By Steven J. Gibbs, Esq.
Hello Friends & Colleagues!
In the world of Medicaid, there are a lot of misunderstandings and these “myths” can tend to be kind of “ingrained” and thus tough to correct. For example, an estate planning client commented recently that she would have to spend down all the assets before getting her husband qualified for Medicaid…to which I responded, “not true”.
Five Common Medicaid Misconceptions or “Medicaid Myths” are:
1. They will take away my home.
2. If I sell my home after my spouse is on Medicaid, they will take ½ the proceeds.
3. I will have to give the nursing home half our assets.
4. If I transfer assets to my spouse, it will disqualify me.
5. I can give my children $14,000 per year and be eligible for Medicaid.
Myth #1 The Status of the Home…
Your home is exempt from the Medicaid asset calculation if a spouse or child lives there. An equity and home care discussion applies if you’re single, and, depending on your state of residence, a home may be deemed exempt even if you’re single if there is some remote possibility that you could return to it, and this is often a very speculative question.
Myth#2 Selling the Marital Home…
If the “well spouse” of an “ill spouse” who has qualified for Medicaid sells the marital home, this will have no negative effect on the ill spouse’s Medicaid. In fact, the well spouse can make any financial decision concerning his/her half of the estate, and it will not affect the ill spouse’s Medicaid. However, keep in mind that financial decisions may affect the well spouse’s own Medicaid needs due to the “look-back period” for asset transfers.
Myth #3 The Nursing Home and the Status of the Marital Assets…
All of one spouse’s assets may be transferred to a “well spouse” in order to allow an “ill spouse” to apply for Medicaid. However, under the traditional Medicaid rules, a well spouse can essentially only keep a portion of all the non-exempt marital assets (currently around $116,000) and would have to spend down any overage of assets following the transfer.
One strategy to deal with this reality is to apply the well spouse’s overage of assets in ways that can still protect the total value of your estate. For example, an overage could be used to repair and even remodel exempt assets such as the home. The spouse could also use the overage to pay for a new car, pay down debts or provide for other needs of the Medicaid applicant ill spouse.
Myth#4 Transferring Assets to a Spouse and the Spousal Refusal of Support in Florida
Notwithstanding #3 above, in limited jurisdictions (i.e. currently New York and Florida) a spouse may refuse to pay for the other spouse’s medical care. What this means, practically speaking, is that the ill spouse’s assets may be transferred to the well spouse. The ill spouse can then apply for Medicaid and thereafter the well spouse may file a document refusing to pay for the ill spouse’s cost of care. Thereafter the ill spouse files something with the state assigning the right to collect from the well spouse. This strategy involves some very specific filings and timelines and should not be attempted without the assistance of a seasoned expert. There are pitfalls that need to be recognized. For example, spousal transfers cannot be made after the well spouse files the notice of refusal.
Myth#5 Gifting to Heirs and the Likelihood of Medicaid Penalties…
While the $14,000 gift exemption allows you, under the IRS rules, to give away this amount to as many beneficiaries as desired without a “gift tax,” this rule does not apply to Medicaid. So this approach would likely result in a penalty period, which would delay payment of Medicaid benefits due to the “look-back period” for transfers. This will be discussed later in this chapter.
When to Use Outright Gifts…
For all of the reasons discussed above, you know by now that an outright gift to an adult child (or other family member) will trigger a penalty for Medicaid purposes unless the child is under 21 or is blind or disabled and under age 65. Nonetheless, an outright gift may be advisable under certain circumstances where the giver is elderly or has estate tax concerns, and it is likely he/she will not require long-term skilled nursing assistance for at least 5 years. Another reason that gifting may be advisable is that there are significant exempt assets or other resources to provide for long-term skilled nursing care.
As always, I hope this is helpful and . . . until next time.
Sincerely,
Steven J. Gibbs, Esq.
Steven Gibbs founded the Gibbs Law Office in January 2009, committed to providing client-centered legal services.
Steve as he would rather be called, is not your typical attorney. If you appreciate the staunch egotistical mannerism of most firms, you will be delighted with Steve’s unpretentious approach to educating and then assisting his client. Instead of giving you his complacent and lofty ideas, he would rather pursue your expectations with professional conversation about resolving your concerns under the Law. It’s your life and it’s his job to make your legal expectations come true while using years of his guidance and knowledge.
Steve was admitted to the Minnesota Bar in 1999, the Florida Bar in 2007 and was recently admitted to the California bar. Keeping abreast of law changes in these three States, as well as the United States, assists him in all aspects of the types of law the firm practices.
Along his career path, he was an associate attorney for an insurance defense law firm; an in-house real estate negotiator for Target Corporation; and corporate counsel for Civix, LLC and Vice President for North American Properties where he was responsible for various real estate transactions, including legal issues and negotiating unresolved business issues. Prior to opening Gibbs Law Office, PLLC, he was an associate with the firm of Roberts & Engvalson, P.A. where he gained his knowledge of trusts, estate planing and Wills. He opened his own firm in 2008 and now focuses on laws that will enrich the needs of his clients throughout their lives and those of their children. The firm has developed a practice dealing only with Trusts and Estate Planning, Wills, Medicaid Planning, Elder Law, Real Estate, Business Law and Probate.
Quoting from Steve “I decided to practice in areas that families will need as they progress down life’s path. To help them with a solid foundation that will carry them throughout there lives is a rewarding experience for me and my staff.”
Gibbs Law Office
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