Dear Mr. Premack: My wife has been gradually getting worse dementia, and I’ve finally had to place her into a nursing home. Her care costs over $5000 each month, and while we are not entirely without resources, this is far beyond what we can afford. We have about $200 thousand in savings, our home is paid off, and between us we have about $2800 each month income. She named me as agent in a durable power of attorney last year, and we each have Wills leaving everything to each other. Is there any way that we can qualify for help to pay the nursing home bill? – T.R.
There are only three ways to pay for the medical care your wife needs. First, you can pay from your own income and assets, which is honorable and in fact necessary. Second, you could have purchased long-term care insurance, which would then be obligated to pay for a portion of her nursing home care. Third, you can seek taxpayer assistance from Medicaid.
Your wife does not qualify for Medicaid. Yet. If you keep spending your money on her care, the assets you have will eventually sink to a level where Medicaid would provide assistance. Using an intelligent strategy as you spend your funds is the best way to 1) save as much of your own funds as is legal, and 2) qualify her for assistance.
Medicaid’s rules do not require that you have no assets. In fact, the rules provide a “spousal protected resource allowance” equal to one-half of the countable resources (but not more than $109,560). Here is an example to clearly illustrate the rule:
You have $200,000 in countable resources (your house, car and personal effects are not countable). You have $2800/month income, nursing home costs of $5300/month and let’s assume you pay $2000/month for your own food, utilities and living expenses. That means you have to take $4,500 out of savings every month to pay the bills, and in just two years your savings has declined to $92,000.
You go apply for Medicaid at the end of that two year period. Their rules say one-half of the countable resources are set aside for you as protected (i.e., $46,000). Your wife is credited with the other half, and before she qualifies for Medicaid her half must be spent down to $2000. Ten months later you go back to Medicaid, reapply, and she is approved. You keep your house, car, personal effects and $46,000.
What if you take a different strategic approach? Do not wait two years to speak to Medicaid, even though you know your wife does not yet qualify. Go talk to them today about benefits. You’ll report that you have $200,000 in countable resources, and they’ll tell you that one-half is set aside for you as protected (i.e., $100,000). Your wife is credited with the other half, which must still be spent down before she qualifies for Medicaid. However, instead of spending all of her half on the nursing home, you 1) buy prepaid funeral plans for both of you, 2) repair and upgrade you home, 3) buy a new reliable car, 4) take a trip, and 5) pay for needed legal services. Whenever her half gets down to $2000 you reapply for Medicaid and she is approved. You keep the rejuvenated house, the new car, the personal effects and the $100,000. A much better outcome for you, which is still completely within the law and the rules.
The strategy does not end there. You must rearrange the ownership and disposition of your remaining assets. Next week’s column will address the changes you must make to your Will and to your asset ownership in order to provide additional protection.
Paul Premack is a Certified Elder Law Attorney practicing estate planning and probate law in San Antonio.
Original Publication: San Antonio Express News, August 19, 2011