1.         There Is More “Medicaid Planning” That Can Be (Safely) Done.

Example.  84 year-old single widow has a home and $600,000 in liquid assets.  Her income is $3,800 per month.  She is in good health but frets incessantly she may need nursing home care and it will deplete her estate.  Solution?  Carve off $100,000 and place it in an irrevocable income only trust.  Once the five year lookback period passes, only the income will be “countable” to her.    

Example.  84 year-old single widow is impoverished except for her home.  She deeds an interest in her home to a son or daughter as tenants in common.  Ownership can be in equal or unequal shares; unless stated, it is inferred the interests are equal.  Widow applies for Medicaid, arguing the value of the home remains exempt because she cannot force the sale of the home, and should not be forced to partition because she will return to the home to live if she can.  Upon her death, only half of the home is subject to lien recovery because that is all she owns. 

What if these two concepts were coupled?  There would be money to “buy” the remaining one-half interest in the home.

 2.         What is “Reverse Half A Loaf” Gifting?

Example.  84 year-old single widow resides in a nursing home and has $20,104 in assets.  She applies for Medicaid.  She then gives $18,104 to her daughter, leaving her with $2,000.  The widow now satisfies three important criteria – she resides in a nursing home, she has applied for Medicaid, and apart from the gift, she is otherwise eligible for Medicaid assistance as she has $2,000 or less in assets.  The sanction period on the gift is 4 months ($18,104 divided by $4,526 (the average cost of care)).  Daughter returns half of the gift, or $9,052.  This reduces the sanction period to 2 months.  Widow uses the $9,052 plus her income to privately pay for her care for two months, and daughter has $9,052 that can be used to supplement her mother’s care in the nursing home. 

Example.  Upon entry to a nursing home, Aunt without children conveys a one-half interest in her home to a trusted nephew in return for his promise to pay for her care (the other half had previously been transferred to a sibling some time ago, who sold his interest to the nephew for $15,000).  Widow meets the three criteria.  Nephew pays nursing home expenses in an amount equal to half the value of the home.

Example.  Widow and son sell family home owned as tenants in common receiving $94,557.70 in net sales proceeds.  Pursuant to their agreement and understanding, all of the proceeds were claimed by son.  Medicaid attributes half of the proceeds to each, $47,278.85.  Son argues that amounts paid on his mother’s behalf (moving expenses, funeral expenses, rent, living expenses, etc.) constituted constructive repayment of any gift from mother to son.       

3.         Seniors Often Think of Their Estate Planning In An “Inverse” Order.

Many estate planners begin a discussion of estate planning with new clients by discussing a will, then perhaps a trust, then a financial power of attorney and a healthcare directive.  Sometimes the last two documents are “tag ons” as part of a “package” and almost become an afterthought.

For seniors, they may be most interested in end of life issues, then a financial power of attorney, whether they need a trust, and last of all, a will.

 4.         Care Treatment Plans and Antibiotics.

A health care directive often ends up on the very bottom of the file (right hand side) at the nursing home – and may never be reviewed again.  The nursing home’s care treatment plan, however (often on colored paper) will always be the top document on the left hand side of the file and will be reviewed virtually every week.

When (or if) to use antibiotics may be one of the most important health care decisions for a person in a nursing home.

 5.         When Children (and Others) Provide Care to Their Parents, It Should Be Done Pursuant to a Written Agreement Entered Into Prior To the Time the Services Are Performed.

Example.  Imagine two identical households facing one another across a suburban street.  In household A, a daughter provides significant assistance to her mother, helping her bathe, providing transportation, picking up groceries and medication, paying her bills, insuring that her lawn is maintained and snow is shoveled.  For these services, mom pays her daughter $y per month.  There is no written agreement.  In household B, a son provides significant assistance to his father, helping him in and out of the shower, providing transportation, picking up groceries and medication, paying his bills, insuring that his lawn is maintained and snow is shoveled.  For these services, dad pays his son $z per month, pursuant to a written agreement entered into some time ago.  Should the mother in household A need Medicaid assistance, payments made to her daughter may be characterized as impermissible transfers.  If the father in household B needs Medicaid assistance, the payments made to his son may well be permissible, since they were performed pursuant to a written agreement entered into (and signed and notarized) prior to the time the services were performed. 

More people should consider using so-called “care contracts”.  They are awkward to discuss and implement, they create taxable income to the care provider, and they arguably result in payment for care adult children and in-laws should provide parents out of love and respect.  On the other hand, they clarify expectations among the parties, and over time, can be an effective Medicaid planning technique.

 6.         Be Careful With Novel Techniques.

Example.  Parent’s estate plan provides a right of first refusal authorizing one of their children to buy the family home for less than fair market value (perhaps, for example, because the child given such right has rendered extraordinary care to one or both parents).  Medicaid must respect the right of first refusal, correct?

Generally, no.  The State takes the position that its estate recovery right supersedes any such arrangement.

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