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 Dear
Attorney Flynn:
My husband is deceased and
I have no children. A neighbor of mine recently had to move
to a nursing home because her daughter couldn’t keep her
safe at home any longer. My neighbor’s situation has caused
me some concern because I do not feel like I have my own
affairs in order and I worry about how I will pay for care
if I need it in the future. My neighbor’s house has been on
the market for many months, but hasn’t sold, so MassHealth
put a lien on it. I don’t want to lose my home and other
assets to nursing home costs.
I have heard that it is no longer possible to protect assets
because of changes in the law. Is this true?
Sincerely, Worried in Weymouth
Dear Worried:
While you are correct that there have been significant
changes to the Medicaid regulations (as a result of the
Deficit Reduction Act, or DRA), and that protecting assets
is more difficult than it was in the past, there are still
options available. As with most things, the best options are
available to those who plan ahead and take steps to protect
their assets before a crisis hits. You are wise to consider
taking steps now to preserve some assets to supplement your
care in the event you ever need a nursing home.
There are many changes as a result of the DRA, such as an
increase in the basic look back period from three to five
years, but there is one change in particular that has made
last-minute planning very difficult and has had a
devastating effect on the average elder trying to preserve
funds to ensure quality long-term care. A little background
information will be helpful to explain the significance of
this change and, hopefully, illustrate why advance planning
is more important than ever.
The Division of Medical Assistance (DMA) imposes a penalty
of one-month of benefits for every $8,010 of assets that an
elder transfers for less than fair market value. A transfer
for less then fair market value (a gift) may be cash, bonds,
a house, a car, jewelry, or even the sale of an item for
less than it is worth. Based on this penalty divisor, we are
able to calculate how long an elder would be disqualified
for long-term care benefits based on the value of the asset
given away. For example, let’s say you want to give a
relative your prize coin collection valued at $73,000. That
would be deemed a gift and would result in a
disqualification period of 10 months of MassHealth coverage
for nursing home care. In the “old days,” that was a safe
strategy because the disqualification period began to run on
the date the gift was given. Therefore, we knew that you
could not apply for MassHealth benefits until after the 10
month penalty period had passed, but the gift would not be a
problem after that.
The most significant change from the DRA is that the
disqualification period for any gift made after February 7,
2006 will not start to run until the elder is
a) in a nursing home and
b) otherwise eligible.
“Otherwise eligible” means that the elder has no more than
$2,000 in total assets or, in other words, the elder does
not have the means to pay privately for the 10-month penalty
period at that point. Advance planning was always better
than crisis planning, but it is now essential. One strategy
that is frequently used since the DRA is to transfer the
home to an Irrevocable Income Only Trust. This type of trust
complies with the current MassHealth regulations and
combines lifetime protection for the elder with a transfer
that is sufficient to start the five-year clock. Once the
five-year period passes, the home is non-countable on any
future MassHealth application for long-term care benefits. A
similar trust is also used for non-real estate assets when
clients have sufficient excess assets they wish to preserve.
This type of trust may be a very good option for you because
it is even more important to preserve assets to supplement
care when an elder does not have immediate family to provide
assistance. Be sure to consult an elder law attorney for a
comprehensive review of your situation so you can determine
what the best option is for you. Best of luck!
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