A House Bill that could affect your long-term care planning

A House Bill that could affect your long-term care planning

The purpose of House Bill 6300 is to authorize a study, among other things, of the impact of long term care costs and to explore the Medicaid eligibility rules and how they might be changed to reduce dependency on Medicaid long term care financing. They will be looking specifically at the effectiveness of 1. How assets are treated for purposes of determining eligibility for long term care services. 2. The Medicaid Eligibility look back period for the treatment of transferred assets. In essence they are considering making the look back period 10 years instead of the 5 year rule currently in place. 3. The disqualification of Medicaid eligibility for folks who have a home and with as little as $50,000 of equity instead of the current rule of $750,000 of equity at least here in Massachusetts. 4. Medicaid Estate recovery which is essentially the rules governing how the state can pursue the estate of the deceased nursing home resident in order to recover assets from the estate to pay back the state for benefits that such individual may have received during his life. This is to include the increased use of Medicaid liens on real estate.

  • Current Law: Start Date of Look Back Period: This five year look back period begins to run on the date in which assets are transferred either to the irrevocable trust or outright to family members for less than fair market value even if you have not entered the nursing home.

Example: Establish a Medicaid irrevocable trust and transfer your home and some assets to it, and at the end of five years those transferred assets will be protected from the costs of long term care. This is why advanced planning still works. Just get the clock started and you will always be better off than if you never started the clock running.

  • Current Law Regarding Treatment of Primary Residence for Married Couples: Provided a spouse is living in the home it will be non-countable nor can a lien be placed on it. It is very important not to leave the home in joint names after one spouse is institutionalized as this will put the home at risk in the event the healthy spouse dies prior to the sick spouse. Finally, it is important to plan to protect the home after the sick spouse has been approved for Medicaid as the home will remain at risk if the healthy spouse were to need nursing home care in the future.

Planning Pointer: The best way to protect the home and ensure the spouse can continue to live there is by transferring it to an irrevocable Medicaid trust. Caution: Please do not just add a child’s name to the home or transfer it to a child all together as this will result in a loss of control for the parent, exposure to the kids’ creditors and potential adverse income and gift tax consequences.

  • Current $750,000 Exemption: For applications received on or after January 1, 2006, equity interest in the principal place of residence exceeding $750,000, renders an individual ineligible for payment of nursing facility and other long term care services (although there are several exceptions). House Bill 6300 is exploring the possibility of reducing the amount of the home exemption down to somewhere between $200,000 and $50,000.

Prepared by:
Todd E, Lutsky, Esq. LLM
Cushing & Dolan, P.C.
Attorneys At Law
Totten Pond Road Office Park
375 Totten Pond Road, Suite 200
Waltham, MA 02451

Securities offered through Securities America Inc., Member FINRA/SIPC and advisory services offered through Securities America Advisors, Inc. Armstrong Advisory Group, Cushing & Dolan, WRKO and The Securities America Companies are unaffiliated.  Representatives of Securities America Inc. do not provide legal or tax advice.  The scenarios provided are for illustrative purposes only and not intended to represent client experiences of Armstrong Advisory Group or the Securities America companies.  Please consult with a local attorney or tax advisor who is familiar with the particular laws of your state. December 2012