First question on Medicaid is can the aging parent still own their home? Is it best to have a child on the home deed? Is there a value limit the home can be? On this so called gifting watch. Medicaid goes back 5 yrs looking at money gifts. Does this include checks for birthdays and Christmas? Which would be much less that a hardship gift like a down payment for a car or pay a childs house note if a parent wanted. Is there a value amount the can gift? And the big question is what if parents have a child freeloader who does not work, owns their own home and has been receiving monthly support for yrs and well over the $13,000 amount each parent could give. Child is healthy and not getting disability assistance of any kind. If the parents run out of money paying out of pocket for a nursing home and apply for Medicaid the money given to the child would need to be paid back to receive Medicaid assistance?
It's alot to deal with & really you should have an elder care attorney that understands how the review is done in your state; how to deal with a transfer penalty & also what your state law is in relation to MERP (estate recovery).
This is going to be long so get a cup of coffee.....
Medicaid NH rules set by each state & are state specific even though is a joint federal & state program. Qualification both financial & medical & needs-based for both. You are fully expected to spend down your assets first & foremost before the state will pay. There are things that can be done with assets in advance but imho need to be done by someone qualified who understands your state’s legal.
For NH Medicaid eligibility, an individual must show that:
1) are 65+ (can be younger if qualified disability),
2) medical condition requires skilled level of nursing care,
3) monthly income at or below their states max (varies, about 2K),
This is the “income test”– how much $ do you make. Income is social security or retirement or other monthly income
4) all countable assets are at or below 2K (higher if community spouse). This is the “asset test” – how much $ do you own. A house (to 500K value in most states) & car are non-countable. Countable assets are savings, IRA, stocks, insurance, real estate, etc. Assets must be spent-down to impoverishment.
5) have not gifted away anything of value during 5yr look-back.
If you do, could be a “transfer penalty” for gifting. Penalty based on each state’s NH daily reimbursement rate. For Texas $ 142.92. So Blue Book value car of 10K = 70 days penalty in which you have to private pay NH although they are accepted in Medicaid. If you transferred 50% home assessed at 150K, that would be a transfer penalty on 75K. Tangible property is recorded so discovered easily.
Financial look-back is up to 5 yrs. Most states require 3 – 6 mo. of all financials, plus property ownership documents with application. For car or home, that usually is current tax assessor’s statement. You sign off for state’s ability to access any & all records. State can require add’l documentation if something pique’s interest, like paperwork to establish if insurance is term or whole life (has to be cashed out)
INCOME: Exact income maximum is set by each state. Most states have “income” at $ 2,022 per mo but it can be more or less. TX is $ 2,094. Income is whatever $ they get monthly – retirement, SS, annuity, etc. If they get something that pays annually – like a dividend – it can be sticky if the amount of the dividend takes them over the income max for that mo. & you likely will have to do a specialized form to have it amoritized evenly by 12.
PNA - For an individual in NH on Medicaid, all their income has to be paid to the NH less whatever your state has as a “personal needs allowance”. PNA varies, most $60 mo, & enough to cover cable, phone or hair salon. Realistically if they have a home or car (exempt assets) there will be no real $ for elder to maintain them (insurance, taxes, upkeep, etc) so family will have to pay for all if you want to keep the elders ownership of the house.
ASSETS: All assets are counted, unless the assets fall within the short list of "noncountable" assets:
- personal possessions,
- a vehicle (some states have a limit on the value)
- a principal residence, provided it is in the same state in which the individual is applying & the house may be kept with no equity limit if the "community spouse" lives there; otherwise the equity limit is about 500K (750K in some states)
- prepaid funeral (irrevocable, NCV, usually 10K max)
- small term life insurance (usually $1,500 & NCV)
All other assets must “spend down” to states max to qualify.
The financials are what most folks focus on. But remember that they also need to medically qualify for skilled nursing care.
Your situation sounds really sticky and the amount of $ transferred sounds significant enough to raise flags on the application, imho you should start calling around now to find an elder care attorney before they have to apply for Medicaid.
2. If the child is on the deed for many years, it can turn out to be a good way to avoid estate recovery by the state following the parent's death. On the other hand, putting the child's name on the deed now will result in it being deemed a very large disqualifying transfer (i.e., a gift) and if the parent applies for Medicaid within 5 years of the deed date there will be a very long penalty period.
3. There are no de minimis gift amounts, so even small gifts can be counted if made within 5 years of a Medicaid application. On the other hand, if you can prove the gifts were made exclusively for a purpose other than to qualify for Medicaid, those gifts will be ignored by the state.
4. If the parents have been supporting an adult child for whom they have no legal liability to support, all those payments are indeed gifts, as far as Medicaid is concerned.
Since you have a lot of questions, I suggest you do a little reading up on this topic by getting hold of my book "How to Protect Your Family's Assets from Devastating Nursing Home Costs: Medicaid Secrets"; it's in some libraries, too.
The gift limit of $13,000 is only relative to IRS guidelines on the recipient and the person making the gift and paying taxes on that amount. It has NOTHING to do with Medicaid. This is where people get very confused. Regardless of the amount, if it is or can be perceived by Medicaid that giving this money away is to keep from having to pay for one's Medical care, then Medicaid can be denied. Need to be very careful about this.
The probably best thing to do is to put improvements into the house, because they cannot take your home from you. Again, talk to a lawyer. It seems most of the time, the 'kid' getting the extra cash seems to have the issues with being a responsible grown up. And parents seem to volunteer for this program.
One more point. In our family, my husband and his brother were put on the deed to their parents' home 20 some years ago. His dad died a few years ago and shortly thereafter, his mother went into a nursing home. The house was sold. Because neither the brother nor my husband were claiming that property was their primary residence, although the proceeds of the home was split three ways, both my husband/we and my BIL/he and his wife were hit with a very big tax liability because she had lived there for 45 years and of course, there were big capital gains on the house. It is better to inherit property than to share the deed most of the time. If the house is 'intended' to be moved back in to, they cannot take your home from you. Demonstrating behavior that appears to be 'skirting the system' will almost always end badly.
If so, you certainly have some things to consider.
What has not been mentioned to you is how the Medicaid applicant is penalized for assets over $2,000 ($115,000 for a couple) transferred without fair market value compensation within five years of application and how this might affect a plan of action.
Medicaid invokes a "penalty period" for ineligible transfers. This penalty period is based on the total value of the transfers divided by the "Medicaid pay rate" in your State (the monthly dollar amount the State pays a nursing home for a Medicaid beneficiary). For instance, in Florida, the Medicaid pay rate is $5,000 per month. Assume transfers totaling $100,000. The penalty period imposed would then be 20 months of Medicaid ineligibility.
Sometimes the penalty period can be part of a strategic plan. You mention, for example, that a child has been receiving "well over $13,000 per year for years". If the elder(s) otherwise qualify, it may make sense to go ahead and apply and have the penalty imposed sooner rather than later. This would start the "Medicaid clock" ticking and the elder(s) would use private funds until the penalty period ran out.
You might then ask: "Where will the private funds come from if the elder(s) is not supposed to have more than $2,000 ($115,000 for a couple) in assets?
This is where planning with the remaining assets would come in...legitimately transferring assets and creating streams of income without inducing further penalty.
One other thought. If Medicaid may be in the elder(s) future the "gifts" to the adult child must cease and a different way to transfer funds to that child need to be sought.
Good luck and God bless!
My husband's ex was a spoiled daughter and she became a free-fall spender as an adult. She spared no expense when it came to taking her kids shopping and buying them the best of everything. My husband made very good money while they were married and he did end up paying her spousal support after the divorce, some twenty plus years ago. She ended up with a good sized 401K and half of his pension, plus has a Masters degree (teacher) and was employed consistently until two years ago, when she evidently just decided she hated paperwork and quit doing it, was eventually fired from a tenured teachers job, let her house over the years totally disintegrate and fill up with dog poop and purchases and quit paying her bills. While she was shirking her responsibilities for grown up things, she 'helped' my stepdaughter with some college stuff, not thinking she might need the money to live some day. Last year she moved in with said daughter and darn near ruined her home life. She is a 62 year old child. Last we heard, she was going to buy a convertible with her 401K funds!
If the focus is on taking care of ourselves, acting responsible and not becoming the repeat 'gift giver' our own kids will hopefully do the same. People are living longer and longer and if you look at our country's financial situation and the health care crisis, we cannot afford to 'help' those who aren't willing to help themselves.
Nevertheless 60 days later I had to fill out another form with more documentation on this "income" and within 7 days. I am pretty OCD on paperwork so I could do this but this is the sort of thing you need to be prepared to do.
Remember they are allowed to have 2K in assets or resources in their bank account, so if it's just $ 1,500 you should be fine. But if it's an extra $ 1,500 added to what was there and it takes her over 2K then spend it down.
AFTER the spouse dies, the survivor can only have $2000 of assets?!? Assets were defined as ANYTHING--bank, property, car, investments, etc.
The baffling thing is, HOW did States come to that conclusion, that a surviving spouse is able to survive on only $2K worth of assets, yet the COUPLE was allowed $40K of assets?!?
Oh, and the IRS?
We were told by them, that a GIFT limit was $10K per year to a family member. Beyond that amount, raised red flags for tax purposes.
Not $13K.