10 Asset Protection Tools for Long Term Care

By Janna P. Visconti, Esq.

1. Plan Ahead - legally - Remember, you cannot give your money away in order to qualify for Medicaid unless you do it very carefully, with the help of an attorney concentrating in Elder Law.

2. Keep Accurate Records - Keep all bank statements, copies of cancelled checks (over $1,000), financial records, tax returns, and medical bills. Beginning with Medicaid applications submitted in March, 2009, the Look-Back Period will increase each month, by one month, until it reaches 60 months (5 years) in March, 2011.

3. Consider Long Term Care Insurance - If you are young enough, healthy, and have some assets you want to protect, Long Term Care Insurance should be your first line of defense. Consult with a specialist in this area and purchase a plan that will allow you to receive the type of care you desire, in an environment of your own choosing.

THE FOLLOWING LEGAL TOOLS HAVE BEEN GREATLY SIMPLIFIED. DO NOT ATTEMPT ANY OF THESE TECHNIQUES WITHOUT THE ADVICE AND GUIDANCE OF AN ELDER LAW ATTORNEY.

4. Advance directives - Have an Elder Law Attorney draw up an Expanded Power of Attorney, Health Care Proxy, and Living Will. These are simple, relatively inexpensive documents that may save your family a lot of money, delay and heartache if you or your spouse should become incompetent. These documents will allow your loved ones to carry out your wishes about your health care, when you are unable to do so. They may also allow your loved ones to do crisis Medicaid planning with the help of an Elder Law Attorney, so that some of your assets can be preserved for you, your spouse or your children.

5. Exempt Assets - Although Medicaid is a program for people with very low assets (currently, $4350), some assets are exempt. You may be able to purchase exempt assets, such as a car, house, life estate in a house, improvements to your house, an irrevocable prepaid funeral, and other personal items, and convert excess resources into exempt assets. With careful structuring, certain investments, such as IRAs, certain loans, and some reverse mortgage proceeds, may be exempt.

6. Exempt Transfers - Ordinarily, a Medicaid applicant who is admitted to a nursing home, and has given away money, will be denied Medicaid benefits for a period of time, called a penalty period. Some gifts, however, are exempt, and the applicant will not be penalized. In certain circumstances, a Medicaid applicant can transfer assets to a spouse or to a disabled or blind child. A house can be transferred to a minor, disabled or blind child, a "caregiver" child who has lived with the applicant for at least two years before the applicant is institutionalized, or to a sibling who has an equity interest in the home and has lived there for at least one year. Since there is no penalty period for some types of Medicaid home care, an applicant can transfer assets and become immediately eligible.

7. Irrevocable Trusts - Whether you give you money to your children, or put it in a Trust, the "Look - Back Period" is now five years for all non-exempt transfers. In other words, if you make a gift of $300,000 to your children tomorrow, and you apply for Medicaid anytime within the next five years, you are going to be penalized (denied Medicaid) because of that gift. The government will want your children to return the money. If it has been spent, or your children's creditors have gotten their hands on it, you will be in a difficult situation. An Irrevocable Trust may give you a layer of protection for your assets. A house and/or investments may be placed in the Trust.

8. Caregiver Agreements - You may be able to employ your family members to perform services, such as bookkeeping, companionship, and home repair for you. You can pay them a reasonable salary, but there must be a written contract that conforms to Medicaid rules, they have to pay taxes on their income and they have to keep careful record of the hours they worked for you. This a new planning tool, and has not been extensively tested with the Department of Social Services.

9. Reverse Mortgage - If you are at least 62 years old, house rich, and cash poor, a reverse mortgage might provide you with significant amounts of money which can be used in any way you wish. You will not have to make loan repayments while you reside in the home, and you can take your money as a lump sum or as monthly payments. If you also intend to apply for Medicaid, you should be careful not to take more than you will need to spend each month.

10. Crisis Planning - Very few people want to go to a nursing home, so when it is absolutely unavoidable and no advance planning has been done, we call it a crisis. If the applicant has the mental capacity to sign a contract or had the foresight to sign an Expanded Durable Power of Attorney, asset restructuring may preserve some of the applicant's assets. If the applicant is otherwise eligible for Medicaid, but has excess assets, we may be able to gift approximately half to a loved one, and make a loan to another loved one, with the loan repayments scheduled to pay for the nursing home during the resultant penalty period caused by the gift. This a new planning tool, and has not been extensively tested with the Department of Social Services.