Some assets can be kept while you qualify for Medicaid

You can save money and impoverish your spouse while still qualifying for Medicaid.

Long-term care costs can quickly add up. According to Genworth, the annual median cost of a private room at a nursing home was $105,850. These costs could be covered by the government if you are eligible for Medicaid. However, that is not an easy task. “Medicaid” is a welfare program, says Neel Shah of Shah & Associates, Monroe Township, N.J. He’s also an estate-planning attorney and certified financial planner.

Medicaid should not be confused for Medicare. Medicare is the national insurance program for seniors 65+ that covers short-term care.

You’ll have more options if you are able to pay for your own healthcare. Not all facilities accept Medicaid. Even couples with substantial savings could end up unable to pay for long stays in nursing homes. You may be afraid of this, but you might be surprised to find out that you can use tools created for that purpose to preserve assets and qualify for Medicaid.

Your income must not exceed $2,382 per monthly, although qualifications may vary from one state to the next. A spouse can be allowed to receive up to $3,259.50 per month, provided that their income is not considered. You must have assets of $2,000 or less. A spouse can keep up to $130,000. Assets include cash, bank accounts, real property other than a primary residence and investments (including those in an IRA, 401(k)). You can keep a personal home, non-luxury personal items like clothes and appliances, one vehicle and engagement and wedding rings. A prepaid burial plot is also allowed.

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You can meet Medicaid’s requirements by distributing your assets. Shah says that instead of keeping $100,000 in the bank you can use that money to pay your mortgage or home renovations. You could also prepay for a burial plot, a replacement vehicle, or upgrades to household appliances. If you require long-term care, your spouse will keep the purchases. With fewer assets, you’ll be eligible for Medicaid faster.

However, what your spouse has left is unlikely to provide enough income to support you. An annuity that is Medicaid-compliant could increase a spouse’s income. These contracts convert your savings into future retirement income for you or your spouse. They don’t count towards an asset. Annuities can be purchased at any time. However, to be Medicaid-compliant, payments must begin immediately with the beneficiary state after your spouse’s death.

Steve Parrish, codirector of the Center for Retirement Income, American College of Financial Services, King of Prussia (Pennsylvania), suggests that you could also create a Miller Trust for your own benefit. This trust can only be used to meet Medicaid’s income limit. The Miller Trust can be used to hold excess income if your income from Social Security, pensions, or other sources exceeds the Medicaid income limit, but is not sufficient to pay for nursing home care. This allows you to be eligible for Medicaid and keeps some money in the trust for yourself. Parrish said that the funds could be used to pay for dental work or to go out to dinner.

These strategies can protect income or assets for couples. It is difficult to leave something to other heirs. It is more difficult to leave something to your spouse after you die. The state government must recover Medicaid costs from your estate as soon as possible. This can be done through a lien on the property, reimbursement from Miller Trust, or by seizing assets during probate.

There is a possibility of a workaround, but there are risks. Assets that are given away within five year of the date of a Medicaid application still count towards eligibility. However, property transferred to heirs sooner does not. Shah says, “You could create an irrevocable trust for your children and then transfer property that way.” It’s similar to putting the property in a vault and giving the key.

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Your heirs must be willing to assist you financially, even if you lose control over the trust’s assets. Parrish doesn’t like that much uncertainty. Parrish suggests that if someone has this much money, they might just use it for better care.