Do I Make Too Much Money for Medicaid?

A 73-year-old single retiree is collecting Social Security and a small state pension. He recently was told that he probably collects too much money to be eligible for Medicaid assistance to help with any kind of long-term care, if it was required in the future. He owns a house with a mortgage.

What options does he have, except for buying a long-term care insurance policy, which may be extremely expensive at his age.

Nj.com’s recent article entitled “I think I make too much money for Medicaid. What can I do?” says that there are some steps a person can take. However, it may take time before these actions will help your situation.

Medicaid has a five-year lookback. Therefore, if the Medicaid applicant gave away all of his assets this year and went into a nursing home expecting Medicaid to pay, the program would “look back” over five years at what he owned. The program can claw back what it spends on the applicant.

But just because you are not eligible for Medicaid and its long-term care benefits today, that does not mean that you will not be eligible in the future.

That is because even if your income is above the limit, you still might be able to qualify for Medicaid, if you have significant medical expenses.

In order to qualify financially, you need to have very limited resources.

In many states, for long-term care, an applicant’s assets cannot be more than a certain amount, such as $2,000 if you are single. However, not all property counts towards the resource limit. A home may be exempt, if it is your primary residence and worth less than the limit.

One option is a reverse mortgage which would free up some of the equity in the home to use towards a long-term care insurance policy.

Long term care policies can still be issued for people in their 70s, but the premiums will be higher than if you had enrolled 10 or 20 years ago. However, it is still an option and would keep the retiree in his home.

There are also a number of federal and state-funded programs that make it easier for seniors to live in the community and in their homes as long as possible.

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Reference: nj.com (March 11, 2021) “I think I make too much money for Medicaid. What can I do?”

How Can I Fund A Special Needs Trust?

TapInto’s recent article entitled “Ways to Fund Special Needs Trusts” says that when sitting down to plan a special needs trust, one of the most urgent questions is, “When it comes to funding the trust, what are my options?”

There are four main ways to build up a third-party special needs trust. One way is to contribute personal assets, which in many cases come from immediate or extended family members. Another possible way to fund a special needs trust, is with permanent life insurance. In addition, the proceeds from a settlement or lawsuit can also make up the foundation of the trust assets. Finally, an inheritance can provide the financial bulwark to start and fund the special needs trust.

Families choosing the personal asset route may put a few thousand dollars of cash or other assets into the trust to start, with the intention that the initial investment will be augmented by later contributions from grandparents, siblings, or other relatives. Those subsequent contributions can be willed to the trust, or the trust may be named as a beneficiary of a retirement or investment account. It is vital that families use the services of an elder law or special trusts lawyer. Special needs trusts are very complicated, and if set up incorrectly, it can mean the loss of government program benefits.

If a special needs trust is started with life insurance, the trustor will name the trust as the beneficiary of the policy. When the trustor passes away, the policy’s death benefit is left, tax free, to the trust. When a lump-sum settlement or inheritance is invested within the trust, this can allow for the possibility of growth and compounding. With a worthy trustee in place, there is less chance of mismanagement, and the money may come out of the trust to support the beneficiary in a wise manner that doesn’t risk threatening government benefits.

In addition, a special needs trust can be funded with tangible, non-cash assets, such as real estate, securities, art or antiques. These assets (and others like them) can be left to the trustee of the special needs trust through a revocable living trust or will. Note that the objective of the trust is to provide the trust beneficiary with non-disqualifying cash and assets owned by the trust. As a result, these tangible assets will have to be sold or liquidated to meet that goal.

As mentioned above, you need to take care in the creation and administration of a special needs trust, which will entail the use of an experienced attorney who practices in this area and a trustee well-versed in the rules and regulations governing public assistance. Consequently, the resulting trust will be a product of close collaboration.

Reference: TapInto (February 2, 2020) “Ways to Fund Special Needs Trusts”