Readers of this column know that I have often discussed the long-term planning involved in protecting assets from being lost to pay for nursing home care. As part of that discussion, I have explained that assets transferred more than five years before a Medicaid application to pay for nursing home care are not considered when determining a Medicaid applicant’s eligibility.
This five year period is known as the “look back period”. If assets are properly transferred from you to someone else more than five years ago (including to an irrevocable trust), those assets are not considered your assets when later determining your Medicaid eligibility.
But the question naturally arises – what if you don’t have five years to wait? What if your spouse is going into a nursing home tomorrow, and you have not done any sort of Medicaid planning. What do you do then?
Fortunately, there are several practical things you can do to protect assets, even if a nursing home admission is imminent.
Number 1 – Consider transferring your house. If your spouse is entering a nursing home in the near term and you own a house with him or her, then the house can be transferred to the “Community Spouse” (the spouse who is not entering the nursing home) from the “Institutionalized Spouse” (the spouse who is entering the nursing home). Generally speaking, that transfer is an exempt transfer that will not result in a penalty period being imposed. A penalty period is an amount of time that Medicaid will be delayed based on the value of the asset that was transferred.
The transfer of the house must be done by a deed, which is recorded in the County Clerk’s office. A challenge that sometimes occurs is what do you do if the spouse transferring their interest is no longer competent to sign a legal document, like a deed? As an alternative, the deed may be signed by an agent (potentially the Community Spouse) pursuant to a properly drafted power of attorney. In the event a power of attorney is not in place, the deed may potentially be authorized by a court in the context of a guardianship proceeding under Article 81 of the Mental Hygiene Law.
Number 2 – Consider paying down your mortgage or making house repairs. To the extent that you have a mortgage on your house, you can take your excess resources (above the allowable Medicaid eligibility levels) and pay down or eliminate your remaining mortgage debt. Since the house will be an exempt resource in the ownership of the Community Spouse, it would be advantageous for the Community Spouse to own the house with as little debt as possible.
It is also allowable to use excess resources to make delayed or needed repairs to the house. If you have been putting off replacing the water heater or air conditioner, this would be the time to do it. More significant expenses, like kitchen remodeling, would likely be impractical.
Number 3 – Prepay funeral and burial expenses. You are allowed to pre-pay funeral and burial expense with excess resources as well. These are costs that need to be paid at some time, so why not pay them now in order to reduce excess resources? This payment will not result in any penalty period imposition.
Number 4 – Buy a new car. It sounds counterintuitive to buy a new car at a time when a couple may be facing significant nursing home costs, but a Community Spouse is allowed to own a car and not have that asset counted against the Medicaid eligibility of the Institutionalized Spouse. So if you have an older car and it is time to consider buying a new one anyways, why not use your excess resources to purchase such an exempt asset?
Number 5 – Pay off existing consumer debt – If you or your spouse has existing consumer debt, like credit cards, you can pay that off without adversely affecting the eligibility of the Institutionalized Spouse. This likely will allow your family to better position themselves financially in the long run.
These are just five options to consider when your spouse is facing a nursing home admission in the near future. There are other more aggressive options, as well, such as transferring all assets to the Community Spouse and having the Community Spouse thereafter file a Spousal Refusal. A Spousal Refusal indicates that the Community Spouse refuses to make his or her assets and potentially income available to pay for the care of the Institutionalized Spouse, despite those assets being above the allowable levels.
People sometimes ask whether they can simply transfer their assets to their children or other relatives in an effort to reduce their assets to a level where they will be eligible for Medicaid. With some exceptions, the answer to that question is generally no. Such transfers usually result in the imposition of a penalty period, which will delay the Medicaid coverage to the Institutionalized Spouse.
Whether the five steps above, a Spousal Refusal, or other options are best for you is something you should discuss with an experienced elder law professional. It is important to know your options under the law, so that the maximum amount of your assets can be retained for you and your family.