Dear Mr. Premack:
My mother-in-law is 91 and in poor health. She is in a nursing home, and
is being assisted by hospice. Her assets include her modest home (which is
in need of repair), worth about $40,000, plus approximately $40,000 in
savings. Her children plan to pay for her funeral in advance, out of her
funds. They also want to set aside the maximum amount of cash allowed for
other uses without jeopardizing her qualification for Medicaid assistance
if she outlives her funds. We are considering investing some funds into
the home to increase its value. What are our options? – J.B.
To qualify for Medicaid at some future date, a person must meet five
strict standards set by law. Medicaid is based on federal law, but is
administered by each state under state regulations. The regulations
require that an applicant:
1. Be a citizen or legal resident alien;
2. Be 65 or older, blind or disabled;
3. Need skilled or intermediate level nursing care;
4. Have monthly income at or below $1536 (for year 2000; the limit
will increase to $1590 on January 1, 2001); and
5. Have countable assets that do not exceed $2,000 in value. Other
assets that are non-countable can exist, and include major items like
her home, personal effects, an auto and limited funds for a funeral.
You do not mention her monthly income, so I will assume that it is well
below the $1536 per month cut off. Also, at 91 she meets the age
requirement, and being on hospice undoubtedly meets the level of care
requirement. That leaves only her assets, and you have two options for
dealing with them under the rules:
First, she can convert her assets from countable to non-countable. Your
letter proposes two ideas that fit this concept: paying for her funeral
and investing in her house.
Medicaid allows funds to be made non-countable in order to pay for a
funeral. They allow three methods: 1) setting aside $1500 in a bank
account earmarked for the funeral; 2) setting aside $1500 in life
insurance death benefits; or 3) purchasing an irrevocable funeral plan
from a mortuary. There is no limit on the amount of money that can be put
into an irrevocable prepaid funeral. Of the three choices for funeral
funding, this is both most realistic and shelters the most funds.
Investing in her house also converts cash into a non-countable resource
(homestead). Medicaid regulations clearly allow her funds to be used to
pay off any mortgage she may have, to repair the house, or to upgrade the
house with new carpet, paint, appliances, even furniture. Eventually when
she dies, her heirs get the house in its improved condition. The key here
is to be sure that Medicaid knows she intends to return to the house if
her health improves.
Second, she can give away some of her assets. Medicaid has strict rules
on any transfer of funds. Essentially, for any gift exceeding $2555 in
value, Medicaid will disqualify your mother-in-law for a one month period.
If she gave away her $40,000 savings, she would be disqualified for 15
months. It may be beneficial for her to give away only part of her funds
(causing a shorter disqualification period) while keeping the rest to pay
for her care during the disqualification period. The impact of transfers
must be considered in detail, and you should have an individual consult
with your Elder Law attorney to calculate the specific amounts and timing
that would be best for her.
