Consider this common scenario:
Your loved one recently suffered some debilitating medical condition, has been in the hospital for some time and is now being released to long-term (nursing) care (which has been deemed medically necessary by the doctor). From various sources, your loved one gets about $3,000 per month in income. You’ve been told that the nursing home is about $4,000 per month, has various assets, and that your loved one probably doesn’t qualify for the government program that helps pay for nursing care. You really don’t understand the requirements of the government program and need help.
Unfortunately, this example is all-too-common. Let me help break it down for you.
First – let’s talk Medicaid. As you probably know, when someone reaches the age of 65 (the designated “retirement” age), certain government benefits usually kick in. If you (or a spouse) has paid into the system, you get Social Security retirement income. No matter what, you get Medicare (the social insurance program that gives certain healthcare for free to senior citizens). For whatever crazy reason, when the government designed this program, they didn’t include long-term nursing care into the program but another government program, Medicaid does offer long-term care. So, many people in need of long-term nursing care (whether they need it because of age or disability) seek the help of Medicaid to pay for it. A couple of pertinent facts about Medicaid:
- Medicaid is a Federally-funded program run by each state. Like any program with strings from both the Federal and State governments, there is a substantial amount of red-tape, requirements, and hassle.
- Nursing care is expensive. In 2010, a study showed that the average nursing home cost about $4,000 per month.
- Certain groups of people automatically qualify for Medicaid (which includes the nursing care we’re discussing). If you receive SSI, are part of the TANF program, or are in the State’s foster care system, you likely already qualify for Medicaid. If none of those apply, you can still qualify if you’re over 65, disabled, or blind provided you also meet certain income and resource (asset) limits.
- The income and resource limits change annually, but in 2016, a single person cannot make more than $2,199 per month and/or countable resources of no more than $2,000. (*Importantly, if you don’t qualify, don’t think you can just transfer assets out of your name in order to qualify. Years ago, the government got wise to this strategy and imposed a penalty for anyone who transferred assets within the last 5 years; we’ll talk more about this below).
- Sometimes, after a patient dies, the government will seek recovery of the sums paid out on the patient’s behalf through a program called Estate Recovery. This does not happen in every case but can happen in certain situations. Don’t be intimidated by this, but be aware of it.
Second – let’s talk Estate Planning. As an attorney, I strongly believe (and suggest) every adult has some form of basic estate planning. At the very least, this should include a Last Will & Testament, but also important documents that can help loved ones deal with disability issues like the one discussed in this article. Such documents include a General Durable Power of Attorney (which is a financial power of attorney that remains effective even after disability) and a Medical Power of Attorney (which is a limited power of attorney that provides the agent can make important medical decisions if needed). In the context of a person who is disabled, these documents are extremely important because, among other issues, it allows you to the legal right to make decisions on behalf of your loved one. Because Estate Planning can be done simply and relatively inexpensively these days, there’s no reason that every adult person should not be protected with such planning.
Third – Medicaid Qualification Strategies. So, if your situation sounds like the example above, what do you do? Fortunately, there is a solution. If your loved one is competent (can sign their own legal documents) or if they previously named someone as their agent under a General Durable Power of Attorney, we can use certain types of trusts to help them qualify for Medicaid. In Texas, a Medicaid Planning Trust or Miller Trust is utilized (also called a “Qualified Income Trust”). In essence, this is an irrevocable trust that directs the patient’s income into the trust. In the most basic terms, this is a trust that establishes income go into a certain type of account and filters the money in a way that precludes it from being counted for purposes of Medicaid eligibility. This is not a unique or trivial strategy – it’s government approved and is done routinely.
A Word of Caution. Medicaid is a complicated program with complicated requirements. While you can get a good idea of what it’s about by reading internet articles, be wary of talking to people about it who aren’t lawyers that practice in the field of Elder Law or Estate Planning Law. Unfortunately, there are a few disreputable non-lawyers who advertise their services to help people get qualified for Medicaid. That’s illegal. Texas law clearly provides that only lawyers can charge a fee for helping people become qualified to receive Medicaid benefits. If you need help in this area, feel free to contact our offices.
ATTORNEY CHRIS PARVIN is Board Certified in Estate Planning & Probate Law by the Texas Board of Legal Specialization. Mr. Parvin is the Managing Partner of the Dallas, Texas law firm of Parvin Law Group, P.C. and serves as an Adjunct Professor of Law at Texas A&M University School of Law. Mr. Parvin can be reached by email at firstname.lastname@example.org.
Parvin Law Group, P.C. is a Concierge Law Firm in Dallas, Texas with attorneys practicing law in the fields of Estate Planning, Probate, Business Law and Family Law.