Often the need for long term care in a skilled nursing facility (SNF) is unexpected and immediate. People tend to underestimate the cost of long-term medical care without qualifying for a Medicaid program. They incorrectly assume they have sufficient assets or insurance to pay for long term care, but when the time comes, their assets have decreased or they find that their insurance benefits are inadequate. They then find themselves seeking an elder law attorney in a Medicaid crises situation. It is too late for advanced Medicaid planning techniques, as any asset transfers will occur within the five-year penalty period. What can be done under these circumstances? Here are six suggestions for last-minute Medicaid planning options.
- Spending down assets as quickly as reasonably possible. There is no Medicaid penalty for spending money on activities such as travel and entertainment. Spending money on personal care items that will make life more comfortable in an assisted living facility, such as televisions, computers, and audio equipment for the applicant’s use, is also permissible. Since furniture and other personal property are Medicaid exempt assets, the applicant can buy new furniture for the home, or he could buy himself comfortable furniture to move with him into the managed care facility. Money spent for professional fees to assist last-minute planning is usually money well spent and part of asset reduction.
- Pay off all current debts including credit cards and medical bills. The applicant can use funds to reduce, if not pay off, the mortgage on his homestead, credit card debt, and medical bills. Paying debt is not a transfer subject to benefit penalties. Make sure that you are paying current debt obligations as money used to prepay a debt that has not accrued could be considered an available resource or a penalized transfer.
- Purchase exempt assets. Purchases should first include burial plots and funeral contracts because these expenses otherwise will have to be paid by other family members. The applicant may use significant amounts of money to purchase a new car as there is no dollar limit on Medicaid’s vehicle exemption. Often a new van that is wheelchair accessible is a wise purchase in any event. The community spouse may be allowed to keep the existing car if its old enough.
- Home improvements make sense. The applicant can use funds at any time to repair or improve their principal residence so long as the applicant would otherwise qualify for Medicaid homestead exemption. Some homestead investments add value such as substantially remodeling the primary rooms including the kitchen, master bath, and master bedroom. Spending available assets on home improvement has multiple benefits: it protects money for Medicaid purposes, enhances the applicant’s homestead if he returns to live there, and increases the value passed on to his heirs.
- Invest in income producing rental property. Substantial funds can be spent down with large down payments for rental property. The asset is exempt if the rental income is used to support the applicant, although the amount of income is counted for purposes of determining the applicant’s income eligibility. The purchase of property is not a transfer subject to penalty because the payment is to an unrelated third party in consideration for the receipt of an asset of equivalent value.
- Spousal transfers coupled with a “just say no” notice. An applicant may convey unlimited assets to his spouse at any time prior to application, and then the spouse may subsequently decline to apply those assets for the care of the applicant during their residency in a nursing facility. Even though the Medicaid applicant’s home is exempt up to $560,000 equity, a married applicant should consider transferring the home to a community spouse. The community spouse gets control over the home and can sell it after the applicant becomes eligible for Medicaid. The community spouse’s estate plan should then be changed so that if they predecease the applicant spouse, the home would pass to the children directly rather than to the institutionalized spouse.