The basic rule is that all your monthly income goes to the nursing home, and Medicaid then pays the nursing home the difference between your monthly income, and the amount that the nursing home is allowed under its Medicaid contract.
A revocable living trust will not protect your assets from a nursing home. This is because the assets in a revocable trust are still under the control of the owner. To shield your assets from the spend-down before you qualify for Medicaid, you will need to create an irrevocable trust.
Other states, such as California and Texas, prohibit Estate Recovery after the surviving spouse dies. The only exception is if the surviving spouse was also a Medicaid recipient.
and is a Certified Financial Planner. Nursing homes can't take a senior's life insurance benefits away from designated family beneficiaries to cover outstanding costs. However, nursing homes can accept payments from the resulting funds of a sold or surrendered policy.
Nursing homes do not take assets from people who move into them. But nursing care can be expensive, and paying the costs can require spending your income, drawing from savings, and even liquidating assets.
Owning and using a home in the correct manner during one's lifetime can exempt it from consideration as an asset for nursing home expenses. Other exempt assets include a single automobile, pre-paid funeral arrangements, and certain life insurance policies.
If you inherit money and do not report it, you will be required to pay Medicaid back for the services and benefits that were provided during any period you would have otherwise been ineligible. When a Medicaid recipient receives an inheritance, it is counted as income in the month that it is received.
For your parents, it may be illegal to sell the house and property. If your parents are going to live in a nursing home, the facility will very likely place a lien on the house. They will want to tap into the equity to help defray the costs of caring for your parents.
Your home may not be counted as an asset
In California, the equity limit is currently $814,000. In all states, Medi-Cal recipients are allowed to keep their homes, with no equity limit, if their spouse or another dependent relative lives in the home.
One such option to protect assets is a Medicaid Trust. By placing some of your assets in an appropriate trust, you can protect them from Medicaid and have them not be counted when you are applying for benefits.
Can Medicare take your home to cover nursing home expenses? Medicare can't take your home and doesn't cover nursing home room and board. However, a Medicaid lien can be placed on your home, and they can sell it once you pass to recover the funds.
Once your home is in the trust, it's no longer considered part of your personal assets, thereby protecting it from being used to pay for nursing home care. However, this must be done in compliance with Medicaid's look-back period, typically 5 years before applying for Medicaid benefits.
If you are in a nursing home for fewer than 90 days, your SSI benefits will not be affected.
For those who are eligible, Medicaid will pay for nursing home care, including room and board, on an ongoing, long-term basis as long as the eligibility criteria continues to be met. In many cases, this is for the remainder of one's life. Medicaid should not be confused with Medicare.
Medicare eligibility is based on age, illness and/or disability status rather than income. Inheriting money or receiving any other windfall, such as a lottery payout, does not bar you in any way from receiving Medicare benefits.
Any assets left in a Medi-Cal participant's name at the time of death will be subject to Medi-cal recovery. Therefore, if you own a home and it is under your name and you were using Medi-cal then your house is fair game for Medi-cal to come after your home.
Inheritance checks are generally not reported to the IRS unless they involve cash or cash equivalents exceeding $10,000. Banks and financial institutions are required to report such transactions using Form 8300. Most inheritances are paid by regular check, wire transfer, or other means that don't qualify for reporting.
Transfer assets to an Irrevocable Trust
If you want to protect assets from nursing home costs, consider establishing an irrevocable Trust. Setting up a Trust will transfer ownership of the cash to the Trust account, which is managed by a trustee.
No one “takes” assets from the patient; the nursing home simply requires payment for its services if the patient intends to reside in the nursing home. The notion of assets being seized by the government or a nursing home is only one of several misconceptions about paying for long term care.
A nursing home cannot take your life insurance policy if you have one or more named beneficiaries. If you pass away, the nursing home that was responsible for your care cannot attempt to claim any of the death benefits from your policy as long as you named a beneficiary to receive it.
If your name is on a joint account and you enter a nursing home, the state will assume the assets in the account belong to you — unless you can prove that you did not contribute them.
Nursing homes will continue to house those who have run out of money if they have already begun the application process for Medicaid. This means that even if Medicaid had not yet been approved, the resident still has a right to continue living in the nursing home.
If an individual pays for some or all nursing home expenses through Medicaid, states can seek repayment upon their death through the Medicaid Estate Recovery Program (MERP). Each state has their own MERP laws, but assets will never be seized while the person receiving care is alive.