Do I have too much money to qualify for Medicaid MassHealth? The Answer might surprise you…
One of the most common questions we get here at Monteforte Law, is “Do I have too much money to qualify for Long-Term Care benefits?” When we mention Medicaid & MassHealth as part of the answer, it is inevitably followed by “I have too much money to qualify for Medicaid.” Our response to that statement may surprise you. That’s because our usual response is “You’re wrong. We can get you qualified.”
Yes, Medicaid MassHealth looks at your assets, and they can disqualify you from long-term care coverage if you have assets that are over their limits. In 2023, the asset limit is $2,000.00 for a single person. If the applicant is married, and the spouse is staying in the home and is not looking for coverage at the same time, the spouse is allowed to keep $148,620.00. While that sounds like a lot of money, and it is a lot, we are talking about the life savings of a married couple that have worked their entire lives, and likely have some retirement and other savings. So, if you have more than $148,620.00 as a married couple, can you still qualify for MassHealth long-term care coverage?
If your attorney sets it up correctly, then yes, you absolutely can.
How? Through the use of expert planning tools.
When it comes to long-term care, there are only three ways to pay. Briefly, the three ways are:
- The first way to pay is to pay out of pocket. That means you would spend your assets on your long-term care, paying out of pocket at the “private pay” rates set by the facility. This is the most expensive option, and assets can dwindle very quickly with private pay.
- The second way to pay for long-term care is through long-term care insurance or life insurance with a long-term care rider. One of the best ways to pay for long-term care is with some form of insurance policy that provides long-term care coverage.
- The third option is to position your assets so that you can qualify for Medicaid (administered in Massachusetts by MassHealth, which is why we are suing the terms interchangeably here). Medicaid not only provides coverage for long-term care, but they pay facilities at special rates that are a lot cheaper than private-pay rates.
You can read in more detail more about those three ways in our free report How To Pay For Long-Term Care, which you can download here.
To qualify for MassHealth, there are several planning tools available that can help families protect their assets while still meeting Medicaid eligibility requirements. For the most part, planning ahead is the best course of action. But there are still tools available for those that need immediate care and don’t have any planning in place.
Some of the best and most effective planning tools are:
- Medicaid Trusts
- Spend down techniques
- Medicaid-compliant annuities.
Each of these planning tools has its own pros and cons, and what works best for one family may not work for another. That's why it's important to work with an experienced elder law attorney who can help you choose the right strategy for your unique situation. With careful planning and the right guidance, it's possible to protect your assets while still getting the care you need.
Let’s look at each tool in more detail:
A Medicaid trust is a specific type of trust that is used to protect assets from long-term care costs. In simplest terms, a trust is a legal document that creates an “entity” to hold certain assets. For most people, this is the best way to protect your home, which tends to be our biggest asset. The protection isn’t limited to just real estate, and cash assets can be protected too, but protecting the home is the most common purpose. Medicaid trusts are complex, so it's important to work with an experienced elder law attorney to create one. If it’s not done right, it’s useless!
Although there are hundreds of different types of trusts, a Medicaid trust has the goal of protecting assets from long-term care. To accomplish that goal, the drafting attorney must ensure that the trust is structured in a way that complies with Medicaid rules and regulations, as well as state-level MassHealth rules, and that it meets the individual's unique needs and circumstances. The attorney can also help you choose an appropriate trustee to manage the trust and make sure that the assets are used properly. When done right, you can protect your assets but still maintain control over them.
One of the benefits of Medicaid trusts is that they can provide more flexibility than other planning tools, such as Medicaid annuities (more on that below). For example, you can continue to receive income from the trust (such as the rent from investment properties), which can be used to supplement Medicaid benefits or to pay for a wider range of expenses, such as housing or transportation, that Medicaid may not cover. But the secret is that you have to Plan Ahead for this strategy to work! That’s because you must transfer assets to the trust well in advance of needing long-term care, as Medicaid has a five-year "look-back" period during which any transfers of assets are scrutinized. The key is to do it NOW, while you are healthy, so that you can start the five-year clock running.
Like anything, there are pros and cons to the Medicaid Trust. While the pros tend to outweigh the cons, they should still be discussed, as these trusts are not be suitable for everyone. On the upside, they are the best way to protect your home from long-term care. On the downside, there are up-front costs to setting them up. It's important to weigh the costs against the potential benefits before deciding whether to use a Medicaid trust, but the potential for protecting an asset in the hundreds of thousands, and even millions of dollars, usually makes the costs well worth it.
Spend Down Techniques
Spend-down techniques involve using various legal strategies to reduce the value of an individual's “countable” assets in order to meet Medicaid eligibility requirements. Two common spend-down techniques are personal services contracts and lease agreements. While there are numerous different techniques, these two are designed to keep the money in the family, as opposed to the strategy of just paying bills. Again, a key point here is Planning Ahead!
A personal services contract is an agreement between the individual needing care and a caregiver. In most cases, the agreement is between a parent and one of their kids, but it can be any family member or friend that is providing care to someone who needs it. The caregiver is paid for providing services such as cooking, cleaning, and transportation. The contract MUST be in writing in order to pass MassHealth scrutiny. There are some logistics to it, but it’s usually better to give the money to a family member, who can put it aside, rather than give it to long-term care.
A lease agreement involves renting out property or assets to a family member or friend in exchange for a rental payment. For example, if a parent moves in with one of their kids, they can pay rent to help spend down their assets. True, most of us don’t want to charge rent to our parents, but in this case it’s a good thing! Like the personal services contract, it allows the person to “spend-down” their assets, to help qualify for long-term care with MassHealth, while keeping the money in the family.
It's important to note that both personal services contracts and lease agreements must be properly structured and executed to avoid any legal issues or accusations of fraud. MassHealth does heavily scrutinize these documents because they don’t want you to be able to save your money! Use an expert to help you create the necessary documents and tracking that MassHealth requires.
But what if you didn’t plan ahead, and the need for the long-term care is immediate?
Medicaid Compliant Annuities
As the name suggests, Medicaid annuities are designed to help individuals meet eligibility requirements for long-term care, and the annuities are specifically designed to be Medicaid-compliant. In other words, they meet MassHealth regulations and standards. These annuities meet certain requirements set by Medicaid and can be used to help individuals preserve their assets while still qualifying for Medicaid. What separates them from other tools is that these annuities can be used even if you didn’t plan ahead (sometimes called “crisis planning”).
An annuity is a financial product where a lump-sum of money is paid to an insurance company, and the insurance company pays you back over time, plus interest. While there are many different types, there are specific requirements for Medicaid-compliant annuities. When used correctly, they can help you qualify for long-term care benefits even if you are over the asset limit. These types of annuities are designed to work within the complex rules and regulations of Medicaid, and are an important tool for individuals who are planning for long-term care.
Medicaid-compliant annuities typically have specific features that make them compliant with Medicaid regulations. For example, the annuity payments must be made over a specific period of time, which is typically the individual's life expectancy. Additionally, the payment you make to the insurance company must be lump-sum, and payments from the insurance company back to you have to start immediately, which is why they are sometimes referred to as a SPIA, which stands for single-premium immediate annuity.
The premise is that the annuity can convert some of your assets into income, to help you meet the asset limit requirements for Medicaid while also preserving some of their assets for your heirs. An experienced elder law attorney can help you understand the risks and benefits, and determine whether a Medicaid-compliant annuity is the right solution for your specific situation. More information about Medicaid annuities can be found in our free report, HERE.
Are there other protective tools?
Yes, there are many, and your attorney should help you select what is best for you. Here are some brief details about other techniques, but this is in no way an exhaustive list:
Gifting is another spend down technique that can be used to reduce the value of an individual's assets and meet Medicaid eligibility requirements. However, it's important to note that gifting can be a complex strategy with potential pitfalls. Medicaid has strict rules around gifting, and there are penalties for transferring assets for less than fair market value within the five years prior to applying for Medicaid (the five-year look-back strikes again!) In addition, gifting assets can have tax implications and may impact an individual's ability to receive certain government benefits.
Gifting can be a powerful tool for individuals who are seeking to qualify for Medicaid, but it must be done carefully and strategically.
A well-designed gifting strategy can help you preserve assets and qualify for Medicaid, but it must be done with careful consideration of all of the potential implications. For example, an attorney may advise an individual to make gifts to a Medicaid Trust, which can help protect assets while still allowing you to qualify for Medicaid benefits. An attorney can also help an individual understand the tax implications of gifting and advise on strategies to minimize tax liabilities. When it comes to gifting, the gift giver pays the tax, not the receiver of the gift, so the utmost care is needed!
The caretaker child exception
The caretaker child exception is a provision under Medicaid rules that allows certain parents to transfer their home to their child without incurring penalties for transferring assets for less than fair market value. To qualify for the caretaker child exception, the child must have lived in the parent's home for at least two years prior to the parent's admission to a nursing home, and the child must have provided care to the parent that allowed them to avoid nursing home placement. Those two requirements must be PROVEN with documentation, or the strategy will fail.
The caretaker child exception can be a valuable tool for families who have a child who has provided significant care to their parent and wants to ensure that their parent receives the care they need without losing all of their assets. However, it's important to note that the rules surrounding the caretaker child exception can be complex and the requirements must be carefully followed to qualify. Your attorney can tell you whether or not you qualify for this option.
How do you get started?
The next step is to review more detailed information, and then speak to an experienced elder law attorney. More detailed information is available here:
- If you have a parent who is in need of long-term care, download this free report HERE.
- If you need more information on how to pay for long-term care, download this free report, HERE.