Long term care Medicaid helps pay for long-term care costs such as nursing home care and drug costs.  The average cost of care in Texas (exclusive of drug costs) is $6500 per month and most Americans have inadequate income or long-term care insurance to pay for the cost of care.  Some believe (in error) that Medicare will take care of such expenses.  Although Medicare has limited coverage for long-term care (up to 100 days after a 3 day hospitalization stay),  Medicaid will help pay for such expenses if you are eligible under its means-tested rules.  

One of the means-tested long-term care Medicaid rules is that if you are married and the combined non-countable resource income (typically Social Security income, pension income, annuity income if annuitized or required minimum distribution income from a traditional IRA) exceeds $3,216.50 per month (this amount changes each year), then the countable resources must be down to ½ of the countable resources as of the “snapshot date” (the first day of the month of hospitalization or institutionalization in a nursing home) not to exceed $128,640 (which also changes annually).  Common non-countable include a homestead, car, pre-need funeral, personal property items and traditional IRA’s if required minimum distributions are being made.

In our success story, the married couple had countable resources of approximately $200,000.  They also had a home, traditional IRAs (with required minimum distributions being made), an automobile and personal property items that did not count.  Since the combined non-countable resource income of the married couple exceeded the spousal minimum monthly needs allowance of  $3,216.50, the couple needed to get below $100,000 (1/2 of the $200,000 owned as of the snapshot date when the wife went into the hospital) before Medicaid would help pay for her care costs as she is now in a nursing home that accepts Medicaid.  As you can see form this example, the protected resource amount is $100,000 (not $128,640) since the rules provide only ½ of the snapshot limit is protected. A good portion of the countable resources was a Roth IRA (which counts as a resource since no required minimum distributions are made from a Roth).  

However, a Roth IRA could be non-countable under Texas Medicaid rules if invested in any form of an annuity. In our case, the Roth was not invested in an annuity as of the snapshot date and the brokerage house holding the Roth would not let the client invest in any type of annuity within the retirement account.  So, we had the client transfer the Roth IRA to another financial advisor who purchased a variable annuity within the Roth. The client also made a few repairs to their home (since cash counts as a resource and a homestead is exempt). The client also took care of the funeral needs in the month of June so eligibility could be obtained as of July 1st (Medicaid looks at countable resources as of the first day of each month at 12:01 AM).  Since the Roth IRA was a substantial portion of the amount of the countable resources and since an annuity within a Roth is a non-countable resource as of the first day the month succeeding purchase of the annuity, the client had an almost spend-less, spend-down (especially since Medicare covers up to 100 days of care if there is a 3 day hospitalization stay).  The wife’s income is less than $1,000 per month (the husband’s income alone exceeds $3,216.50 per month and he is able to keep all of his income per the rules) and that would be her co-payment for her cost of care under the Medicaid rules. Since the cost of care at the facility (exclusive of drugs) would otherwise be approximately $6500 per month, the client saved over $5500 per month in care costs plus the cost of her drug costs. Furthermore, since they paid for July and August in advance as part of the spend-down in June, they are even getting a refund for the amount in excess of her co-pay for those months. 

If you would like to know more, attend one of our free upcoming virtual Estate Planning Essentials workshops by clicking here or calling 214-720-0102.  We make it simple to attend and it is without obligation.

We would like to invite you to join our Alzheimer’s walk team, Michael’s Marchers, on October 23, 2020, to raise funds for the benefit of the Alzheimer’s Association to help find a cure for this terrible disease. Unlike prior years of a mass gathering, the Walk will be virtual where you can virtually walk with a small group or individually from any location. This will be a unique experience! Please join our Walk team (whether you contribute or not) by clicking here.

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