Medicaid crisis planning is where a patient is currently in a nursing home or will be placed in the nursing home in the near future. Additionally, a home-bound patient who currently needs non-medical home care not covered by Medicare is also considered to be in crisis and in need of planning.
Because of Medicaid’s 5-year lookback on the transfers of assets, most people think it’s too late to protect assets from the spenddown – BUT IT’S NOT TOO LATE!!! We handle a significant amount of crisis planning and can typically protect from 50-100% of the assets of the estate from the spenddown even after a person has entered the nursing home.
Plans vary depending on the circumstances. For married couples, the asset-to-income rule will allow for excess assets to be converted into an income stream for the healthy spouse through a special type of Medicaid-compliant annuity. Because the healthy spouse’s income doesn’t have to be contributed towards the cost of care, this can protect the assets that would have otherwise had to be spent on the nursing home patient’s care.
For single patients, we can help implement an asset protection plan with a version of the Modern Half-a-Loaf which was approved by the Federal Court of Appeals as a viable planning technique in 2015. This involves transferring roughly half of the assets to a person or an Asset Protection Trust and half of the assets to a Medicaid-compliant annuity, then applying for Medicaid.
Because the transfer is within the lookback period, it triggers a divestment penalty when the Medicaid application is filed. A divestment penalty is merely a period of time where the patient is ineligible for Medicaid payments. That’s where the short-term annuity comes into play. The term on the annuity is set to match the term of the penalty period. If the patient is ineligible for 10 months, the then annuity is set to pay out for a term of 10 months. The monthly payments coincide with the months the patient is ineligible, so that the patient has the income needed during the penalty period to pay for care.
If your loved one has suffered from a stroke or Alzheimer’s-related dementia that causes them to need skilled nursing care, our team can help you protect assets from the spenddown even if you’ve already started spending down your assets. To get help with protecting assets during a medical crisis that leads to a long-term care stay, click here.