Q: What is a “Miller Trust” or “Qualified Income Trust” and do I place my assets into such a trust?
A: Long-term Medicaid has income eligibility requirements (in addition to resource limits and other requirements) in certain states such as Texas (an “income cap” state). As of January 1, 2014, the income cap is $2163 per month. If an individual, who is applying for Medicaid, has income over the cap, then a “Miller Trust” can be created to place the income (not resources) to pass such eligibility requirement. “Miller Trusts” are also known as “qualified income trusts” or as “QITs”
Q: Will I, as the spouse that lives at home (the “community spouse”), be allowed to keep any of my spouse’s income if such spouse lives in a nursing home (the “institutionalized spouse”) and is on Medicaid?
A: It depends on the income of the respective spouses and what strategy is employed. If the income of the community spouse is greater than what is called the minimum monthly maintenance needs allowance (“MMMNA” is $2931 as of January 1, 2014), then there are limited situations when a court order can be obtained to divert income from his or her institutionalized spouse so that his or her income is above the MMMNA. If there is a “spend down” of countable resources, then there can be a diversion of income to the community spouse so that the community spouse has income up to the MMMNA. However, it is often best to not “spend down”, so this situation must be carefully reviewed with your experienced elder law attorney.
Q: If we get my loved one on long-term care Medicaid, are we going to lose the family home?
A: Under the Texas Medicaid Estate Recovery Program, the state has a right to make a claim against the probate estate of the Medicaid recipient to the extent that Medicaid benefits have been advanced if the Medicaid recipient applied for Medicaid on or after March 1, 2005. There are several exceptions to the rule (i.e., if there is a surviving spouse, if there is an unmarried adult child living in the home for one year prior to the death of the Medicaid recipient, etc.). Furthermore there are some Medicaid programs such as the Primary Home Care which are excluded from estate recovery. Presently, there are also several planning methods to avoid the claim of the state against the home (not to mention other non-countable resources such as a car and a business).
Q: Can I transfer or give away my assets to obtain long-term care Medicaid?
A: A transfer of assets can result in a penalty causing ineligibility for long-term care Medicaid. There are some exceptions to the rule (particularly with regard to disabled children). As a result of the Deficit Reduction Act of 2005 (“DRA”) signed by President Bush on February 8, 2006 (which was implemented in Texas on October 1, 2006), the rules regarding transfers for less than fair market value have changed for transfers that occur on or after February 8, 2006. Transfers for less than fair market value on or after February 8, 2006 are subject to a 5 year look-back period. For transfers on or after February 8, 2006, the transfer penalty period resulting in ineligibility for long-term care Medicaid starts from the date of application or from when one is otherwise eligible for long-term care Medicaid (unlike the pre-DRA rules where the transfer penalty starts from the 1st day of the month of the transfer for less than fair market value). Under DRA, the presumption is that any uncompensated transfer (even a gift to a charitable organization) within the 5 year look-back period was done for the purpose of obtaining Medicaid benefits. So, under DRA, if you made a gift to a charitable organization and 4 years later you had a stroke and applied for Medicaid, the presumption is that the gift 4 years earlier was for purposes of obtaining Medicaid and the period of ineligibility would start when such person applied (assuming it was within 5 years of the uncompensated transfer) and is otherwise eligible for long-term care Medicaid and not from when one made the transfer. Notwithstanding DRA, there are still planning strategies presently available for asset preservation – even for transfers within the 5 year look-back period. The transfer penalty (representing the average cost of a nursing home in Texas) is $156.34.
Q: Can’t I always transfer $10,000 to my children?
A: See above. The annual exclusion (which is now $14,000) is still subject to the Medicaid rules. So, the transfer could result in a transfer penalty – depending on when the uncompensated transfer was made and if there was an existing transfer penalty and if the transfer was to a disabled child.
Q: What are countable resources and non-countable resources?
A: Most assets that can be converted to cash are considered countable (such as the cash surrender value of life insurance policies, stocks, IRAs, mutual funds, bank accounts, etc.) and can be used for your support. They are considered in determining Medicaid eligibility. Excluded resources, such as the homestead, one car, pre-need funeral, a burial space, term life insurance, etc. are considered non-countable for Medicaid eligibility purposes.
Q: Do the accounts that I own jointly with someone else count toward my Medicaid eligibility?
A: It is assumed that the account all belongs to the applicant unless it could be proven otherwise.
Q: Do the assets of the community spouse count even if there is a prenuptial or postnuptial agreement?
Q: Is buying an annuity the best way to protect all of my resources?
A: It depends on the factual situation. With the rule change which became effective as of September 1, 2004, “Medicaid annuities” became more popular when there is an institutionalized spouse and a community spouse and their total non-countable resource income exceeds or is close to the MMMNA ($2931 as of January 1, 2014). For those who entered an institution prior to 9/1/04 it was rarely the best way to protect resources. Before one makes a decision one should consider all of the options. Be wary of anyone who advises this is the only option. Under DRA, there have been additional requirements in the use of this type of annuity.
Q. If a Medicaid recipient inherits can such person lose his or her Medicaid benefits?
A. Yes- so there should be planning which is often why some create Special Needs Trusts.
Q: Can the community spouse keep several hundred thousand dollars (if not more) and still get Medicaid eligibility for his or her spouse without having to change the nature of resources of the community spouse?
A: Depending on the income of the community spouse and other factors, often the answer is “Yes”.
Q. Can I give away my assets and obtain Veterans benefits (such as Aid & Attendance) if I have too much assets for eligibility (assuming all other qualifications are met)?
A. Yes. There is presently no look-back period or transfer penalty if you transfer assets prior to applying for such benefits at the present time. There are different ways of making transfers (I.E., trusts or just making a gift). There are a couple of Congressional bills creating a 3 year look-back so transfer planning may reduced if such laws are passed and different planning strategies are likely to result. Tax issues, changes in the VA rules and potential need in the future for Medicaid (since often more is saved for long-term care though the use of Medicaid especially if the applicant is likely to be in a nursing home within 5 years) should also be considered. Furthermore, there are some exceptions to the rule (i.e., gift can’t be to a member of same household, all rights in property must be relinquished, etc.).
Q. Is the surviving spouse of a wartime Veteran (not dishonorably discharged) sometimes eligible for such Veterans benefits?
A. Yes, assuming the surviving spouse was not divorced from the Veteran at the time of the Veteran’s death.
Q. Will the Veterans Administration try to recover against excluded assets such as a home or car after death if benefits are received?
A. No. This different than the Medicaid rules as explained above.
Q. Can I always keep $80,000 of assets and get VA pension benefits?
A. No. There is a determination whether or not the claimant’s financial resources are sufficient to meet his or her basic needs. Pension is based on need. Contrary to what most people have heard, there is no specific amount of money used to determine the level of assets that will disqualify them. Generally, the older the claimant, the less that will be needed to cover need for their lifespan (and thus less assets can be protected).
Q. What is the maximum monthly benefit for the improved pension program?
A. Single Veteran – $1758 (as of 1/1/14); married Veteran with one dependent – $2085 (as of 1/1/14); and surviving spouse of Veteran – $1130 (as of 1/1/14).