medicaid planning for married couples

MEDICAID PLANNING FOR COUPLES: HOW TO MANAGE THE $7-9,000/MONTH COST OF STAYING IN A NURSING HOME

P. Haans Mulder, JD, MST, CFP®

Cunningham Dalman, P.C.321 Settlers RoadHolland, MI 49423(616) 392-1821phmulder@holland-law.com

Upcoming Seminars• Medicaid Planning for Singles-April 18• Veterans Benefits, Estate Recovery, and

Changes in the Medicaid Rules-June 13• All seminars are at 4:30

Serving the Holland area since 1900

Background• Attorney and Partner at Cunningham

Dalman, P.C.• Have a Masters in Tax (MST), CFP®

and specialize in estates/elder law and business planning.

Serving the Holland area since 1900

Background• Cunningham Dalman, P.C. has been serving

the greater Holland area since 1900.• We have 15 attorneys specializing in all

areas of the law.

Serving the Holland area since 1900

Overview• Discuss the Medicaid rules and the

program.• Give you some ideas to help the healthy

spouse protect more of your assets if nursing home care is necessary.

Serving the Holland area since 1900

Did you know?• 40% of people 65 years and older will

stay in a nursing home.• Average cost to stay in a local nursing

home is $7-9,000/month ($84-$108,000/year).

Serving the Holland area since 1900

What is Medicaid?• It is a state and federal program that

pays for medical treatment (including long term care).

• Oftentimes confused with Medicare.

Serving the Holland area since 1900

When does Medicaid apply?• Historically, it only paid for nursing

home care. • In certain counties (that have the MI

Choice Waiver program), it will pay for care in someone’s home or an assisted living facility.

Serving the Holland area since 1900

Who does Medicaid apply to?

• Applies to people who are 65 years or older, blind, or disabled.

• Must satisfy the medical requirements (level of care assessment).

• Need to meet the income and asset tests.

Serving the Holland area since 1900

Who does Medicaid apply to?

• Your monthly income cannot exceed the monthly cost of your stay in a nursing home ($7-9,000 in this area).

• For the Waiver program, your income (not your spouse) must be less than $2,094/month.

Serving the Holland area since 1900

Who does Medicaid apply to?

• Asset test allows a married couple to keep their home (again, if it’s not in a trust), a vehicle, and one-half of their other assets (up to a maximum of $115,920).

Serving the Holland area since 1900

Planning Example #1• Clients are a husband and wife who

are in their 70’s.• They have a house and $250,000 in

investments.

Serving the Holland area since 1900

Planning Example #1• They previously planned to avoid

probate by having an estate plan (which included a living trust, pourover will, and powers of attorney) and titling their assets in their trust.

Serving the Holland area since 1900

Planning Example #1• They are now worried about the cost

of long term care.• They are also concerned about one of

them passing and what “safety net” will be available for the surviving spouse.

Serving the Holland area since 1900

Planning Example #1• To plan for these risks, they convert

their joint living trust into a single living trust.

• If one spouse passes away, the single living trust becomes a “spousal supplemental needs trust.”

Serving the Holland area since 1900

Planning Example #1• If the surviving spouse needs nursing

home care in the future, she will likely qualify immediately for Medicaid.

• The trust creates a “safety net” to pay for the house and expenses not covered by Medicaid (so the children do not have to).

Serving the Holland area since 1900

Planning Example #1• If one spouse was already on

Medicaid, that spouse will remain in the program.

• It also creates a “safety net” to pay for expenses not covered by Medicaid (so the children do not have to).

Serving the Holland area since 1900

• The client is a husband and wife in their mid-70s and have three children.

• Their son is trustworthy and lives close by.

• Have a house, vehicle, and $350,000 in investments.

Serving the Holland area since 1900

Planning Example #2

• They receive monthly income of $2,200 in Social Security and $600 from a pension.

• They have monthly expenses of $3,200 so there is a shortfall of income of $400 per month.

Serving the Holland area since 1900

Planning Example #2

• The wife is very healthy.• The husband has been diagnosed with

an early onset of Alzheimer's and they are concerned about him going to a nursing home and the wife not having sufficient resources.

Serving the Holland area since 1900

Planning Example #2

• They create an irrevocable trust in which they receive the income (interest and dividends).

• Their son is the trustee and their three children are the beneficiaries of the trust principal.

Serving the Holland area since 1900

Planning Example #2

• They make a gift of $200,000 to the trust.

• They will receive approximately of $667/month in income from the trust.

• They will not likely need any other resources.

Serving the Holland area since 1900

Planning Example #2

• If they need other resources, their son can take a distribution from the trust (because he is the trustee and beneficiary).

• He can then gift it back to them.

Serving the Holland area since 1900

Planning Example #2

• There is a five year “look back” period for Medicaid.

• The husband will need to remain healthy for five years from the time of the gift for this planning technique to be effective.

Serving the Holland area since 1900

Planning Example #2

Planning Example #3• The clients are a husband and wife in

their late 70s.• They have a house, vehicle, and

$250,000 of investments.• The wife had to go to a nursing home.

Serving the Holland area since 1900

• They could keep the house (because it was properly owned) and their vehicle

• Without any Medicaid planning, they would have had to spend down their investments to the less of one-half or $115,920.

Serving the Holland area since 1900

Planning Example #3

• Drafted a “sole benefit trust” that allowed the husband to protect all of their investments (as opposed to just half).

• The wife was able for qualify immediately for Medicaid and no spend-down was necessary.

Serving the Holland area since 1900

Planning Example #3

Questions……

Serving the Holland area since 1900

Upcoming Seminars• Medicaid Planning for Singles-April 18• Veterans Benefits, Estate Recovery, and

Changes in the Medicaid Rules-June 13• All seminars are at 4:30

Serving the Holland area since 1900

Thank YouP. Haans Mulder, JD, MST, CFP®Cunningham Dalman, P.C.321 Settlers RoadHolland, MI 49423(616) 392-1821phmulder@holland-law.comwww.holland-law.com

Serving the Holland area since 1900