As we have discussed many times in the past, Medicaid planning is often critical to the financial survival of seniors. With nursing home expenses exceeding on average $6,800 per month, many families would be broke within 12 months or less. Fortunately with effective planning, medicaid qualification can be achieved long before a person becomes destitute.
Once a person becomes eligible for Medicaid benefits however, the planning isn’t over. Every 12 months Medicaid recipient must reapply for Medicaid. This is called Medicaid redetermination. Typically, this involves providing proof of current income and verification that the person’s countable assets do not exceed $2,000. In addition, post-Medicaid approval planning must include planning for when the Medicaid recipient passes away.
Many Medicaid recipients have a home, car, life insurance and one or more bank accounts. Without proper planning after Medicaid benefits are approved, there assets could be tied up in probate court following the owner’s death. Also, when Michigan implements its estate recovery law, these assets could also be claimed by the state.
For married couples, the need for post-Medicaid approval planning is often greater. If the community spouse unexpectedly dies before the nursing home spouse and proper planning has not been implemented, the nursing home spouse could risk becoming ineligible for Medicaid benefits and risk losing all of their life savings. For example, let’s assume that George and Kathy Smith have a modest estate consisting of a home, 1 care, prepaid funeral contracts, and $80,000 in checking and savings accounts. After Kathy is admitted to a nursing home due to her advanced dementia, George hires an elder law attorney to assist him in qualifying Kathy for Medicaid benefits. Unexpectedly, 6 months after Kathy is approved for Medicaid, George suffers a fatal heart attack. If no post-Medicaid approval planning has occurred, Kathy will now be ineligible for further Medicaid benefits because her countable assets are well above the $2,000 limit for single persons. Additionally, she will be the sole owner of a home and car that she can no longer use.
There are several important steps that are often critical after Medicaid benefits are approved. These may include:
a. Establishing a trust for the community spouse.
b. Changing life insurance and IRA beneficiaries.
c. Drafting a life estate deed for the home.
d. Naming children as T.O.D. beneficiaries of bank and investment accounts.
e. Removing the Medicaid recipients name from bank accounts.
Every situation is unique and the planning must be tailored to fit the person’s needs. As is often the case, it is best to consult with an experienced elder law attorney.