I had clients, a husband and a wife, and the husband was suffering from dementia. His wife and extended family have helped with his care, for as long as they can, but he has reached a point where he needs professional care, beyond what the wife and family can provide. The husband is now in need of long-term care at a nursing home facility, and that is why they came to me for help.
The option they needed to go forward with is MassHealth Medicaid Long-Term Care coverage. They needed help with the application process, and lucky for them I have a 100% success rate! MassHealth is tricky though, and there are many rules in order to qualify for long-term care coverage. Keep reading to see how I can help them qualify, despite them having too many assets to qualify.
The parties own a home worth $500,000 and it is fully paid off. The wife has a 401K in her name with a value of $75,000. They each have a life insurance policy earmarked for their burial. They have joint bank accounts and investment accounts totaling $250,000.00. They do not have any long-term care insurance, and their life insurance does not have any long-term care riders. The wife gets social security of $200 per month, and the husband has social security and a pension that total $2,000 per month. Their household bills, including real estate taxes, insurance, and utilities are approximately $1,500 per month.
The husband needs long-term care due to his dementia. Long-term care facilities, on average, cost $12,000.00 per month. Without coverage, they will exhaust all of their assets very quickly if they have to private pay for his care. If they could qualify for Medicaid Long-Term Care coverage, their home would be subject to a Medicaid lien. On paper, they have too many assets to qualify for coverage.
Can I get them qualified for Medicaid Long-Term Care, even with their assets of $825,000? With the right planning, YES!
First, the home. How do I protect it from long-term care liens? I use a Medicaid Trust with two deed transfers. First, I note that the husband is the one in need of long-term care, so I transfer his name off of the house and put the house into his wife’s name. Then, I transfer from the wife into the Medicaid Trust. After the transfer, the house cannot count as an asset, or be subject to a lien, with regard to the husband’s care. The wife has also started her 5-year clock running against MassHealth’s five-year lookback, and after 5 years, the house cannot count against the wife either, if she needed long-term care. You can read more about this kind of trust in my free report, 5 Trusts That Can Wreck Your Estate Plan.
Next, I prepare the MassHealth application for the husband’s benefits. The MassHealth limit for the assets of an applicant is $2,000, so I have to move some assets around in order for him to qualify. Even with $325,000 in cash assets, I can still make it work.
First, I need to remove the husband’s name from any accounts that would put him over the $2,000 limit. It is crucial to leave him with an account that has $2,000 in it, and the rest of the assets have to be in the wife’s name. That leaves the wife’s $75,000 401k in her name, plus bank/investment accounts of $248,000.00.
However, MassHealth looks at married couples as a single financial unit, and there is a limit on the assets the wife can have as well. The spousal limit is called the CSRA, which stands for community spouse resource allowance, and in 2021 the dollar limit is $130,380. As it stands, the wife’s total assets are $323,000, so she is $192,620 over the limit.
The way I get her below the limit is by using a Medicaid-compliant annuity. First, I leave the $75,000 401k where it is, and that means I’ve got to cut down the bank accounts to $55,380. I take the excess funds from the bank accounts, which is $192,620, and put it into the annuity. MassHealth looks at both income and assets, but because I put the cash into the annuity, I’ve converted that cash from an “asset” into an income stream. Therefore, by using the annuity, I’ve cut the couple’s assets down to the allowable limit, and the husband is now eligible for coverage.
MassHealth is still going to look at the husband’s income to determine his monthly co-payment to the facility, called a PPA, for the patient-paid amount. First, he’s entitled to an automatic deduction from his countable income for what’s called his Personal Needs allowance, in the amount of $72.80. The rest of his income has to be used as his PPA unless I can show that the wife needs a share of the husband’s income in order to maintain her home.
The wife’s income is only $200 in social security, and that is not enough to pay her $1,500 per month in taxes, insurance, and utilities. I, therefore, look to the husband’s income and take what is called the Monthly Maintenance Needs Allowance, or MMNA, to cover the difference in expenses. As long as the wife’s expenses are provable, I can take them from the husband’s income.
And that’s it. With the right planning, I waived a magic wand and took a married couple with substantial assets, and gotten them approved for MassHealth Long-Term Care coverage. Now, MassHealth will pay the facility at the state-approved rate, and not at the private pay rate of $12,000.00 per month. If the husband were to pass away, MassHealth could look to the remaining annuity, if any, and seek a return of their paid-out coverage. Any annuity funds beyond that coverage go to the wife.
If you think you have too many assets to qualify for MassHealth Medicaid Long-Term Care Coverage, you may be wrong! If you need to apply for this coverage, call me at 978-657-7437 and I can help you, just like I helped this couple.
Don't go at this application alone, if you get rejected you could be stuck paying thousands of dollars every month. Let me help you through this difficult process!
If you want to learn more about long-term care, download my free book "The Long Game - The Top 10 Reasons Your Massachusetts Long-Term Care Application Will Be Rejected".