Mon, 27 April 2009
Mary and Joe own their home and have $150,000 in savings. They have wills leaving everything to each other and then alternatively to their children, but they have done nothing to address their long term care needs. Joe is now about to enter a nursing home and Mary is faced with spending down to $75,000 and losing Joe’s income before he will be eligible for Medicaid. A classic crisis planning case. Does Mary have any options?
Actually, yes. While she will have to spend down there are ways to spend that will be more beneficial for Mary. Let’s go through a list of some of them. At the top of the list is setting up an irrevocable burial fund to pay for both of their funerals. Better to do that now. Otherwise she’ll have to take that expense out of what Medicaid says she can keep. Other strategies focus on exempt assets, the house and a car. Mary will keep the house and one car. Of the $75,000 that she has to spend down she could fix up the house. That might include replacing an old cooling or heating system, installing new windows and/or siding and remodeling the interior. If she makes improvements that enhance the value of the home should she decide to sell that will result in more money for her to live on.
How about her car? Mary has a 10 year old car. It is better for her to purchase a new car as part of the spend down. Or perhaps she has a car loan that she is paying off over time. Paying it off before applying for Medicaid may be the better alternative. That applies for other debt, such as credit cards or other installment loans. Finally, Mary ought to look at anticipated expenses. For example, if she or Joe needs dental work now may be the time to do it.
Some of the spend down will need to go to the nursing home to pay for the cost of care at its private pay rate so it is important to determine what amount will be necessary to get Joe into a quality facility. Knowing that, they can then work backwards to determine what they have left to spend on the other items. Additionally, if Joe is not yet in the hospital or nursing home it may be possible for Mary to keep more than $75,000 by taking a home equity line of credit (more on that in next week’s post).
A word of caution, however. One size does not fit all. What is best for one person may not be right for another. Medicaid rules are very complicated and quite technical. Before taking any action it is best to consult with an elder law attorney well versed in Medicaid law. But, if done properly, Mary can preserve more than the 50% of assets that Medicaid laws say she can keep. This is especially important, given the possibility that Mary may outlive Joe by 5 or 10 years or more.
Category:Medicaid -- posted at: 6:00am EDT