06 Mar Success Story Of The Month Medicaid’s Love It Or List It?
Sometimes there is a simple solution for asset preservation when applying for long-term care Medicaid – whether the applicant is either in a nursing home that accepts Medicaid or is living at home. If eligible for Medicaid, the government will help pay for those care costs.
FACTS: Married couple. Husband needs long-term care. They have no long-term care insurance and Medicare’s limited coverage has expired. The couple have insufficient income to pay for care (the average monthly cost of a skilled nursing facility care in Texas is over $7,000 a month and some facilities care cost over $10,000 a month). Their combined monthly Social Security and pension incomes exceed the limit to keep all assets without a spenddown to the maximum protected resource amount of $148,620, pursuant to the Medicaid rules for eligibility. Their home (which has a mortgage), car, personal property items (furniture, clothing, etc.) and the wife’s traditional IRA (she has started making required minimum distributions) are not countable under the long-term care Medicaid rules. The couple has $125,000 of countable cash resources and a rental property worth approximately $200,000 for a total of $325,000 of countable resources. There will not be eligibility for the government (through Medicaid) to help pay for the care at the nursing home or for paying caregivers to provide care at home until the couple’s countable resources are below the $148,620 (the maximum protected resource amount) as of the first day of the month after the “snapshot date” (the first day of the month of at least 30 days of continuous institutionalization if applying for Medicaid assistance at a nursing home). So, for example, if the husband entered a hospital on March 11th and then went to rehabilitation and then to a nursing home and never went home, the snapshot date is March 1st. In this case, if the couple’s countable resources were $325,000 on March 1 and were below $148,620 before April 1st, then there would be Medicaid eligibility as of April 1 which would result in saving the difference between the husband’s Social Security income (in this case, his income is $1,200 per month) and the monthly cost of the nursing home ($7,200 per month). So, there would be a $6,000 per month savings if there is eligibility under the Medicaid rules.
Pursuant to the Medicaid rules, real estate placed for sale is not a countable resource as long as there is a continuous attempt to sell the property. As a result, the couple merely listed the rental property for sale in March so there would be eligibility as of April 1 ($325,000 – $200,000 = $125,000 which is less than $148,620). However, what if the property is quickly sold? The proceeds would then need to be spent down to get below the $148,620 threshold before the first day of the succeeding month to retain eligibility. If that occurs, the cash proceeds would be used to pay off the mortgage on the couple’s homestead (which is not a countable resource), pay all credit card debt and take care of their funerals in advance of need (another non-countable resource). If there is still too much cash, the wife will buy a Medicaid compliant annuity since there is no limit to the income she could keep. She presently has $4,300 a month of Social Security income, pension income and income from her IRA (required minimum distributions). If the annuity paid her $5,000 a month, then she would be receiving $9,200 a month and she would be debt-free while saving $6,000 a month of care costs (plus drug coverage) as a result of Medicaid eligibility.
So, does the wife love the rental property so much that she would be paying privately for the cost of care, or does she list it for sale? In this case, she listed it. She simply went by Medicaid’s rules (just as others follow IRS rules to save on taxes).
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