One of the largest expenses many people have and lose sleep over later in life is paying for long-term care. Although Medicaid can cover long-term care, it sets low income and asset limits, which have not been updated since 1989. When you have to pay out of pocket, your assets can quickly dwindle to next to nothing. Then, you finally qualify for Medicaid. But, because you had to use up your savings and other assets first, you no longer have anything left to leave loved ones. If you are like many of our clients, spending all your savings on long-term care defeats much of the reason you worked so hard and so long to save money.
With careful planning and a good Medicaid protection lawyer, you can get the best of both worlds. You can protect your assets for your loved ones and get the care you need. Reach out to Robbins Estate Law to speak to an Austin Medicaid asset protection attorney.
How Do You Qualify for Medicaid?
To qualify for long-term care through Medicaid, you have to be 65 or older and have a financial need. Financial need is specific, set at the state level, and depends on whether you are married and whether your spouse also needs Medicaid coverage.
Qualifying When Unmarried
Long-term care Medicaid requirements are simpler for those who are not married. To have a financial need, you must own $2,000 or less in assets and have a monthly income of $2,829 or less. Most money you receive qualifies as income, like a salary, investment profits, and retirement benefits. Similarly, most property you own counts as your assets, with a few notable exceptions. For many people, the most important is the exception for your homestead and its furnishings.
Qualifying When Married
If you are married and need long-term care Medicaid, but your spouse does not, your limits are the same as if you were unmarried. You can have an income of up to $2,829 and own assets totaling up to $2,000. Although each spouse’s assets are determined separately, there are limits on what the non-applicant spouse can own.
In Texas, nearly all property you earn or acquire while married belongs equally to each spouse. That means that property your spouse owns can be counted against your limits. However, a non-applicant spouse can generally retain half of your community property up to a maximum of $154,140 while you still qualify for Medicaid. If half of your community property totals $30,828, your spouse can retain all of that property.
If both you and your spouse need coverage, your assets and income are combined to determine whether you qualify. You can earn a combined total of $5,658 per month and own a combined total of $3,000 in assets.
What Is Medicaid’s Look-Back Period, and How Does It Work?
Many people know that qualifying for Medicaid is not as simple as giving away your assets. Designed to deter people who are not truly financially needy, the Medicaid look-back period is the origin of the common belief that Medicaid requires you to spend down your assets.
Under the look-back rule, you are not supposed to transfer assets specifically to qualify for Medicaid. To cut down on those who can afford to pay for their own long-term care using Medicaid resources, the government looks back at your asset transfers over the past five years. It considers impermissible asset transfers to include:
- Gifts of significant value;
- Sales at significantly below market price; and
- Moving money between accounts, including trust accounts.
If the government identifies improper transfers, it imposes a penalty period on you. During that time, Medicaid will not pay for your services, even if you otherwise qualify. The penalty period lasts for a number of months based on state rules and how much you transfer. The look-back period begins on the date you submit your application.
To determine the possible look-back period in Texas, you divide the amount of the transfer by $7,339. So, for example, if you improperly transfer $50,000 in assets, you would divide 50,000 by 7,339. This gives you 6.8 months of a penalty period. As a result, the government will not pay for your care for almost seven months from the date you apply for Medicaid.
How Can You Protect Your Assets and Qualify for Medicaid?
Although the rules forbidding transfers make some sense, they fail to take into account the reality of just how expensive long-term care can be. At an average cost of $3,000 to $4,000 per month, paying for even one year of care costs upwards of $36,000. While some may be able to afford such a steep bill, potentially for several years, that amount can fundamentally change the estate you leave behind.
There are many ways to protect your assets. Trusts are among the best options for most people, but you must have created the trust outside the five-year look-back period. If you need Medicaid coverage sooner, you may still be able to minimize the impact of penalty periods with the help of an experienced lawyer for Medicaid protection.
Asset Protection Trusts
One of the best options is often to put your property into a Medicaid Asset Protection Trust (MAPT). You can place almost any property into a trust. Generally, to prevent the government from counting your assets for Medicaid purposes, you must put them into an irrevocable trust. When you create an irrevocable trust, you select your beneficiaries and cannot generally withdraw your funds without special consent. Since you have limited control over your assets once you place them into the trust, they no longer count as your assets for Medicaid purposes.
Along with your asset protection trust, you may also want to set up a Miller Trust—also known as a qualified income trust. When you create a Miller Trust, the amount you receive in income above the Medicaid cutoff is automatically placed into a trust. This ensures you can continue to qualify for Medicaid even if you technically make more than you are allowed to.
Robbins Estate Law Can Help
If you need help planning for your long-term healthcare needs, contact Robbins Estate Law today. We know what it takes to qualify for Medicaid while protecting some assets to leave your loved ones after you pass. You do not have to be a millionaire or leave nothing in your estate to afford the care you need. Let us help. Call today.