How to protect assets and still qualify for Kentucky Medicaid
Medicaid is supposed to be your last resort for medical services. If Medicare is not paying enough to pay for services then Medicaid will pay for medical services. However, you have to spend down assets first before using Medicaid. In essence, Medicaid becomes just like a judgment creditor who can take your assets for paying your remaining bill. This is how to qualify for Kentucky Medicaid and protect assets.
The average person will be sued about nine times during their life. If you want to own anything,you must have some plan to safeguard your assets and get them out of your name so probate, taxes, and creditors do not take your assets. This is often called asset protection. Trusts, converting assets to exempt assets, spending assets and other legal devices allow you to own or use property in ways creditors cannot reach it. This does not mean you cannot get benefits from your assets.
Medicaid and the five-year rule.
With Medicaid, you can gift your home or personal property to children and others. However, for five years, you will have to pay at least in part for Medicaid coverage. Each month of nursing home care costs about 10,000 dollars. If you need extended care for nursing home benefits you cant gift money just before applying. If you do you may have to pay about 1month towards every 2 months of care before Medicaid will cover the remainder. This means you have to return or hold back enough to plan for some partial payment if five years have not passed.
There is a Gift Tax Exclusion which may allow you to give more than 15,000 per year. These exclusions allow you to give to a disabled child, spouse or caregiver for tax purposes on form 709 with no tax liability. However, the tax exclusion does not apply to your Medicaid benefits. You may have to return some part or all of a gift if it was made less than 5 years before receiving Medicaid.
What Medicaid does not look at.
Medicaid does not look at your spouses home or your personal auto used to go to a doctor. Your spouse can win the lottery or receive an inheritance, and that is not your property. However, you cannot comingle assets and place her income into a joint bank account. At that point it becomes your money as well and getting it back may be impossible or at least hard to do. At the time of making the resource assessment, all of your assets should be exempt assets, spent or transferred properly so Medicaid does not get them.Although Medicaid does not use the Bankruptcy exemptions exempt property for Medicaid purposes act very much like the Bankruptcy exemptions because the Trustee cannot attach exempt property or the property of third parties.
The Miller or Qualified Income Trust.
If the Medicaid applicant receives an income, you may be able to pour that income into a Trust called a Miller Trust. Miller trusts pay for personal needs, health Insurance, patient liability, and spouse and family support. However, the personal needs allowance is very restricted. The Community spouse may be paid from 2057 to 3090 (2018 figures) for support from this trust. The Community Spouse is given a Shelter Expense if her income is below the limit 2057 (2018). Income may be transferred to her to bring her income up to this limit.
Attempting to use a trust is too late for most people who do not plan for what eventually must happen. Further, we never know when it will happen. Persons have been forced into Nursing home care in their 20s and 30s by disabilities. Planning for Medicaid as a creditor means we plan before the need becomes critical. At least five years before you apply for Medicaid you should have assets out of your name and control. If you don’t, you may go without care, or you may give property away to Medicaid instead of your heirs.
Medicaid planning for Married Couples
Fortunately, Medicaid can never come after the family home if the spouse is still alive after the nursing home resident dies. Your IRA and one auto are also excluded. It can, however, come after any other property such as a farm or vacation home which is not the residence. Essentially almost all property of the recipient including personal injury lawsuits belong to Medicaid. The application process is very similar to a Trustee in bankruptcy or a creditor who has a judgment lien. All of the property belonging to the resident becomes the property of Medicaid with some exclusions such as the marital home.
Many items are not paid by Medicaid like Clothing, Dental care, Eyeglasses, Hearing aids, and batteries, Cable TV, Telephones, personal items, or devices that give patient mobility such as wheelchairs or scooters. These are all items which you may still want to be provided for the patient. Medicaid planning allows the nursing home stay to be more comfortable and pleasant for both the spouse and the resident. Medicaid planning provides the Married couple benefits they otherwise will be without by just moving the property from non-exempt to exempt, so Medicaid doesn’t take it.
The Resource assessment.
At the time of filing, every couple applying for Medicaid will have to supply a Resource Assessment which lists the property to be sold or transferred to Medicaid and what property can be kept. The goal is to give them nothing. Family trusts which are irrevocable and which you have no control in are often used to set property aside for later use. If you transfer property within less than five years before needing Medicaid, you will lose assets or be denied care.
Special or Supplemental Needs Trusts and spending
Certain Trusts can provide for a disabled person, companion which gives care, home, special medical equipment, or handicap vehicle. Special and Supplemental needs trusts can also provide for other exempt items for a severely injured person. The Special and Supplemental needs trusts can be exempt from Medicaid. Depending on whether the trust is created with first party or third party funds Medicaid has either a little or no control. If the person is under age 65, he must be disabled when the trust is created if he sets up the trust with his funds. A self-settled trust is set up with your funds. Any trust must not be controlled by the beneficiary in any way
You may want to transfer or use up property to make countable resources into exempt assets. We also may want to use up assets. For instance, we may put on an expensive 50-year roof, and air conditioner and the furnace for the exempt marital home. This uses up money in savings which is not exempt for an exempt asset. Furniture and appliances are rarely counted as an asset in the resources assessment. If a spouse is going into the nursing home for ten years, now may be the time to buy appliances for the wife who will need them during this time. Exempt assets we keep, non-exempt assets are taken. If assets over 10,000 are left over at the time of death, then Medicaid is paid first. Therefore you may want to make certain assets are used or properly transferred to prevent this.
These laws are listed in 42 USC 1396p(b) (1-4) and Kentucky 907 KAR 1:585. You may also want to see The Medicaid Operations Manual and 2005 Deficit Reduction Act of 2005.