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Medicaid explained

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MEDICAID EXPLAINED
For more information and suggestions for your own Medicaid planning – contact us for a private consultation or to have more information sent to your home.

LBJ Pension & Consulting Services, Inc.
Barry Jewell J.D. – Asset Strategist
http://www.lbjpension.com
www.facebook.com/pages/LBJ-Pensions-Consulting-Services-Inc/644814248997910

Published in: Health & Medicine
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Medicaid explained

  1. 1. MEDICAID EXPLAINED Medicaid provides medical assistance for public assistance recipients and other low income persons. An individual who is aged 65 or older, blind or disabled will be eligible for Medicaid in a skilled nursing facility or intermediate care facility if certain resources and limitations are met. An individual must deplete resources to approximately $2,000 in order to establish Medicaid eligibility. Medicaid is a joint federal-state program that pays for the cost of nursing home care for most nursing home residents. Medicaid has both asset rules and transfer rules for determining eligibility. The transfer rules are used to determine whether certain gifts made will cause an ineligibility period for Medicaid. The general rule is that transfers for less than fair market value will create an ineligibility period if made within the five-year period prior to the filing of a Medicaid application (i.e., the look- back period). Certain transfers of resources will not create an ineligibility period, including transfers between spouses, transfers to children with disabilities, transfers to a trust for the benefit of a disabled person under the age of 65, transfers to caretaker children, and transfers to siblings in certain situations. I. Exempt assets. The following assets are exempt, which means they are not counted: 1. Under certain conditions, the home with an equity value not to exceed $500,000. If the home is sold, the proceeds are exempt for 90 days if they are used to purchase a new home. 2. Household belongings (i.e., furnishings, personal effects, and jewelry). 3. A burial account of up to $1,500. 4. Burial plots. 5. Pre-paid noncancelable burial contracts. 6. Cash value of life insurance that does not exceed $1,500 face value.
  2. 2. 7. Term-life insurance. 8. One motor vehicle, regardless of value, if used by a member of the household. 9. Inaccessible assets. 10. Pension funds until they are accessible to the client. 11. Certain income-producing property essential to a person's self-support (e.g., an applicant-owned small business on which the applicant and the family depend). 12. Up to $6,000 of the equity value of nonbusiness property used to produce goods and services essential to the individual's self-support. II. Look-back period. Medicaid looks back for 60 months (i.e., five years) from the date the application is filed to determine if any ineligible transfers have occurred. If such gifts have been made, the applicant is ineligible for benefits from the date he or she would otherwise have been eligible for benefits until the penalty period expires.It used to be possible to transfer some of the applicant’s assets, intentionally setting up a penalty period, and just keep enough assets in the applicant’s name to last through the ineligibility period. This won’t work now, because the ineligibility period doesn’t even start until the applicant is eligible for Medicaid, that is, has $2,000 or less in his name. The penalty period is calculated by dividing the total transfers by Medicaid's calculation of the average monthly cost of a nursing home for a given year (approximately $5,000 per month in Arkansas). Any complete transfers made more than five years before that date are not considered by Medicaid. Congress may extend this period. Some have suggested that it will be increased to seven years, so it is very important for individuals to start early if they are going to plan. III. Spend down. When determining how to qualify for Medicaid benefits, make a complete list of the applicant's assets and determine which are countable (non-exempt) and which are not countable (exempt). If the countable assets exceed the resource limit ($2,000), and it’s within the five-year look- back period, you should use the countable assets to do any of the following: 1 Purchase household goods, furniture, furnishings, and appliances (e.g., food, clothing, furniture, kitchen appliances, computer, printers, scanners, flat screen televisions, etc.). 2 Purchase a new home or make home improvements (e.g., add an addition or new bathroom, install ramps, etc.). (Only if the applicant, spouse or certain others will live there.) 3 Make improvements or additions to an adult child-caretaker's home (e.g., widen the doors, install ramps, remove carpet, and add a mother-in-law suite). 4 Purchase a new car, including a wheelchair-compatible vehicle. There is no limit on the value of the car. 5 Purchase prepaid funeral or burial plans. 6 Pay to maintain the client's other assets (gardeners, painters, etc.). 7 Provide care for the applicant. If the applicant pays children or others for their services, a carefully drawn agreement is needed that specifies what is to be provided, and the amount to be charged (which must be reasonable). Also, the caregiver must keep a complete list of when services are rendered and the type of services rendered. The caregiver must take the income and report it on his or her tax return. 8 Acquire an actuarially sound annuity (i.e., an annuity in which the annuitant's reasonable life expectancy is commensurate with the annuity's duration). 9 Make a loan for a valid purpose to someone, and substantiate the loan with a written promissory note. The purpose of the loan can be to assist children buying a home or grandchildren obtaining an
  3. 3. education or any other reasonable purpose, provided a promissory note sets forth the amount of the loan, the repayment terms, and the interest rate that is substantiallyin accord with current rates for such types of loans. This is the least effective means of converting countable assets intononcountableassets as repayment must be made according to the terms of the note. The loan is considering income-producingproperty, which is only excluded from resources if the equity does not exceed $6,000 and the property produces net annualreturn of at least 6%. If the funds are essential for the applicant's self-support, the 6% requirement is waived. 10 Pay off debts. For more information and suggestions for your own Medicaid planning – contact us for a private consultation or to have more information sent to your home. LBJ Pension & Consulting Services, Inc. Barry Jewell J.D. – Asset Strategist http://www.lbjpension.com www.facebook.com/pages/LBJ-Pensions-Consulting-Services-Inc/644814248997910

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