MEDICAID CASE STUDY:
SINGLE PERSON GOING INTO THE NURSING HOME
After being diagnosed with multiple sclerosis, Pauline enters a nursing home that costs $8,300 per month. In order to avoid losing her life savings to pay the nursing home bill, she wants to make a wealth transfer to her children. She turns to a local Elder Law attorney for help.
Pauline's Age: 82
PAULINE'S MONTHLY INCOME
GIFT A PORTION OF PAULINE’S COUNTABLE ASSETS TO A TRUST FOR THE BENEFIT OF HER CHILDREN AND PURCHASE A MEDICAID COMPLIANT ANNUITY (MCA) WITH THE REMAINING ASSETS TO HELP PAY FOR HER CARE DURING HER PENALTY PERIOD.
PAULINE WILL THEN BE ELIGIBLE FOR MEDICAID BENEFITS AT THE END OF HER PENALTY
PERIOD AND WILL HAVE SAVED $75,000.
Pauline is allowed to keep an Individual Resource Allowance of $2,000. Medicaid will tell her she must “spend-down” the remaining $138,000 of her countable assets to qualify for Medicaid.
Instead of “spending-down” her excess countable assets, an Elder Law Attorney recommends gifting $75,000 to a trust for the benefit of her children. This gift will intentionally trigger a penalty period from DSS. In this case the penalty period is approximately 10 months.+
APPLY FOR MEDICAID
After gifting $75,000 to a trust for the benefit of her children, the Elder Law Attorney purchases the MCA and applies for Medicaid. The MCA will allow Pauline to pay her nursing home bill during the 10-month penalty period. After 10 months, Medicaid will pay for Pauline’s nursing home bill every month.
Medicaid pays Pauline's nursing home bill each month, and she was able to gift $75,000 to a trust for the benefit of her children.
Excess Countable Assets:
AMOUNT SAVED FOR THE FAMILY:
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* All situations are different. These strategies require a very specific type of annuity. Purchasing a "general" annuity will not achieve these results. For protection of your family, please work with an experienced Elder Law attorney.
+The duration of the penalty is case-specific and has a significant impact on the effectiveness of a strategy.