Medicaid Planning for Nursing Home Care

Nursing home living is expensive. If you plan to move to a nursing home, it’s time to start planning now, so you and your family are able to afford it without depleting your life’s savings.

The average cost of a nursing home in North Carolina is $5,500 per month. Private insurance will pay only a minor fraction of this cost, while Medicare will cover less than two percent. That leaves Medicaid as the only viable payment option for most elderly citizens.

To learn more about Medicaid nursing home benefits and to discuss your specific planning needs, contact the attorneys at TrustCounsel today by calling us at 800-201-0413 or by e-mailing us at info@trustcounselpa.com.

Medicaid in North Carolina

Medicaid is a government-funded program that provides nursing home benefits to those who have limited income and resources.  Applying for Medicaid can be a lengthy and difficult process. You must complete extensive paperwork and provide specific documentation. An experienced and knowledgeable attorney can guide you through the process, including helping you to determine if you meet certain income and asset criteria established by the North Carolina Division of Medical Assistance (DMA), and how to best preserve your life’s savings when faced with the costs of nursing come care.

Income Test

If you do not have enough countable monthly income to cover your nursing home costs after deducting allowable expenses, then you meet the income test. Countable monthly income consists of wages, pensions, Social Security benefits and savings interest.  Your allowable monthly expenses include:

• $30 per month for personal needs, such as clothing and toiletries;
• Uncovered medical costs, such as health insurance premiums;
• A monthly allowance paid to your spouse (if still living at home) or dependents; and
• A home maintenance allowance if you intend your nursing home stay to be less than six months, and your spouse is not living in the home.

If your spouse is living outside of a nursing home, the spouse may keep all income paid solely in his or her name and does not need to contribute any of it to your nursing home costs. Your spouse may also share in your income. The DMA will determine your spouse’s monthly maintenance needs allowance based on his or her housing costs, and if the spouse’s income falls below those monthly maintenance needs, the difference can be taken from your income up to $2,739 per month. The spouse can also receive an additional share of your income by showing exceptional financial hardship.

Asset Test

To meet the asset test, whether you are single or married, you can have no more than $2,000 in countable, or nonexempt, assets in your name. In addition, you may own the following exempt assets and still qualify for Medicaid nursing home benefits:

• Home: The equity in a home of up to $500,000 may be exempt if: you intend to return to the residence within six months; a spouse, dependent minor children or disabled children still live in the home; or the home is rented and produces a net income of at least six percent of its equity after deducting expenses related to producing that income.
• Real property interests: Life estates, tenancies in common and remainder interests may be exempt.
• Tangible personal property: Personal items, such as jewelry, furniture, clothes, a mobile home used as a home site and up to one automobile may all be exempt.
• Certain liquid assets: Exempt assets include term life insurance, variable life insurance that does not exceed $10,000 in cash value, IRA/retirement accounts that cannot be withdrawn in a lump sum and irrevocable burial contracts (however, $1,500 in nonexempt assets may still be set aside for burial purposes).

Certain trusts may also qualify for exempt status, such as when you are the beneficiary of a trust funded by your spouse’s will or the beneficiary of a trust that prohibits any distributions to you under any circumstances. If the trust was funded by someone other than you or your spouse and requires the assets to be distributed to you under certain circumstances (i.e. for educational or health expenses), then any distributed assets would be nonexempt, while the remainder would be exempt.

If you are married, the combined nonexempt assets of you are your spouse are counted towards determining your Medicaid eligibility. However, your spouse may retain one half of those assets (up to $109,560) or the minimum resource allowance amount of $21,912.

Transfer Penalty

To keep people from simply giving away their assets at the last minute to avoid paying nursing homes, the DMA has restrictions on transferring assets. These rules were greatly changed by the Deficit Reduction Act, which applies in North Carolina to any transfers made on or after November 1, 2007.

Under these rules, any transfer you have made to an individual or trust within 60 months of your Medicaid application – called the “look-back period”—results in a period in which you are ineligible to receive Medicaid benefits. This period of ineligibility is calculated by taking the amount transferred and dividing it by $5,500. For example, a transfer of $220,000 would result in 40 months of ineligibility.  However, certain transfers are exempt from the penalty, including:

• Any transfer to your spouse or to your blind or disabled child;
• Compensated transfers (sold or exchanged for a value greater than or equal to the fair market value of the transferred asset);
• Transfers of exempt assets;
• Transfer of your home to your spouse or to your blind or disabled child; or
• Transfer of your home to a “caretaker” child who has lived in the home for at least two years prior to your institutionalization while providing nursing home-level assistance to you.
• Purchase of certain annuities if they comply with Medicaid regulations.

Estate Recovery

When a Medicaid recipient dies, the DMA is required to seek reimbursement from the recipient’s estate, including property and other assets that were exempt during the recipient’s lifetime. However, the state waives any estate recovery when:

• A spouse, minor child or adult disabled child continues to live on estate property;
• The estate’s total assets are less than $5,000;
• The amount of Medicaid payments recoverable are less than $3,000; or
• Estate recovery would impose undue hardship on an heir who is dependent on the estate assets for financial support.

If you need care at an assisted living facility rather than a nursing home, North Carolina offers the Special Assistance Program to provide benefits to those who have limited income and resources. The Special Assistance Program is similar to Medicaid but operates under a different set of rules and criteria regarding eligibility.

Contact Us Today

In addition to helping you determine if you meet the income and asset criteria to qualify for Medicaid nursing home benefits, a North Carolina Medicaid planning attorney can assist you with establishing trusts and handling transfers of assets that are within the Medicaid rules. In other words, the attorney can help you to find ways to qualify for Medicaid without losing your life’s savings. You should begin planning now if you think you might be entering a nursing home within the next five years. To discuss your situation, contact the attorneys at TrustCounsel today by calling 00-201-0413 or e-mailing info@trustcounselpa.com.