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Can elderly couple do any Asset Protection planning?

Dear Mr. Premack: My husband (90) is in a nursing home and has dementia, and I am 88. I am seeking advice on protecting our assets. We have about $90,000 in cash, $100,500 in mutual funds, a farm worth $300,000, a rental residence worth $95,000, our homestead, car and personal property worth $115.000. Our income is only $40,000 annually, and we get $17,500 a year in oil royalties. That, of course is an unknown in the future. Will we benefit from protecting our assets at this late date? – E.K.

When you say “protecting our assets” what you mean is “not having to spend even more of our assets on nursing home care.” The burden you face already is staggering: on average, a month in a Texas nursing home costs about $4,300 (it can be much higher in large cities and may be a bit lower in small towns). Over a year, that is nearly $52,000.

There are only three ways to pay for those necessary medical services. First is to pay out-of-pocket, as you have been doing since your husband moved to the nursing home. Second is to utilize long-term care insurance. If you had it, you would not be asking about protecting your assets. Instead you would have protected them by purchasing insurance that covers this risk; but at 88 and 90, with one of you already in a nursing home, it is too late to buy this coverage.

Third, you can seek benefits from Medicaid. However, Medicaid is only available to elders who have low-income and low-assets. Thus your question: is there a way to move your assets or to protect them so that you can get Medicaid’s assistance while your assets are preserved? There is no simple answer, and every situation calls for specific analysis of your goals, your opportunities and your limits.

For instance, you have about $585,500 in countable resources, and about $115,000 in exempt resources. The countable assets would be divided so that you get to keep $113,640 and your husband is credited with $471,860. Your share is definitely a “protected asset” and your exempt resources are definitely a “protected asset” so by law you have already sheltered about $228,640.

What about the balance that is credited to your husband? He cannot qualify for Medicaid until that share is reduced, in a legally acceptable fashion, to $2,000. What are the legally accepted ways of reducing that share? You can 1) spend some of it on the monthly nursing home bill, 2) use some of it to buy other exempt resources [like making repairs to your home, or replacing the old car with a new model], 3) use some of it as an educational fund for your young grandchildren, and 4) pre-purchase a burial policy, so long as the policy is non-refundable. With those techniques, you may be able to protect some of the funds, but not all.

Notice that I did not include “give some of it away to your children” as a solution. There is a penalty for transferring assets which makes the transfer undesirable. Some exceptions exist, like transferring title to your home to a child of yours who has lived with you for at least two years and has provided documented services that helped keep your husband out of the nursing home for those two years.

Also notice that even when his share of the assets is reduced to $2,000, your husband must still be low-income to qualify for Medicaid. The checks he receives monthly cannot exceed $2,094. If his part of your income is over that limit, you may be able to use a “qualified income trust” to overcome the limit.

Qualifying for Medicaid is complex and everyone’s situation is different. My best advice: don’t listen to the anecdotal stories about what a neighbor or your barber’s sister did. Instead, seek personalized advice from a Certified Elder Law Attorney, who will help analyze your individual options and make unbiased recommendations on whether you can or cannot “protect your assets” within the rules of Medicaid law.

Paul Premack is a Certified Elder Law Attorney and a Five Star Wealth Manager (Texas Monthly Magazine 2009-2012) practicing estate planning and probate law in San Antonio.

Original Publication: San Antonio Express News, July 23, 2012


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