You may hear people make claims about certain estate planning and elder law details that are based on some correct but incomplete information. This can lead to misconceptions that can yield negative consequences, and we will look at one of them in this post.
Medicaid Estate Recovery
Medicare does not pay for long-term care, and nursing homes and in-home caregivers are very expensive. What kind of numbers are we talking about? You can expect to pay somewhere in the vicinity of $80,000 for a year in a Hilton Head area nursing home.
Medicaid will cover a stay in a nursing home, and there is a Medicaid Home and Community Based Services waiver that will pay for in-home care that is provided by a professional caregiver.
You are probably aware of the fact that Medicaid is only available to people that have limited assets. In South Carolina and most other states in the union, there is a $2,000 asset limit. However, it is possible to divest yourself of assets with future Medicaid eligibility in mind.
If you become eligible for Medicaid and you reside in a nursing home during the final stage of your life, the program would be required to seek reimbursement from your estate after your death.
Since you can’t qualify if you have more than $2,000, the cupboard will typically be bare during the Medicaid estate recovery phase, but there is an extenuating circumstance.
The value of your home is not counted if you apply for Medicaid to pay for long-term custodial care. However, there is an equity limit, and it stands at $636,000 in South Carolina during the current calendar year. There are inflation adjustments each year, so it will be higher next year.
Since you can qualify for Medicaid as a homeowner, a lien could be placed on the property during the recovery phase if you are the formal owner at the time of your death.
Widely Held Misconception
Getting back to the point we initiated in the opening, some people do not understand the full picture, and they come away with distorted viewpoints. They think that Medicaid simply takes your home if you apply for coverage, but it does not work that way.
There would be no immediate seizure of a home as soon as the individual in question enters a nursing facility. Plus, it would be protected if a healthy spouse, a minor child, or a disabled child is living in the home at the time of the Medicaid beneficiary’s death.
In addition to those circumstances, there is a caregiver child exemption. To explain through the use of an example, let’s say that you would require nursing home care unless you can find someone to provide the care that you need in your home.
Your daughter is available and willing, and she moves into your home to provide care and companionship. If she fills this role for at least two years before you apply for Medicaid, you could give the home to your daughter, and it would be protected from Medicaid recovery.
Medicaid Look Back
There is also the matter of the Medicaid look back period. You can give gifts to your loved ones or fund an irrevocable trust to divest yourself of assets with future Medicaid eligibility in mind.
If you establish a trust, you would surrender access to the principal, but you could accept distributions of the trust’s earnings until you apply for Medicaid.
In order to successfully execute this strategy, you have to fund the trust at least five years before you apply for Medicaid. If you violate the look back, you have to wait out a period of ineligibility.
The duration of the penalty would be based on a nursing home cost/total divestiture ratio. Let’s say that the state determines that the average cost for a month in a nursing home is $7,000. You fund an irrevocable trust with $490,000.
This amount would pay for 70 months of nursing home care, so your eligibility would be delayed by 70 months.
Schedule a Consultation Today!
We can help you devise a nursing home asset protection plan that will allow you to live in comfort and go forward with the knowledge that Medicaid will pay for long-term care.
If you are ready to get started, you can schedule appointment at our Bluffton, SC elder law office if you call us at 843-815-8580. There is also a contact form on this site you can use to send us a message, and if you reach out electronically, you will receive a prompt response.
Hunter is a member of the South Carolina Bar Association, the Beaufort County Bar Association, and has served on charitable and advisory boards in the Bluffton/Hilton Head area.
Hunter graduated from Hilton Head High School. He then earned his Bachelor of Science Degree in Economics from Clemson University, in Clemson, South Carolina.
Hunter graduated Cum Laude from Regent University School of Law in Virginia Beach, Virginia, having earned a Juris Doctor Degree. He also wrote his doctorial thesis on Estate Planning Dynasty Trusts.
Hunter has called Beaufort County home for since 1984, where he lives with his wife and two children.In his spare time he dabbles in automobiles, reading history, hunting and fishing.
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