Why You Should Work With An Attorney On A Medicaid Application
It is not required to get an attorney to apply for Medicaid. When you enter a nursing home, the facility will generally offer to do it for you—for free! So why should you actually hire and pay an elder law attorney to handle it?
Spousal Refusal is Complex
One of the most common strategies for asset protection is “spousal refusal.” The healthy “community spouse” signs a document effectively stating that his/her assets and income are not to be used for the care of the spouse in the skilled nursing facility. This can be put into effect by executing a relatively simple document. Sometimes nursing homes will provide it to residents and their spouses. But spousal refusal is not something that all Medicaid districts accept all of the time. Some counties (on a case-by-case basis) pursue litigation against the refusing spouse to compel a contribution. An attorney can negotiate with the district and come up with a settlement that the spouse can handle. Usually this means contributing some amount without breaking the bank and rendering the spousal refusal meaningless.
Estate Planning is Involved
Spousal refusal is not enough. Even though the community spouse is healthy, he/she needs to make plans for what would happen if he/she should be outlived by the spouse in the skilled nursing facility. The institutionalized spouse’s name should be removed from the deed to the home. The estate plan of the healthy spouse should be changed to exclude the institutionalized spouse, in favor of the children. (Some counties will attempt to force an institutionalized spouse to file a “right of election” claim against an estate plan that excludes them if their spouse should die while they’re on Medicaid, but this would only result in the institutionalized spouse getting one-third, so excluding him/her from the estate plan is still worth doing.) Also, after the spousal refusal is complete and Medicaid picks up, the community spouse should do Medicaid planning for him/herself to protect assets in case he/she requires skilled nursing home care in the future. All of this is legal work that only an attorney can handle.
The Five-Year Look-Back
During the Medicaid application process, the county’s Department of Social Services “looks back” at all of an applicant’s bank statements and financial records for the last five years. (The accounts of the community spouse are also reviewed in just the same way.) Any uncompensated transfer in excess of $2,000, as well as any lesser transaction that recurs frequently, can be considered a gift that incurs a penalty. This means that there will be a delay in Medicaid coverage. For every $13,000 (this number varies by region) in gifts, there will be a month that Medicaid will not cover, and you will have to private pay the nursing home at their standard rate. (This can cost you tens of thousands of dollars!) Attorneys cannot always make penalties disappear, but they can often work with you on strategies that would minimize them and drastically reduce out-of-pocket costs. At our law firm, we meticulously go through every bank statement and financial record in advance of submitting a Medicaid application and complete a full audit. Then, we devise legal strategies to deal with any potentially problematic transactions that we find. The goal is to maximum asset protection with no surprises.
Even when someone is unmarried and spousal refusal is therefore an impossibility, and even when someone has done no advance planning to get assets out of his/her name, attorneys can still protect assets. Through a process sometimes referred to as “half a loaf planning,” elder law attorneys strategically have clients make a gift of roughly half of their assets that incurs a penalty with Medicaid intentionally, and then a loan of roughly the other half of their assets to a family member who makes a promissory note to repay it. When the numbers are crunched exactly correctly, and the transfers are properly calculated and executed, the loan can float the client through the penalty period caused by the gift. The individual then qualifies for Medicaid, and the family keeps the half of the assets that were gifted. All this can be done by an attorney, even with no advance planning.
Nursing homes and elder law attorneys are not in opposition to one another. At our firm, we like to maintain good relationships with the local skilled nursing facilities by providing transparency and keeping them apprised of the Medicaid application status of our clients who are residing in their facilities. Generally, nursing homes actually like when a client retains a skilled elder law attorney because it usually means that any complications will be worked out, and Medicaid will eventually pick up the tab.
The value in having an attorney work on a Medicaid application is that so much of asset protection is legal work. It is rarely as straightforward as just signing the papers to apply for Medicaid. When nursing homes handle the applications, people generally do qualify for Medicaid. However, it’s the asset protection component that’s missing. When nursing homes apply, individuals often have to spend down resources or face penalty periods that would not have happened had they hired an attorney. Although attorneys cannot prepare applications for free like the nursing homes, we tend to save our clients tens of thousands of dollars in the long run.
Contact us today. We are here to talk to you, answer your questions, and give you the counsel that you need!
This is not to be considered legal advice. You should contact an attorney to discuss your specific situation.
Michael Wagner is Partner concentrating on elder law and estate planning. He can be reached by phone 845-764-9656 and by email.