In the last several years there has been a shift in most estate planning offices. This shift in planning has in the main been driven by the continually escalating costs in health care and particularly nursing home expense.
The monthly cost for nursing home care in Ohio is currently on average between five thousand and seven thousand dollars dependent upon the level of care received. It must be remembered that this is a monthly figure. Extrapolating from this monthly figure this creates potential annual expenditures for nursing home care in the range of $60,000 to $84,000 per year. As the pundits observe, after five or ten years of paying those amounts, after a while that begins to add up to real money.
Most people are vaguely aware that potential nursing home expense is lurking out there somewhere, but it’s a bullet that many of us hope that we will be able to dodge. My clients regularly inform me that their dad lived to be ninety six and only died when he fell off the barn roof or that their mother at a hundred and three went to bed one night and just didn’t get up the next morning. When we are forced to consider such things that’s how many of us want to believe that our lives will end. Dependent upon which end of the argument you find yourself on, either fortunately or unfortunately, that’s not how things end up for most of us. Typically a majority of those of us reading this column will find themselves at some point in their lives in a nursing home setting. The longer you reside in a nursing home, the more expensive it will be to you and to your estate.
It is important to understand that Medicaid is a federal program. However, Medicaid is administered by each of the fifty states pursuant to agreements which each state reaches with the federal Medicaid system. For this reason if you do any reading in national periodicals pertaining to Medicaid eligibility rules and regulations you can find information which is confusing and contradictory. That is because each state’s Medicaid rules are different.
Most of those of you reading this article reside in Ohio. For the balance of this article I will refer to Ohio rules and regulations.
Medicaid is designed to pay for several types of disabilities. The specific one which will be discussed here is nursing home assistance. First of all, nursing home living eligibility requirements are different than assisted living requirements. The levels of care are greater in a nursing home setting. Medicaid does not generally pay for assisted living as Medicaid was never designed to provide rent monies to its beneficiaries.
In Ohio a potential Medicaid applicant will fall into one of two categories and be either married or unmarried. There are eligibility rules which apply to each category.
In general terms if you are married, the asset base of both spouses regardless of how it is allocated between the spouses is considered to be one economic unit. The spouse entering the care facility is known as the institutionalized spouse and the spouse who remains at home is known as the community spouse.
For purposes of determining the Medicaid eligibility for the institutionalized spouse Medicaid divides the assets of the spouses into two major categories, exempt assets and non-exempt assets. The exempt assets are generally comprised of the primary residence of the spouses, the furnishings of the primary residence, and a vehicle. The community spouse is allowed to retain the use of these exempt assets. The non-exempt assets are the balance of the assets of the spouses. The community spouse is usually allowed to retain approximately half of the non-exempt assets as long as a true half does not exceed approximately $109,000. Accordingly the spouses would have to have $218,000 worth of non-exempt assets before the community spouse in this example would be able to retain $109,000. If the spouses had only $100,000 worth of non-exempt assets, the community spouse would only be able to retain $50,000. This is true until a bottom figure is reached or approximately $20,000 of non-exempt assets in which case the community spouse would be able to retain that entire amount.
Any amounts of non-exempt funds which exceed the permitted amounts allowed to be retained by the community spouse must be spent down prior to the institutionalized spouse being eligible to receive Medicaid nursing home care assistance payments.
Medicaid divides transfers of money into two major categories. These are proper transfers of monies and improper transfers. The terms proper and improper are terms selected by Medicaid and any connotation of the propriety or impropriety of these types of transfers are true in the context of Medicaid eligibility requirements exclusively.
Medicaid generally regards proper transfers of assets to include any payments of monies for which one receives value. Accordingly, the payment of your mortgage, medical bills, real estate taxes, home repairs, clothing and food necessities etc; these are all considered to be proper transfers of monies which would be in most cases constitute an appropriate spend down of your excess monies to attain Medicaid eligibility.
Any transfers of assets for less than value, in other words gift of an asset, are deemed by Medicaid to be an improper transfer of your assets and can in some cases result in a determination of a penalty period of Medicaid ineligibility occasioned by the improper transfer of an asset.
Upon application, Medicaid requires the applicant to disclose any improper transfers of assets made within sixty months prior to the application date. Improper transfers made by the applicant or spouse of the applicant during this five year look back period will in most cases result in penalty periods of Medicaid ineligibility being determined by the Medicaid intake worker based upon the amount or amounts of the improper transfers made.
Next time we will discuss how these penalty periods are calculated and how they affect the eligibility of the applicant.
This article was written by David F. Bacon, Attorney and Ohio State Bar Association Board Certified Specialist in probate, trust and estate planning. David Bacon and Jeff Roth are partners in Roth and Bacon Attorneys with offices in Upper Sandusky, Marion, Port Clinton, Ohio, and Fort Myers, Florida. They have focused their practice to provide estate and business planning concepts to their clients. Nothing in this article is intended for, nor should be relied upon as individual legal advice. The purpose of this article is to help educate the public on concepts of law as they pertain to estate and business planning. This is number one hundred forty one of a series of articles. Additional articles will be published in the future. If you have any questions you would like to have answered, please direct your question to The Daily Chief Union and your question will be considered for use as the topic of subsequent articles. Copyright @ David F. Bacon 2008
