Having to pay for long term care expenses such as a nursing home can be traumatic to any family. The cost of the average nursing home is over $10,000.00 a month. Very few couples have the means to pay this amount over a long period of time. The scariest part for most couples is there is no end date. You start paying $10,000.00 a month from your accumulated savings and you don’t know for how long you need to pay this amount. The average length of stay in a nursing home is often three years; however, it is much longer for patients with Alzheimer’s disease. There are three ways to pay for nursing home costs: pay privately, use long term care insurance, or apply for Medicaid.
Clients often seek the advice of an elder law attorney because they are worried that the nursing home cost is going to leave the community spouse (or the at home spouse) impoverished with no money to survive. The words I often hear are “the nursing home is going to take everything”. There are provisions in the law to protect the community spouse. In a previous podcast, I discussed the Community Spouse Resource Allowance which basically allows the community spouse to keep a maximum of $115,430.00 in countable assets. Today, I want to talk about the “spend down” process. The “spend down” is the period of time from the date that the nursing home spouse first enters the nursing home until the time period when the married couple is financially eligible to apply for Medical Assistance.
What happens during the “spend down” phase? First, the couple can spend down their assets to qualify by paying out of pocket for the nursing home. However, there are other ways to protect some of the money for the community spouse. It is highly advisable to pay off any debts, such as mortgages, car loans, or credit card debt. The State of Maryland doesn’t care how much debt you hold, only how much money you have in assets. Most of my clients are not holding much debt but it is best to pay it off now. The next suggestion that I usually have is to fix up the primary residence. We want the community spouse to be as comfortable as possible for as long as possible. This means to fix the roof, replace the siding, buy new windows, purchase a new heating/cooling unit, replace old appliances, or make any needed repairs. Now is the time to make these large capital expenditures in the hope that the house will not need major repairs before the community spouses passes away.
Another method to spend down the assets is to convert the assets to an income stream. The community spouse is often the woman and she usually has less income. Once Medicaid starts paying for the nursing home, the spouse’s income is a co-payment under Medicaid. The community spouse might not have enough income to maintain their standard of living. Therefore, the community spouse can purchase a Medicaid qualifying annuity to increase the income. The annuity is not considered an asset.
There are several conditions for the annuity to be a qualified Medicaid annuity. The annuity must be irrevocable, non-assignable, immediate, equal monthly payments based on the individual’s life expectancy, and the primary beneficiary must be the State of Maryland up to the amount of money that they have already paid out for the nursing home spouse’s care. Therefore, we recommend that the length of the annuity should be written for the shortest term possible.
As you can see, the process of qualifying for Medicaid can be quite complex. A qualified elder law attorney can assist in helping you to plan in advance for your long term care needs.
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