There is never a “right” time to enter a skilled nursing home. For most of us, we wish to live our lives in the comfort of our own homes and never have to contemplate a time when we would leave them because we need long-term care. Unfortunately, as we age, our needs, especially when it comes to our health, may not match what we want.
There may come a time when you or a loved one will need care outside the home. This could be due to a health care crisis, a cognitive decline, or for many other reasons. The question then changes to a more immediate issue: how will you be able to afford this care for your spouse in addition to your monthly bills?
Medicaid has a fixed amount of countable assets you are allowed to own and also receive Medicaid assistance.
What happens, then, should you have more than this amount? Did you know that in our state a Medicaid “spend down” of countable assets can be done to make sure the spouse entering into the skilled nursing facility is immediately eligible for Medicaid nursing home assistance? This is done because the spouse in a nursing home, often referred to as the “institutionalized spouse”, cannot own more than $2,000 in countable assets and the healthy or “community” spouse can only own countable assets that do not exceed $126,420.
A “spend down” scenario exists when the community spouse purchases assets that result in there being less cash or available assets that would otherwise disqualify the institutionalized spouse from Medicaid nursing home assistance. The “spend down” is accomplished by the community spouse paying for things that are allowed. For example, he or she could pay cash to improve his or her residence, pay off a credit card balance, or purchase a new automobile. There is no limitation on the ways in which a spend down can be accomplished. However, the spend down cannot result in a gift being made. This would constitute a penalty that would make the nursing home spouse ineligible for assistance.
The risk of a spend down is that the nursing home spouse may suddenly die. In such an event, the cash that could have available for the community spouse’s needs over the ensuing years of comfort may no longer be available for the community spouse’s medical or other emergency needs. There are alternatives to spending down. Rather than spending down the assets and subsequently not having the cash for emergencies, the community spouse should consider using the proceeds received through an allowed Medicaid strategy. For example, he or she could utilize a reverse mortgage on the residence to pay the nursing home costs rather than leaving the community spouse without sufficient funds for future expenses.
Another strategy could be creating a non-countable asset such as a Medicaid Qualifying Annuity.
This annuity can be owned by the community spouse, regardless of its value. This annuity must meet strict rules including being irrevocable, non-assignable, have no cash value, and payable over no more than the owner’s life expectancy. Since the community spouse may also eventually need long-term care, the community spouse’s purchasing a Medicaid Qualifying Annuity may be the best solution for protecting assets since the investment in the annuity, if not used for care, could be paid back to the community spouse and then be available for his or her subsequent long-term care.
We know this article may raise more questions than it answers. There is never a wrong time to plan for the potential need for long-term care in a skilled nursing facility and, often, pre-planning can help you achieve the strategies you need early on. Whether you are in a crisis or pre-planning today, know that we have solutions available for you. Do not wait to contact our firm and schedule a meeting to discuss your needs.