Whose Money Is It Anyway

Whose money is it?  I can’t tell you how many people I meet with who believe that a husband and wife’s assets are separate assets.  Marriage is a partnership.  When you’re an elder law attorney and you meet with people who have been married for fifty years or more, it’s fairly safe to say that just about every asset the couple owns is a marital asset.

The context in which I frequently meet with people has to do with Medicaid planning.  A family member will come to see me and tell me that “Mom has these assets in her name” and “Dad,” who now needs care in a nursing home, ” has these assets in his name” or “has no assets in his name.”  The thought is, dad will qualify for Medicaid benefits immediately because he has no assets.

Medicaid is a health insurance program for needy individuals.  In order to qualify for Medicaid, a person must have a limited amount of assets and insufficient income to pay for his care.  If an unmarried individual wishes to qualify for Medicaid, he must have less than $2,000 in assets.  With a married couple, the spouse who does not require care, called the “community spouse,” can retain up to $115,000 in cash assets (approximately), plus the home, a car, and the personal property (furniture, etc.).

The $115,000 figure is a maximum figure of cash assets that the community spouse can retain.  The community spouse can only retain the maximum amount of cash assets if the couple’s combined cash assets meet or exceed $230,000, which is double the $115,000 maximum.  If the couple’s assets are less than $230,000, then the community spouse retains less than the maximum amount.

The reason the Medicaid laws permit the community spouse to retain $115,000 in assets is due to the fact that the Medicaid laws pool the assets of a married couple.  In other words, whatever assets one spouse owns, as far as Medicaid is concerned, the other spouse owns.  If the wife owns all the assets and the husband requires care in a nursing home, all of the wife’s assets count against the husband’s eligibility for the Medicaid program.

Even if the wife’s assets came to her by way of inheritance or gift, which would typically be exempt from equitable distribution in the context of a divorce, as far as Medicaid is concerned, those assets belong to the husband as well.  It is because Medicaid combines the assets of the married couple that Medicaid permits the community spouse to retain the $115,000.

If Medicaid didn’t permit the community spouse to retain the $115,000, then the community spouse would be pauperized because the couple’s assets are combined and the spouse in the nursing home can only have $2,000.  These facts would mean that the community spouse could only have $2,000 if the Medicaid laws didn’t permit her to retain the $115,000.

Another common misconception involves a parent adding a child’s name to a bank account.  Many people have come to see me and said “I’m on mom’s bank account, so mom only owns half the account.  The nursing home can only take half.”

These statements are incorrect.  If mom added son’s name to mom’s bank account that holds mom’s money, then the money remains mom’s in its entirety.  Simply adding another person’s name to a bank account does not transfer any portion of the assets in that account to the new joint owner as far as Medicaid is concerned.

The bottom line is, if it sounds too good to be true, it probably is.  Medicaid is a very complex law.  If people could skirt Medicaid eligibility simply by adding another person’s name to their account or transferring all of their money from the ill-spouse to the well-spouse, the laws governing Medicaid eligibility would have no meaning.  There are planning techniques available, but they may require the assistance of a trained professional.

Federal Court Upholds Use of Annuities

A recent New Jersey federal court decision reaffirms the use of annuities as a Medicaid planning device.  Medicaid is a health insurance program for needy individuals.  In order to qualify for Medicaid, an individual must have a limited amount of assets and his income must be insufficient to pay for the cost of his care.

When dealing with a married couple, Medicaid combines the assets of the couple.  No matter which spouse owns the asset, the asset is owned by both spouses as far as Medicaid is concerned.  Because of this fact, the Medicaid laws permit the spouse who does not need care, called the “community spouse,” to retain a certain amount of assets.  For instance, the community spouse can retain the house, a car, and up to a maximum of $115,000 in cash assets.  All other assets must be spent down before the spouse who requires long-term care, called the “institutionalized spouse,” can qualify for Medicaid.

Income is treated differently than assets.  As stated, assets of a married couple are combined and it is wholly irrelevant which spouse owns the assets.  Income, on the other hand, belongs to the spouse to whom the check is made payable.  This is known as the “name on the check” rule.  If the community spouse receives Social Security of $1,000 per month and a pension of $500 per month, then that $1,500 is her income and does not count against the institutionalized spouse’s eligibility for the Medicaid program.  If the institutionalized spouse has fixed monthly income of $2,000, then that is his income.

Only if the institutionalized spouse’s monthly income exceeded the cost of his care would he be ineligible for the Medicaid program.  For instance, if the institutionalized spouse were residing in a nursing home and the nursing home cost $9,000 per month, but the institutionalized spouse had fixed monthly income of $11,000 per month, then the institutionalized spouse would not qualify for Medicaid.  The amount of his income would exceed the cost of his care in this example, so he is ineligible for Medicaid.

The community spouse’s income does not affect the institutionalized spouse’s eligibility for Medicaid.  For instance, if the institutionalized spouse’s income were $2,000 per month but the community spouse’s income were $11,000 per month and the cost of care were $9,000 per month, then the institutionalized spouse would qualify for Medicaid, if his assets were at the appropriate level.  The cost of his care ($9,000) exceeds his monthly income ($2,000), so he is eligible for Medicaid.

Annuities are used as a planning technique to convert excess assets into a stream of income that belongs to the community spouse, not the institutionalized spouse.  For instance, assume that Mr. and Mrs. Smith own a house, a car, and $300,000 in cash assets.  Assume that Mr. Smith enters a nursing home, and Mrs. Smith wants to qualify Mr. Smith for Medicaid benefits, which will pay for the costs of the nursing home.

Medicaid will permit Mrs. Smith to retain the home, the car, and $115,000 in cash assets.  The Smiths continue to have $185,000 too much in cash assets; however, If Mrs. Smith were to use that excess $185,000 to purchase a certain kind of annuity in her name, she would effectively convert the excess $185,000 in assets into a stream of income that belongs to her and that does not count against Mr. Smith’s eligibility for Medicaid.  Mr. Smith would qualify for Medicaid immediately.

In the recent federal court case, the State challenged certain wording in the annuity contract, claiming that the wording prevented the annuity from complying with the requirements of the Medicaid laws.  The federal court ruled against the State, holding that the annuity did comply with all of the requirements of the Medicaid laws.  This case is yet another federal victory in a long string of federal victories on the subject of annuities planning in the context of Medicaid.

Kickin’ Dad to the Curb

When a family member needs long-term care, it is scary.  It’s scary to see a loved one deteriorate.  It’s scary to see someone who has taken care of themselves your entire life, perhaps even taken care of you at one time, need care themselves.

To top it off, providing for the long-term care that loved requires is scary.  The long-term care field is quite complex.  There are multiple types of long-term care—home health aides, adult day care centers, assisted living residences, nursing facilities, and continuing care retirement communities.  And the cost of long-term care is stunning, anywhere from $2,000 to $12,000 a month.

The people who work at the nursing homes and assisted living residences do the work they do for a living.  Compared to you, they are “experts” at what they do.  To you, the entire process is an unknown and a scary event, scary because of the expense, scary because you are unsure if you are doing the right thing for your loved one.

In short, when a loved one suddenly requires long-term care, you are in a very vulnerable state, and it is little wonder that the people who are in the long-term care field exploit that vulnerability.

Nursing homes are repetitive abusers of the lay person’s vulnerability.  Nursing homes frequently tell family members and residents things that simply are not true.  Just last week, I had a client who was the victim of these lies.  A well-respected senior advocate group has written a booklet about the twenty most common lies that nursing homes tell people, and I recently re-read this booklet to brush-up my knowledge on the subject.

Most people enter a nursing home after they are discharged from a hospital.  The patient enters the nursing home for rehabilitation.  For instance, Mr. Smith falls and breaks his hip.  Mr. Smith goes to a hospital for surgery on his broken hip.  Mr. Smith spends several days in the hospital, then is discharged to a nursing home for rehabilitation of his newly-mended hip.

Most people don’t think of rehabilitation facilities as nursing homes, but they are.  A nursing home provides rehabilitation and long-term care services under the same roof.  When you are in a rehab center, you are in a nursing home.

After anywhere from several days to several weeks, Mr. Smith will be ready to be discharged from the nursing home because the nursing home believes that Mr. Smith has achieved the goals that were set for him as far as his rehabilitation.

Mr. Smith’s family might believe that Mr. Smith needs to remain in the nursing home.  Perhaps Mr. Smith was beginning to suffer from dementia before his accident, and the accident and subsequent surgery has caused his dementia to kick into high gear.  (This is not uncommon at all.  In fact, this is what happens in a great number of cases.)

Assume that Mr. Smith has very little money.  The nursing home may tell the family, “We don’t have a Medicaid bed at this time” or “We have a waiting list for a Medicaid bed that is two years long” or “We require you to give us a security deposit of $10,000,” which Mr. Smith does not have or “We require private-payment for one year before we’ll accept Medicaid.”  The facility will then tell the family that they have to take Mr. Smith home.

All of these statements, which are probably made every day at some facility, are lies.  The fact of the matter is, the nursing home is stuck with Mr. Smith.  In short, the nursing home cannot discharge Mr. Smith unless the nursing home can implement a safe-discharge plan, and Mr. Smith’s family is under no obligation to provide the care Mr. Smith needs to Mr. Smith.  Sending Mr. Smith home without a 24/7 care plan in place is an unsafe discharge, and the nursing home cannot do that.

Federal and state law prohibits nursing homes from requiring a patient to pay privately for a period of time before it will accept a resident on Medicaid.  So, the bottom line is, Mr. Smith can stay in the nursing home and can begin receiving Medicaid benefits and there is nothing that the nursing home can do about it.  Ironically, it is the nursing home that is in the weaker position, not the resident.  The nursing home is just far more adept than the layperson at flipping the dynamic and making it appear as if the family member is in the weaker position.