Elder law is not just about Medicaid (MassHealth) planning; very few people actually end up needing long term nursing home care. However, for those who need it, and their spouse left behind in the community, the changes to the Medicaid rules make a big difference in the different strategies used. I posted about changes to the look-back period and transfer penalty start date few weeks ago, and here are some of the additional changes.
Annuities
Annuities used to be used as a planning tool by an unmarried person who is in a nursing home. By purchasing an annuity with excess funds, the person qualifies for Medicaid coverage. The income from the annuity goes to pay the nursing home every month, with the additional cost of coverage paid for by Medicaid. When the person dies, the beneficiary named on the annuity receives the remaining funds. This used to be a child or non-spouse partner.
The new law requires that the state be named as the remainder beneficiary (after any spouse or minor or disabled child) for the amount equal to the funds paid on the deceased's behalf. There are other very specific rules about annuities and Medicaid, which your attorney or financial adviser should be able to talk to you about.
Home Equity
Under the new law, individuals cannot establish eligibility for Medicaid coverage of nursing home care if their equity interest in their home exceeds $500,000 (this has been increased to $750,000 in Massachusetts), unless a spouse or minor or disabled child resides in the home. There will be a process whereby the home will not be a countable asset even if the equity exceeds the maximum "in the case of a demonstrated hardship."
There are ways to reduce the equity in the home without having to sell it, such as a home equity line, or selling a portion of the home to the children, but these should not be done without consulting an elder law attorney as each has their own ramifications.
Long Term Care Insurance
For those people who can afford it, and qualify medically, long term care insurance may be a good way to protect yourself and your assets from overwhelming nursing home costs. In addition, some long term care insurance policies will allow coverage for in home care, which Medicaid does not usually cover. AARP has educational materials on LTC insurance on their website, which also sells LTC insurance policies.
Final Thoughts
No one wants to go to a nursing home, and the cost is expensive for individuals and states, but the solution is not simply making drastic cuts to the system. People will still need the care, and the nursing home won't be able to simply discharge patients who have run out of funds but are in a "penalty period" for a donation they made to a charity 3 years ago, or a gift to a grandchild to go to college 4 years ago. It remains to be seen what the long term effects of the Deficit Reduction Act are. I'll be sure to post about them here, and feel free to let me know what your thoughts are as well.
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Estate
Planning, Medicaid, Probate and Trusts involve complex areas of law. Individual
circumstances must be considered before any advice can be given. The
general information above is not to be construed as legal advice, which
can only be given after consideration of the unique facts of each
matter. Please seek the advice or counsel of your attorney, financial
advisor or CPA as it may be appropriate.
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