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, 2023, the income cap is $2,742 per month. If an individual, who is applying for Medicaid, has income over the cap, then a Qualified Income Trust can be created to place the income (not resources) to pass such eligibility requirement. Qualified Income Trusts are also known as “QITs” or “Miller Trusts.”
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 $3,715.50 as of January 1, 2023), 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.
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, if there is a Ladybird deed or Transfer on Death deed, or if there is a beneficiary designation on a vehicle, etc.). Furthermore, there are some Medicaid programs such as the Community Attendant Services and Qualified Medicare Beneficiary (QMB) 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).
Transferring 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 and from when one is otherwise eligible for long-term care Medicaid. 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. The applicant would need to rebut the presumption by claiming it was done for a purpose other than for purposes of qualifying for Medicaid. 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 divisor (representing the average daily cost of a nursing home in Texas) is $242.13.
See above. The annual gift tax exclusion ($17,000 per person in year 2023) under Internal Revenue Code Provisions is still subject to the Medicaid transfer penalty 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 or under some other exception to the transfer penalty rules.
Most assets that can be converted to cash are considered countable (such as the cash surrender value of life insurance policies if the face value of the policy exceeds $1,500, stocks, mutual funds, bank accounts, deferred annuities, etc.) and can be used for your support. Such resources are considered in determining Medicaid eligibility. Excluded (non-countable) resources, for Medicaid eligibility include, but are not limited to, the homestead; one car; pre-need funeral; a burial space for the applicant and family members; term life insurance; personal property items; traditional IRAs and making minimum required distributions (RMDs); or IRA where no RMD is required (i.e. Roth or under the age for RMD) if the investment within the IRA is an annuity; a business essential for self-support; or certain mineral interests if limited value, etc.
It is assumed that the account all belongs to the applicant unless it could be proven otherwise.
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 ($3,715.50 as of January 1, 2022). 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.
Yes, so there should be planning which is often why some create Special Needs Trusts within a will. It should also be noted that Texas permits reformation of Wills if public benefits of the beneficiary are jeopardized as a result of the inheritance.
Depending on the income of the community spouse and other factors, often the answer is “Yes”.