THE MEDICAID PROGRAM’S
EFFECT ON ESTATE
PLANNING FOR THE
ELDERLY
Michael A. Fuerst
BUCKLEY & ZOPF
OBJECTIVES OF
MEDICAID ESTATE
PLANNING
 Protection of community spouse
 1. adequate income, resources
 2. prevent impoverishment
 Assure care for institutionalized spouse
 Maximize estate for heirs
DIFFERS FROM STANDARD
ESTATE PLANNING
 A. Standard estate planning techniques will
not work
 B. Gifts are problematic
 C. Grantor trusts mostly ineffective
 D. Traditional ownership concepts do not
necessarily apply
MEDICAID PROGRAM
 Needs based health insurance program
 Income and resource limitations
 Only health insurance which pays for
nursing home care
Medicare
 Health insurance for Social Security retirees
 Does not cover long term care in a nursing
home
 Covers skilled/rehabilatative care in nursing
home
ELIGIBILITY FOR MEDICAID
 $2500 assets.
 Income below State reimbursement rate for
nursing home.(approximately $4300/mo)
Spousal Impoverishment Rules
1.Income Rules
2.Resource Rules
INCOME RULES
 Community (healthy) spouse may protect up to
$1822/mo of ill spouse’s income.
 If high shelter (housing) expenses up to $2739.
 None of healthy spouse’s income attributable to ill
spouse.
 Ownership- “name on the check” concept
 If no document, 1/2 of income attributable to each
spouse.
Income
 An immediate payment annuity is treated as
income of the owner/annuitant.
 Social Security or a pension is treated as the
income of the individual who is entitled to receive
it
 Wages
 Interest/Dividends
 Loan
Example
 Ill spouse- social security and pension$3000;
 Healthy spouse- $750 social security
 Healthy spouse entitled to keep at least
$1072 of ill spouses income.
 If shelter expenses are high may keep
additional $917(750+1072+917=$2739)
Example
 Healthy spouse- social security and
pension-$3000;
 Ill spouse- $750 social security
 Healthy spouse entitled to keep all $3000
 Healthy spouse entitled to an unlimited
amount of income if in his/her name
RESOURCE RULES:
 All resources are countable regardless of
which spouse holds title or jointly owned.
 The “marital pie”
Countable Resources
 Stocks, bonds, savings
and checking
accounts;
 IRA and 401K
accounts
 Annuity and insurance
policies
 Real estate-other than
the principal residence
Resource Assessment.
 “Snapshot” of countable resources.
 As of date of first continuous period of
institutionalization.
 Even if application for Medicaid is later.
Spousal Share
• Maximum countable resources
protected level for community
spouse - $109,560.
• All other resources to benefit
institutionalized spouse
Spousal Share
 One half of total countable resources to a
maximum of $109,560.
 If total assets $300,000 healthy spouse only
entitled to protect $109,560, not $150,000.
 If total assets $100,000 healthy spouse only
entitled to $50,000.
 Minimum protected amount is $21,912.
 If total assets $40,000 healthy spouse keeps
$21,912.
 Although community spouse may use the
remaining assets for his/her benefit as well.
Spousal Share
 Assets less than $43,824- $21,912
 Assets between $43,824 and $219,120 One-half
 Assets more than $219,120 -$109,560
The family home is an
excluded resource
 As long as it is used as
the residence of the
community spouse
 Up to a maximum
equity value of
$500,000 for ill
spouse.
Other Excluded Resources:



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motor vehicle
furniture and personal possessions
prepaid funeral
irrevocable burial trust
Deeming of Resources Stops as
of Date of Eligibility for
Medicaid
 timing is crucial
 no restrictions on what community spouse
does with these resources
 sale of home-no claim by Medicaid
TRANSFER OF ASSET
RULES
 Transfers between spouses are not
disqualifying.
 Gifts/transfers for less than adequate
consideration are potentially disqualifying
Transfers After February 7, 2006
 “Look Back” Period:
 5 years from first date individual is both
institutionalized and applies for Medicaid
 applies to all gifts, including trusts.
.
Period of Disqualification:
 Equal to the total uncompensated value of
all gifted assets
 Divided by state average nursing home cost
($8,421.11)
 Commencing on the date of application for
Medicaid for nursing home care.
 All gifts disqualify regardless of size.
Example
 Gift of $84,211 to pay for college for
grandchild made on Jan 1, 2010
 Apply for Medicaid Jan 1, 2014
 Disqualification period-10 months
($84,211 divided by $8,421/mo)
 Disqualification period commences on date
of application for Medicaid:1-1-20114
Exempt Transfers
 To spouse
 To sibling who has “equity interest” and has
resided in home for 1 year
 To child who has resided in home for 2
years and provided care enabling recipient
to stay out of nursing home
 To disabled or minor child
Trusts
 3 types of trust recognized:
 Revocable
 Irrevocable/grantor retained interest
 Irrevocable/no grantor retained interest
Revocable
 Countable resource
 Residence will be countable
 Subject to lien recovery
Irrevocable -Retained Interest
 Income only
 Right to principal-available asset regardless of
trustee’s discretion
 Grantor’s residence considered countable asset
 Risk of inclusion if Grantor retains incidents of
ownership ( right to borrow, power of
appointment, Grantor as trustee)
 No clause or requirement in trust precludes it from
being considered under Medicaid program.
Irrevocable-No Retained Interest
 Transfer-must cover 5 year disqualification
 Not treated as income or asset.
 Congress and State have tried to make the
use of trusts more difficult.Rules do not
apply to trusts created on or before August
10, 1993.
ESTATE RECOVERIES
 New Hampshire has an expanded definition
of “Estate” for recovery purposes
“Estate”
 “Estate” includes not only probate assets but also property
held by the recipient as a joint tenant, tenant in common or
holder of a life estate. RSA 167;14-A
 Property in a revocable trust is subject to recovery as well
 Possible recovery against irrevocable “income only” trust
to the extent of the life interest in the income
“Estate”
 Enforceable only against the estate of the
recipient/institutionalized spouse-55 or
older; not against estate of surviving spouse
 Not enforceable against estate if child under age of
21 or disabled
Life Estate/Joint Tenancy
 Joint ownership and life estate which avoid probate, will
not now avoid the lien.
 Life estate valued as of one minute before date of death
based upon actuarial tables
 Joint tenancy valued as percentage of the total value (e.g.
50%).
Lien on Home
 Not enforceable against home of surviving spouse ( or
minor or disabled child of recipient)
 Not enforceable if:
 sibling has resided with recipient for 1 year and has equity
interest; or,
 child has resided for 2 years and provided care to keep
recipient out of nursing home
Estate RecoveriesAnnuities
 Annuities require the State to be the primary
beneficiary for Medicaid payments made to
annuitant or spouse.
 If State not named then purchase of annuity will
be deemed a transfer for less than adequate
consideration
Planning: Protection of
Community Spouse
 Re-title assets in healthy spouse’s name.
 Apply for Resource Assessment as soon as
possible.
 Do not need to be eligible for Medicaid to
apply for resource assessment
Planning: Protection of
Community Spouse
 Convert countable resources to excluded
resources. (payoff mortgage, make improvements
to home,buy car).
 Insure greatest amount of income in healthy
spouse’s name.
 After institutionalization spend down ill spouse’s
share - for benefit of healthy spouse.(pre-pay
taxes, purchase annuity).
 After Medicaid eligibility, convert excluded
resources to liquid resources.
ANNUITIES
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
Countable asset unless immediate annuity
Convert from countable asset to income
Convert after Resource Assessment
Not a transfer for less than adequate consideration
Annuitization for “period certain”cannot exceed life
expectancy pursuant to CMS standards
 The State must be primary beneficiary for any Medicaid
provided to annuitant or spouse
Maximizing Estate for Heirs
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Transfers before 60 months
Long-term care insurance
Irrevocable Trusts - are they of any use?
Life estates
Change will of healthy spouse
All assets in name of healthy spouse
Risks of Gifting

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Unable to pay for care for entire 5 years
Gifts made to children no longer available
Spent by kids
Divorce or death of child
Bankruptcy of or lawsuit against child
Choice of Law
 The location of the Nursing Home controls
which State’s Medicaid rules apply.
 Legal residence is irrelevant
VIII.
RULES OF THUMB
 A. Property transferred more than 60
months before institutionalization will be
protected
 B. Property transferred within 60 months of
institutionalization will cause
disqualification.
 C. The rules will change
1. IS THERE A DIFFERENCE
BETWEEN MEDICARE AND
MEDICAID OR IS THE FEDERAL
GOVERNMENT TRYING TO
CONFUSE ME?
2. WHO IS ELIGIBLE FOR
MEDICAID FOR NURSING
HOME CARE?
3. IF A SPOUSE GOES INTO A
NURSING HOME DOES THE
NURSING HOME OR MEDICAID
TAKE CONTROL OF OUR
SAVINGS?
4. IF A SPOUSE HAS TO GO
INTO A NURSING HOME DOES
THE HEALTHY SPOUSE HAVE
TO SPEND ALL OF HIS/HER
ASSETS FOR THE CARE OF
THE ILL SPOUSE?
5. IF MY ILL SPOUSE HAS TO GO INTO
A NURSING HOME WILL HIS MUCH
LARGER RETIREMENT INCOME HAVE
TO GO WITH HIM?
6. DO WE HAVE TO SELL OUR
HOME IF ONE OF US MUST GO
INTO A NURSING HOME TO BE
ELIGIBLE FOR MEDICAID?
7. DOES IT MATTER IN
WHOSE NAME THE ASSETS
ARE TITLED WHEN
DETERMING WHAT MUST
BE PAID TO THE NURSING
HOME.
8. WHEN DOES THE MEDICAID
PROGRAM DETERMINE WHAT
AMOUNT OF ASSETS MUST BE
USED FOR NURSING HOME
CARE?
9. IS A LIEN PLACED ON
THE HOME OF A HEALTHY
SPOUSE BY THE MEDICAID
PROGRAM?
10. IF MY CHILDREN OWN
PROPERTY JOINTLY WITH ME
WILL THEY BE REQUIRED TO
PAY OFF THE LIEN?
11. CAN THE HEALTHY
SPOUSE SELL THE HOME?.
12. IS THERE A 5 YEAR
DISQUALIFICATION FROM
MEDICAID FOR ANY GIFTS I
MAKE?
13. CAN AN INDIVIDUAL GIVE
AWAY HIS/HER ASSETS TO
BECOME ELIGIBLE FOR
MEDICAID?
14. IF A SPOUSE IS JUST ABOUT
TO GO INTO A NURSING HOME IS
IT TOO LATE TO PROTECT
ASSETS?
15. IF IT LOOKS LIKE A
SPOUSE MIGHT HAVE TO GO
INTO A NURSING HOME,
WHAT SHOULD WE DO?
Michael A. Fuerst, Esq.
Buckley & Zopf
PO Box 1485, 233 Broad St
Claremont, NH 03743
 603 542 5114
 603 543 1570 fax
 Mfuerst@buckleyzopf.com
 November 2011