‘Will Medicaid be able to take the money from her bank account?’
Dear Quentin,
I am my mother’s caregiver. She is 93. Four years ago she added my name to her checking and savings accounts and added me as the beneficiary on her pension and IRA. If, by chance, she has to go into a nursing home, will Medicaid be able to take the money from her bank account and other assets, given that my name is on her accounts? I’m eager to protect her money and my inheritance.
The Daughter
Dear Daughter,
You would need to be a magician to make your mother’s assets disappear.
No, your mother won’t qualify for Medicaid. And, no again, it’s likely too late to protect her assets from the five-year look-back rule, even if you did manage to put her property and other assets beyond Medicaid’s reach. She would need to live until she was at least 98 and, even then, you would have your work cut out. At 93 with an IRA, a pension, a home and savings, it would be a near-impossible task for your mother to qualify.
Medicaid is not designed to protect your inheritance. And second, adding your name to your mother’s accounts will not automatically qualify her for Medicaid. Your mother may be 93, but the costs could be substantial if she needed nursing-home care and lived for another five years. The cost of a nursing home can vary wildly, depending on the facility, whether she has a private room and, crucially, the location. In a metropolitan area, it could cost $6,000 to $10,000 — or more — per month.
Medicaid is not designed to protect your inheritance.
Your mother would have to put her assets in an irrevocable trust and transfer whatever remains to you entirely. Adding your name to her accounts merely makes you a co-owner. What’s more, there is a five-year Medicaid look-back period for the program to review whether an individual divested themselves of assets in order to qualify for benefits; that would be a challenge at age 93. To be eligible for Medicaid, she must have no more than $2,000 in countable assets, which includes bank accounts and investments, and no more than $2,829 a month in income. But this can vary by state.
The Jarvis Law Firm in Lancaster, Ohio, lists seven deadly sins for people planning to avail of Medicaid: 1) Waiting until care is urgently required leaves little time to protect assets. 2) Gifting above the tax exemption limit or transferring property without understanding Medicaid rules can trigger penalties. 3) Failing to avail of available exemptions. 4) Bad record keeping. 5) Acting on non-professional advice. 6) Failing to understand that Medicaid rules and penalty divisors vary by state, leading to incorrect assumptions. 7) Overlooking irrevocable trusts or other legal tools.
Options for elderly people
There are options for other readers with elderly parents. A Medicaid Asset Protection Trust or a special-needs trust could protect a parent’s assets if she wished to apply for Medicaid, as long as this is done before the five-year look-back period. These trusts can be complicated, and Medicaid can challenge them. They can include stocks and bonds, bank accounts and CDs, and vacation homes and rental properties. With a MAPT, the parent would give up control of those assets. (For others, transferring assets before the age of 65 could result in a Medicaid penalty.)
“MAPTs allow individuals to transfer assets out of their estate, effectively removing them from Medicaid’s asset limit calculation after a designated period, typically five years under the Medicaid lookback rule,” says Donohue, O’Connell & Riley, a law firm with offices in New York state. “By establishing a MAPT, individuals retain a degree of control over their assets, such as deciding on investment strategies or how funds are distributed among beneficiaries. This strategy ensures compliance with Medicaid guidelines.”
‘Lady-bird deeds’ and annuities
Any actions for self-impoverishment would be frowned upon by Medicaid. If a parent made monetary gifts to a child within the current IRS guidelines, for example, Medicaid could apply a penalty comprising a period of ineligibility for Medicaid benefits. There are instances where a gift would be exempt from the Medicaid look-back period, including a gift made by a parent to their child who is blind, disabled, or a child under the age of 21 or, as in your case, a “caretaker child” who lived in the home for at least two years prior to your mother’s admission.
That said, Florida, among several other states, has enhanced life-estate deeds — known as “lady-bird deeds” — which automatically exempt all homes with such a deed from the Medicaid estate and remove the home from the probate assets, thereby protecting the house from subsequent Medicaid asset recovery efforts. Another way to get around the Medicaid five-year look-back rule, depending on the laws of your state, is to transfer money to a pooled special needs trust run by a charitable organization.
Any attempt at self-impoverishment is frowned upon.
Annuities can also be used as part of a Medicaid planning strategy, the law firm adds. “Medicaid-compliant annuities are structured to meet specific legal requirements, ensuring they do not jeopardize Medicaid eligibility,” it says. “These annuities provide a predictable income stream while reducing the countable assets that could otherwise disqualify an individual from Medicaid benefits. Properly structured annuities can help individuals meet Medicaid’s income requirements and cover long-term care expenses effectively.”
Some states, including Florida, New York and California, have rules that exempt a primary residence from assets calculated by Medicaid under certain circumstances. In New York, you need to live in the home while receiving care or plan to return to the home afterwards. California eliminated its asset limit, making a person’s home automatically safe from Medicaid while they are living. That does not mean it’s safe from Medicaid’s Estate Recovery Program, which allows states to collect money from a deceased person’s estate to cover Medicaid benefits paid.
Thankfully, she has assets to pay for a nursing home, if she needs one.
Full Article & Source:
‘I am my mother’s caregiver’: My mom, 93, added my name to her retirement accounts. Will she qualify for Medicaid?
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