by Kerry L. Peabody, CSA, CLTC, a Long Term Care Insurance Specialist with Clark Insurance
“I don’t want the state to take everything I have.” I often hear this when I begin discussing Medicaid with my clients. Medicaid is a good program, but it’s designed to help people who have very limited assets. If you’ve managed to build a decent nest egg, and you don’t want to be forced to spend it to qualify for Medicaid, then there may be better options. Let’s discuss “I don’t want the state to take everything.”
(Remember, I’m NOT an attorney, so I’m not qualified to give legal advice. I’m simply providing some very basic interpretations of generally accepted guidelines here. Consult a qualified professional for legal advice on this topic.)
So, let’s say you’ve worked for the past 40 years, and now you’ve retired. You’ve managed to pay off your mortgage, you’ve got a decent car, and you have $400,000 in retirement savings. But, your husband just had a stroke, and you want to get some help to pay the nursing home bill, so you apply for Medicaid benefits for him.
The state will say something like this: “Gee, Mary, we’d love to help, but first we need to take a look at your assets, to see if you qualify financially.” So, you provide all of your financial documentation for them to review. In general, they’re going to let you keep:
1) your primary home
2) your primary vehicle
3) $110,000 for a couple. A single person can keep about $2,000.
But you have more than that, right? Don’t panic (yet), they’re not going to take the extra stuff or money you have when you apply. But… they won’t provide you with any financial help while you still have it.
This is where “spend down” comes in. If you have a camp on the lake, a vacation home, the RV, or that extra retirement money, then you’ll have to get rid of them and spend the excess money. The “cash” you can keep would be capped at the $110,000. So, if you end up with $400,000 in “excess,” you’ll have to “spend down” $290,000 of that before you’d qualify financially.
This is where people generally say “Well, I’ll just give it to the kids.” Nice try. The state will “look back” five years from the date you apply for help, and they’ll want to see everything you did with your money that counts as a “transfer.” This is giving anything away, selling it for less than fair market value, paying for something for someone else, etc.
So, if you gave your grandson $50,000 for college, that counts against you. If you’ve been “gifting” $13,000 per year to your children, that counts against you. If you sign the camp over to the kids, or put everything into an irrevocable trust within the last five years, that all counts against you, and makes you ineligible for a certain period of time.
Let’s face it – the state doesn’t want your house, or your car, your clothes, your dog, or anything else. People seem to have this impression that someone from the state is going to kick down the front door and start carrying out your furniture if you apply for Medicaid, but that’s not so. What the state will do is refuse to help you financially while you still have assets above and beyond what they say you can keep. You’ll be forced to “spend down” to acceptable levels before you can get any help. The questions then become “Is this really what I wanted to do with my money, and what will this mean for my spouse and family?” This is why you need to plan ahead, before you find yourself in a crisis.
How do you plan ahead? That’s for the next installment! Thanks!
Kerry Peabody, CSA, CLTC