Nursing homes are expensive. Massachusetts residents work hard to build up their savings for retirement. But all those savings can dry up quickly for a person who requires long-term care. Social Security and other benefits programs can help, but they may not provide enough income to pay for care.
What’s more, some benefits programs use a means-testing approach, in which a person must have below a specified amount in income and assets in order for them to be eligible for the benefits. This requirement can leave some people in a difficult in-between situation: They’re considered too wealthy for the benefits, but they can’t afford the care they need.
For example, Medicaid provides long-term care benefits to nursing home residents who have no more than $2,000 in “countable assets.” In some cases, eligible people may own a home or other assets that are well beyond that value, but if they have a bank account or other liquid asset that goes over the limit, they can lose their eligibility.
Many seniors and their families get around this problem through Medicare and Medicaid planning. Attorneys with experience in elder law and related legal fields can help people arrange their assets in a way that protects their property while maintaining their eligibility for the benefits programs that can help them.
Medicaid planning involves taking an inventory of all the person’s property, dividing it into exempt and non-exempt assets, calculating their income and then, if possible, transferring assets in a way that maintains their eligibility. For instance, they may transfer assets to a spouse or their children.
In the case of a married couple, Medicaid requires taking inventory and calculating all assets and income from both spouses. This can be especially complicated in cases where only one spouse needs long-term care, or where one spouse needs it long before the other does.
Medicaid uses the term “community spouse” to refer to a person who is not in long-term care but has a spouse who is in a nursing home or other long-term care situation. For eligibility purposes, the community spouse can own a much larger amount in assets, but there is still a limit. This limit changes every year to reflect inflation, and so these couples may have to inventory their assets every year to make sure they maintain eligibility.
Some families can get around some of these hurdles through careful use of trusts. A trust is a way of dividing ownership: A trustee manages the assets in the trust for the benefit of the named beneficiaries. If the beneficiary is a person in a nursing home, the trustee can pay out the assets in the trust to the beneficiary in a way that does not push them above the income threshold. At the same time, the assets in the trust no longer technically belong to the beneficiary, so they are not counted as property that would make the person ineligible for the benefits.