August 2023:
The MLO Minute: “Medicaid Planning and ‘Spend Down’ – Get Professional Advice” —
By Jennifer Simons, Esq. —
Clients frequently come to our office when they need to apply for Long-Term Care Medical Assistance (Medicaid). Medicaid is a public benefit which can cover the cost of care in a nursing facility if an individual does not have sufficient funds to privately pay for their care. Medicaid is a resource-based public benefit, which means that an individual must have limited resources and be financially and medically eligible. When an individual learns that he/she may soon need care in a nursing facility, or a family member needs long-term care, the person or family frequently believes that they just need to spend or give away all of their money and then they will qualify. And while it may be advisable to spend down assets in some situations, there are certain rules that must be followed when doing so. Furthermore, when a person applies for Medicaid, there is typically a 5 year look back period in which the PA Department of Human Services (DHS) will review the applicant’s financial history for the past 5 years. If DHS determines that the applicant improperly transferred or gifted assets during the look back period, it may impose a period of ineligibility. Unfortunately, by the time some clients come to our office, they have already improperly spent or gifted assets without realizing the implications of doing so.
Care in a nursing home is extremely expensive and can cost in a range upwards of $10,000.00 or more per month. Most people cannot afford to pay privately for nursing home care or may be able to pay for a while, until their funds run out, at which point they need to apply for Medicaid. To be eligible for Medicaid a person must have very limited assets, typically no more than $2,000.00 or $8,000.00, depending on income. When a person does not have enough money to privately pay for nursing home care, yet they have too much money to qualify for Medicaid, they will sometimes need to “spend down” to the applicable resource limit in order to qualify. The rules regarding a spend down of assets are complex and there are strict guidelines as to what is an acceptable transfer of assets. If assets are transferred for less than fair market value (FMV) there may be a period of ineligibility (depending on the amount of the assets that were transferred for less than FMV) in which the individual will need to privately pay for their care.
The good news is that there are permissible ways to spend down assets. And some assets are excludable assets. For instance, a primary residence may be an excludable asset, depending on the circumstances. A car is also an excludable asset. There are also transfers which are allowed, such as transfers for FMV, transfers between spouses, transfers to a blind or disabled child, transfers to a trust for the benefit of a blind or disabled child or transfers to a trust for a disabled person under age 65. However, each individual’s circumstances are different, and Medicaid planning and spend downs should be done in conjunction with the advice of a qualified attorney to avoid any penalties for improper transfers or gifting. Engaging legal counsel at the beginning can often prevent having to spend money in the future on damage control for improper transfers. And attorney fees for Medicaid planning are also permissible as part of a spend down.
If you need legal advice concerning Medicaid or a Medicaid spend down, please contact our office at 610-648-9300 and ask to speak with an attorney in our Estate and Trust Department. You can also contact us by CLICKING HERE.
