to go home even if it might not be realistic.
- Don’t always believe the nursing home social worker or county economic support worker. Now, this is not meant to disparage these well meaning people. They may want to help you through the process of becoming eligible for benefits. However, as an elder law attorney I see more clients who have been steered in the wrong direction by social workers and case workers, than any other set of people. These people do not fully understand the law, and are not motivated to make sure that you save the most assets you can save, or that you spend your money in places other than their facility.
- See a qualified lawyer: if you choose to get legal advice, make sure the attorney is an elder law attorney who practices regularly in Medicaid law. A general practitioner or your long term estate planning attorney, while good at what they do, may not know the ins and outs of the Medicaid law.
- IF YOU ARE A VETERAN or the widow/widower of a veteran, there is another program that might help with long term care costs: This is a program that is called “Aid and Attendance” and it is not well-known. It is important to get good information on the differences between Medicaid and Aid & Attendance, so that you can plan well.