While preparing for long term care need to preferably occur years before entering a retirement home, this is not always possible or perhaps thought about until it is too late. The following post, however, lays out a number of methods that are readily available for individuals with “a foot in the door” of an assisted living home with regard to their offered assets.
1. Under a plan frequently known as the “Reverse Guideline of Halves”, a private getting in an assisted living home can transfer all of his assets (over and above the Medicaid resource allowance ($13,800.00 in 2011) to his beneficiaries, and then make an application for Medicaid – knowing that the application will be rejected because he has actually moved properties. He will then be disqualified for Medicaid for an amount of time equivalent to the total possessions transferred divided by the average monthly cost of an assisted living home. On Long Island in 2011 that’s $11,445.00 each month. The successors to whom he moved his possessions must then execute a promissory note to him, accepting repay, in regular monthly installments an amount equivalent to about half of the total properties moved, plus interest at a “reasonable” rate (which the Department of Social Provider says is 5%.)
The nursing house will then be paid the institutionalized person’s monthly income plus the regular monthly payments on the promissory note until the period of ineligibility ends. If, for example, an individual with $200,000 in possessions requires retirement home care, under the Reverse Rule of Halves, he will have to invest half of his possessions on retirement home care prior to ending up being eligible for Medicaid – just as under the old Guideline of Halves. However instead of simply transfer half of his properties as previously, he would move the entire $200,000 to his successor, who would sign a promissory note to him pledging to repay $100,000, plus interest at 5%. He would then be disqualified for Medicaid for approximately 10 months: $100,000 (or half of the properties transferred) divided by the Medicaid divisor ($11,445.00). If he had $1,000 monthly in income, that $1,000 (less a little individual allowance) would be paid to the retirement home, and the balance of the retirement home expenses would be paid from the beneficiary’s month-to-month payment under the promissory note. Those payments would continue up until the period of ineligibility expires at which time Medicaid will be approved.
The promissory note need to meet specific criteria. The payment should be actuarially sound, indicating the monthly payments should suffice that the loan can be paid back during the institutionalized individual’s life span. Likewise, the payments need to be made in equal amounts with no deferral and no balloon payment. The promissory note also should prohibit the cancellation of the balance on the death of the lending institution. Lastly, the note should be non-negotiable, otherwise it may be figured out that the note itself has a value, which could make the applicant ineligible.
2. Nonexempt assets under Medicaid can be converted to exempt possessions. For instance, the community partner can buy a bigger individual home or include capital enhancements to an existing house. This method nonexempt cash would be transformed into an exempt residence.
3. An immediate annuity that is irreversible and non-assignable, having no cash or surrender value (i.e., permitting no withdrawals of principal) can be purchased with excess money. The annuity agreement must supply a regular monthly earnings for a period no longer than the actuarial life expectancy of the annuitant-owner. In the occasion the annuitant dies prior to the end of the annuity payout duration, the policy’s follower beneficiary would receive the remaining installments. This method can convert a nonexempt excess property into an earnings stream that goes through the more liberal income rules of what the neighborhood spouse can keep under Medicaid. An annuity with a term surpassing the annuitant’s life span might be considered a transfer affecting Medicaid eligibility.
4. Liquid resources ought to be used to settle consumer debts and prepay burial plots and funeral expenses (including a household crypt), hence investing down excess money in an appropriate fashion.
5. Kids can be made up for documented family and care services as long as the quantity is reasonable. An independent price quote needs to be obtained prior to determining the amount of reimbursement and the family should have a written arrangement with the relative providing care. This is more frequently called a “Caregiver Agreement”.
6. All joint and individual properties that are in the name of the institutionalized partner ought to be moved to the community spouse. In 2011 the maximum Community Partner Resource Allowance (“CSRA”) is $109,560.00. After such transfers, possession protection planning can be carried out for the community partner).
7. Under the Medicaid transfer rules, certain transfers are exempt. The transfer of a home is exempt if the transfer is to a spouse, a minor (under 21), or a blind or handicapped child, a bro or sis with an equity interest in the house who lived in home one year prior to institutionalization, or a boy or child who lived in home 2 years and provided care so as to keep the individual from ending up being institutionalized.
Certain other transfers of any resource might likewise be exempt.