Medicaid Planning for Singles

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Medicaid Planning for Singles

  1. 1. MEDICAID PLANNING FORSINGLES: HOW TO MANAGE THE$7-9,000/MONTH COST OFSTAYING IN A NURSING HOMEP. Haans Mulder, JD, MST, CFP®Cunningham Dalman, P.C.321 Settlers RoadHolland, MI 49423(616) 392-1821phmulder@holland-law.com
  2. 2. Upcoming Seminars• Veterans Benefits, Estate Recovery, andChanges in the Medicaid Rules-June 13.• Seminar is at 4:30.Serving the Holland area since 1900
  3. 3. Background• Attorney and Partner at CunninghamDalman, P.C.• Have a Masters in Tax (MST), CFP®and specialize in estates/elder law andbusiness planning.Serving the Holland area since 1900
  4. 4. Background• Cunningham Dalman, P.C. has beenserving the greater Holland area since 1900.• We have 15 attorneys specializing in allareas of the law.Serving the Holland area since 1900
  5. 5. Overview• Discuss the Medicaid rules and theprogram.• Give you some planning options to protectthe assets of a single person.Serving the Holland area since 1900
  6. 6. Did you know?• 40% of people 65 years and older willstay in a nursing home.• Average cost to stay in a local nursinghome is $7-9,000/month ($84-$108,000/year).Serving the Holland area since 1900
  7. 7. What is Medicaid?• It is a state and federal program thatpays for medical treatment (includinglong term care).• Oftentimes confused with Medicare.Serving the Holland area since 1900
  8. 8. When does Medicaid apply?• Historically, it only paid for nursinghome care.• In certain counties (that have the MIChoice Waiver program), it will pay forcare in someone’s home or anassisted living facility.Serving the Holland area since 1900
  9. 9. Who does Medicaid apply to?• Applies to people who are 65 years orolder, blind, or disabled.• Must satisfy the medical requirements(level of care assessment).• Need to meet the income and assettests.Serving the Holland area since 1900
  10. 10. Who does Medicaid apply to?• Monthly income cannot exceed themonthly cost of your stay in a nursinghome ($7-9,000 in this area).• For the Waiver program, income mustbe less than $2,094/month.Serving the Holland area since 1900
  11. 11. Who does Medicaid apply to?• Under assets test, a single person canonly have $2,000 in countable assets.• Can keep his or her home (if it’s not ina trust) and a vehicle.• All other assets are countable.Serving the Holland area since 1900
  12. 12. • Client is single.• She has an estate plan (living trust,pourover will, and powers of attorney).• She is healthy and does not anticipateneeding long term care in five years.Serving the Holland area since 1900Planning Example #1
  13. 13. • She has a house, vehicle, and$250,000 in investments.• She receives monthly income of$1,100 in Social Security and $600from a pension.Serving the Holland area since 1900Planning Example #1
  14. 14. • She has monthly expenses of $2,200 sothere is a shortfall in her income of $500per month.• Since her husband passed, she has ason who has started to help her invarious ways.Serving the Holland area since 1900Planning Example #1
  15. 15. • She is concerned about going to anursing home and not having anyresources to take care of her house.• She is also worried about Medicaid notcovering all of her needs (other medicalcare, clothes, etc.).Serving the Holland area since 1900Planning Example #1
  16. 16. • She creates an irrevocable trust in whichshe receives the income (i.e. interest anddividends).• Her son is the trustee and her childrenare the beneficiaries of the trustprincipal.Serving the Holland area since 1900Planning Example #1
  17. 17. • She makes a gift of $220,000 to thetrust.• She will receive approximately$916/month in income from the trust.• She will not likely need any otherresources.Serving the Holland area since 1900Planning Example #1
  18. 18. • If she does need other resources, herson can take a distribution from the trust(because he is the trustee and abeneficiary).• He can then gift it back to her.Serving the Holland area since 1900Planning Example #1
  19. 19. • There is a five year “look back” period forMedicaid.• She will need to remain healthy fiveyears from the time of the gift for thisplanning technique to be effective.Serving the Holland area since 1900Planning Example #1
  20. 20. • Client is single and is admitted to anursing home.• He has a house, vehicle, and $75,000 ininvestments.Serving the Holland area since 1900Planning Example #2
  21. 21. • Without any planning, he will have tospend the $75,000 in investmentsdown to $2,000.• He could then receive Medicaid.Serving the Holland area since 1900Planning Example #2
  22. 22. • With only $2,000, he would over timebe unable to pay for his house.• In these cases, he could rent it.• Or, his children will have to come upwith the funds to pay the houseexpenses.Serving the Holland area since 1900Planning Example #2
  23. 23. • There is planning that could protectapproximately half of his $75,000 ofinvestments (or $37,500).• These funds could pay for whatMedicaid does not cover (i.e. othercare, clothes, etc.).Serving the Holland area since 1900Planning Example #2
  24. 24. • It could also pay for expenses with thehouse.• If there are any funds left over, theywould be an inheritance to his childrenand other beneficiaries.Serving the Holland area since 1900Planning Example #2
  25. 25. • Upon entering the nursing home, he (orhis power of attorney) creates anirrevocable trust.• His daughter is the trustee and hischildren are the beneficiaries of the trustprincipal.Serving the Holland area since 1900Planning Example #2
  26. 26. • He then makes a gift of $37,500 to thetrust.• This gift results in him being ineligible forMedicaid for approximately five months.Serving the Holland area since 1900Planning Example #2
  27. 27. • He invests the other $37,500 in a“Medicaid annuity.”• The annuity and his other monthlyincome pays for his care for the fivemonths of ineligibility.Serving the Holland area since 1900Planning Example #2
  28. 28. • At the end of the five months, Medicaidpay for his care.• He will have to pay all, but $60 of hismonthly income to the nursing home.Serving the Holland area since 1900Planning Example #2
  29. 29. • However, the funds in the trust can beused to pay for non-covered care.• They can also be used to pay for houseexpenses.• Any funds that are remaining become aninheritance.Serving the Holland area since 1900Planning Example #2
  30. 30. Questions……Serving the Holland area since 1900
  31. 31. Upcoming Seminars• Veterans Benefits, Estate Recovery, andChanges in the Medicaid Rules-June 13.• Seminar is at 4:30.Serving the Holland area since 1900
  32. 32. Thank YouP. Haans Mulder, JD, MST, CFP®Cunningham Dalman, P.C.321 Settlers RoadHolland, MI 49423(616) 392-1821phmulder@holland-law.comwww.holland-law.comServing the Holland area since 1900

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