When a spouse or parent needs care in a nursing home, the cost ($12,000-$15,000/month) can become an all-consuming focus. This is very understandable because this cost can be devastating for the spouse who is healthy and expects to live many years yet, or the family who is financially stepping in to help the loved one in a nursing home.
Fortunately, Medicaid is a program that can financially help pay for that nursing home cost. However, purely focusing on qualifying and applying for Medicaid can create significant financial risks for the healthy spouse or the family who is now making financial decisions for that loved one.
These are some of those risks:
1. The Medicaid spouse becomes disqualified after the initial approval. Not doing proper estate planning can later disqualify a spouse from Medicaid. This can happen in two ways. One is not timely amending a trust that owns assets exceeding $9,660 to no longer include as a beneficiary the Medicaid spouse. One year after Medicaid is approved, the Medicaid spouse can only have assets of $9,660. In a situation like this, a trust almost always benefits both spouses. If that trust is not changed to have that Medicaid spouse removed, the assets in that trust that exceed the limit of $9,660 will result in disqualification. The other way this arises is if assets go to the Medicaid spouse after the other spouse passes. This could happen by maintaining the Medicaid spouse as a primary beneficiary on assets like an IRA or life insurance. Doing proper estate planning will avoid this risk of disqualification.
2. Medicaid recovering assets at death. Not doing proper estate planning can also make assets subject to recovery from Medicaid. Michigan’s Estate Recovery Program can pursue the payback of Medicaid benefits. This can happen when assets go through probate when the Medicaid recipient has passed. Fortunately, estate planning can be done to avoid probate and Medicaid’s Estate Recovery Program from recovering those assets.
3. The future risk of a Medicaid spend-down. Not doing proper estate planning can also risk a Medicaid spend-down for a surviving spouse and their family. If the assets go to the spouse who survives and that spouse is still living independently, there’s no immediate risk of a Medicaid spend-down. But, if that spouse’s health declines and needs care, the assets will be at risk of having to be spent down to qualify for Medicaid. Estate planning can be done to prevent this and protect those assets if Medicaid is later needed.
If you have any questions about incorporating estate planning into a Medicaid plan, feel free to contact me at phmulder@cunninghamdalman.com.
