What happens to your assets if you or your spouse need to go into a nursing home?

| Written by Wendy A. Mara, J.D., M.B.A |
Long-term care planning is key to protecting your assets should you or your spouse need to go into a nursing home.  In Florida, the Department of Children and Families (“DCF”) determines your eligibility for Medicaid Long Term Care (“Medicaid LTC”).  DCF looks at two separate things: your income and your assets.  The applicant would need to qualify both under the income limit requirements and under the asset limit requirements in order to qualify for Medicaid LTC.  If the applicant does not qualify, the applicant would need to engage in Medicaid LTC Planning in order to qualify for Medicaid LTC.
With respect to income, the applicant’s income must be under $2,349.00 per month (for 2020).  Income for a spouse (called Community Spouse) can be unlimited.  If the Community Spouse has no income or little income and is in need of support from the applicant, the Community Spouse may qualify for a Spousal Diversion whereby some of the applicant’s income is “diverted” to the Community Spouse.  The Community Spousal Allowance minimum for 2020 is $2,155.00, but the Community Spouse may qualify for up to $3,216.00 under certain circumstances.
If income for the applicant is over the income level allowed, the applicant may have a Qualified Income Trust (called QIT) created to deal with this overage.  It is important to note that an applicant is allowed to keep $130 per month as a personal needs allowance as well as the cost of Medicare Part B. In addition, the Community Spousal Diversion may be deducted if that applies.   All other income of the applicant must be paid to the nursing home.  Medicaid LTC picks up the difference between the cost of the nursing home care and the remaining income after the allowable expenses and the Spousal Diversion.
With respect to asset limits, assets for an applicant can’t be more than $2,000.00 (not including non-countable assets such as the homestead, vehicle, irrevocable funeral contract, designated funeral   account, and other non-countable assets or assets treated as income for Medicaid LTC qualifying purposes).  The Community Spouse may have no more than $128,640.00 in assets (for 2020). Oftentimes, assets are transferred to the Community Spouse to allow the applicant to qualify.  However, what happens if the assets are greater than the allowed limit for the Community Spouse?   We have many tools in the state of Florida that we can use to protect your assets.  If you do your Medicaid planning enough in advance, we typically have more options for protecting assets.
With Medicaid LTC qualification, there is a five year look back period for Medicaid Asset Protection strategies. What that means is if you use gifting or trust strategies for reducing your assets in order to qualify for Medicaid LTC, DCF can look back 5 years for any gifting or transfers to trusts.  Any gifts or transfers made beyond that 5 year look back period are not countable assets for qualification purposes.  Any gifts made during that 5 year look back period are countable assets and may cause you to either have to ask for the gift back or transfer the asset back into your name.  Otherwise, DCF will assess a penalty period during which you will need to pay for Long Term Care privately before Medicaid kicks in.
The tool that attorneys use frequently for Proactive Medicaid LTC Planning is the use of Medicaid Asset Protection Trusts (“MAPT”).  If the MAPT is created and funded five years or more before you need Medicaid LTC, the assets placed in the MAPT are not countable.  However, it is very important that you have a MAPT created by an attorney experienced in Medicaid planning as the Medicaid rules for Long Term Care are complicated.
If you don’t plan proactively for Medicaid LTC, then you would need to do what is commonly called Crisis Planning for Medicaid LTC.  Crisis Planning is a better option than doing no planning at all, but you may not be able to protect as many assets as you can protect if you had done Proactive Medicaid Planning.  With Crisis Planning, the attorney will help you choose from a variety of strategies including but not limited to spending down assets, purchasing an irrevocable funeral trust, and creating a Personal Services Contract.  Each of these options have their own benefits and drawbacks, so it is important to consult with a Medicaid Planning Attorney to come up with the best options.  Bottom line, if you want to protect your assets in the event you need skilled nursing home care in the future, contact an attorney to begin your planning for Medicaid LTC now!