While planning for long term care need to ideally take place years before entering an assisted living home, this is not always possible or perhaps considered up until it is far too late. The following short article, however, lays out numerous techniques that are readily available for people with “a foot in the door” of a nursing home with regard to their offered assets.
1. Under a plan commonly understood as the “Reverse Rule of Halves”, a specific entering a retirement home can transfer all of his possessions (over and above the Medicaid resource allowance ($13,800.00 in 2011) to his heirs, and after that obtain Medicaid – knowing that the application will be rejected due to the fact that he has transferred properties. He will then be ineligible for Medicaid for a time period equivalent to the total possessions moved divided by the typical monthly cost of a nursing house. On Long Island in 2011 that’s $11,445.00 each month. The successors to whom he transferred his possessions should then execute a promissory note to him, consenting to repay, in regular monthly installations a quantity equal to about half of the total possessions moved, plus interest at a “affordable” rate (which the Department of Social Services states is 5%.)
The assisted living home will then be paid the institutionalised individual’s regular monthly income plus the regular monthly payments on the promissory note till the period of ineligibility ends. If, for instance, a person with $200,000 in possessions requires nursing house care, under the Reverse Rule of Halves, he will need to invest half of his possessions on assisted living home care before ending up being eligible for Medicaid – just as under the old Guideline of Halves. But instead of simply transfer one-half of his assets as in the past, he would transfer the entire $200,000 to his beneficiary, who would sign a promissory note to him pledging to pay back $100,000, plus interest at 5%. He would then be disqualified for Medicaid for roughly 10 months: $100,000 (or half of the properties moved) divided by the Medicaid divisor ($11,445.00). If he had $1,000 each month in income, that $1,000 (less a small individual allowance) would be paid to the assisted living home, and the balance of the retirement home costs would be paid from the heir’s regular monthly payment under the promissory note. Those payments would continue up until the duration of ineligibility expires at which time Medicaid will be authorized.
The promissory note must satisfy specific criteria. The payment must be actuarially sound, suggesting the month-to-month payments must be sufficient that the loan can be repaid throughout the institutionalized person’s life span. Likewise, the payments should be made in equal amounts without any deferral and no balloon payment. The promissory note also needs to restrict the cancellation of the balance on the death of the lending institution. Last but not least, the note must be non-negotiable, otherwise it may be figured out that the note itself has a value, which could make the applicant ineligible.
2. Nonexempt possessions under Medicaid can be converted to exempt assets. The neighborhood partner can buy a bigger personal house or add capital improvements to an existing house. By doing this nonexempt cash would be transformed into an exempt residence.
3. An instant annuity that is irrevocable and non-assignable, having no cash or surrender value (i.e., permitting no withdrawals of principal) can be purchased with excess cash. The annuity contract need to provide a regular monthly income for a duration no longer than the actuarial life span of the annuitant-owner. In case the annuitant passes away prior to the end of the annuity payout period, the policy’s follower recipient would get the staying installations. This strategy can transform a nonexempt excess property into a profits stream that goes through the more liberal income guidelines of what the community partner can retain under Medicaid. An annuity with a term exceeding the annuitant’s life span might be thought about a transfer impacting Medicaid eligibility.
4. Liquid resources ought to be used to settle consumer debts and prepay burial plots and funeral expenses (including a household crypt), therefore investing down excess money in an acceptable fashion.
5. Children can be compensated for recorded household and care services as long as the quantity is sensible. An independent estimate must be obtained before identifying the amount of remuneration and the household must have a written contract with the household members supplying care. This is more commonly referred to as a “Caretaker Agreement”.
6. All joint and private possessions that remain in the name of the institutionalized partner must be moved to the community partner. In 2011 the optimum Community Partner Resource Allowance (“CSRA”) is $109,560.00. After such transfers, property security planning can be carried out for the neighborhood spouse).
7. Under the Medicaid transfer guidelines, particular transfers are exempt. The transfer of a home is exempt if the transfer is to a partner, a small (under 21), or a blind or handicapped child, a brother or sibling with an equity interest in the home who lived in house one year prior to institutionalization, or a child who resided in house 2 years and offered care so regarding keep the person from ending up being institutionalized.
Certain other transfers of any resource may likewise be exempt.