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Elder Law / Medicaid Eligibility

Chicago Elder Law Attorney

Elder Law / Medicaid Planning

Elder Law / Medicaid Eligibility

Elder law is a hybrid of various legal areas relating to issues faced by older Americans. A significant segment of estate planning has always addressed these issues, well before “elder law” became an area concentrated upon by lawyers. Disability planning, guardianship, Medicaid eligibility and elder abuse (including exploitation and neglect, by family members, caretakers and nursing home staff), together with an aging population, all combine to make this a legal field growing in demand.

Of course, other than the legal field of elder law, there are myriad other segments of the U.S. economy geared toward aging, including evolving housing needs, health care and home assistance, whether provided by skilled care professionals or simply competent companions..

One goal of many elderly people is to live in their own homes. If you have enough money, you may specify in your estate plan documents (Durable Power of Attorney for Property and Revocable Trust) that, if necessary, you will receive 24/7 care at home until depleting substantially all of your assets rather than reside in any facility.

For others, 24/7 paid care and/or the physical limitation of your residence brings the focus to the possibility of eventually living in an assisted living facility or nursing home. These places can cost $70,000 per year or more. Planning for this expense may involve buying long-term care insurance (that includes the home care preferred by so many), but by the time some people are ready to buy the insurance, it is cost-prohibitive due to age and/or poor health.

Naturally, some older people (and their future presumptive inheritors) are eager to protect their assets so that Medicaid, a needs-based federal program administered separately by each state, will pay for the residential facility. The purpose of Medicaid is to pay for the care of substantially indigent people rather than wealthy people who give away all of their assets to their children and apply soon after, but that does not prevent people from making themselves “impoverished” as a way to protect their assets. Note that selling your house to your daughter for a dollar is not a serious strategy for impoverishment, as any asset transferred for less than full consideration is considered a gift, based upon the spread between the value of the asset and the price paid for it.

There are rules governing Medicaid eligibility with respect to the assets a Medicaid applicant may own and his/her income. There are also rules governing the assets the community spouse may own and the amount of income that person can receive. Certain assets are exempt and not countable when determining eligibility.

In 2006, new federal rules were enacted under the Deficit Reduction Act (DRA) that make it more difficult for people with assets to qualify for Medicaid.

Among other things, the DRA makes it more difficult for an applicant to “spend down” asset by giving them away, usually to family members. The DRA extends the “look-back period,” also known as the “penalty period,” from 36 months to 60 months. The look-back period is the length of time that must elapse before a gift is considered effectively transferred out of an estate for Medicaid impoverishment.

With the implementation of the DRA in Illinois, the look-back period will not begin until: the applicant has moved to a nursing home, spent down sufficiently to meet Medicaid asset limits: applied for Medicaid and is found to meet Medicaid eligibility requirements but for transfers made during the spend-down period.

The following is a simplified overview of Medicaid qualifications:

Generally, Medicaid will pay the cost of living in a nursing home or assisted living facility for an impoverished applicant provided that s/he:

  • Is a U.S. citizen or legal resident and, if applying in Illinois, an Illinois resident.
  • Has income no greater than $30 per month. Additional income, including most social security, must be paid to the facility. Each additional dollar paid to the facility in this manner is one less dollar paid by Medicaid to the facility.
  • Possesses non-exempt assets no greater than $2,000 in cash or cash equivalent. Exempt assets include:
  • Exempt assets include:

    • The equity in a principal residence up to $750,000, provided that the applicant intends (and/or has realistic expectations) to return or his/her spouse or disabled, blind or care-giver child or sibling (if sibling, that person must have a current equity interest) continue to reside there.
    • Certain annuities
    • Pre-paid funeral valued up to $10,000
    • Insurance with "face value" up to $1,500
    • Some items of tangible personal property, including furniture, home furnishings, clothing and a wedding ring
    • A car or truck
    • Other "stuff" worth no more than $2,000.

Non-exempt assets are basically any other assets that can be turned into cash. These include assets with which another person is a joint tenant with the applicant unless it can be proven that the other joint tenant actually funded the account with his/her own money.

If the applicant is married, the community (“well” or “at-home”) spouse may receive income up to about $2,800 per month without the applicant being disqualified and may possess non-exempt assets of no more than about $110,000.

Though Medicaid will not require a community spouse, minor, disabled, blind or care-giver child or sibling with an equity interest to move out of the applicant's primary residence, it can and often does put a lien on the residence. In other words, it is only exempt as long as the living arrangements continue when the residence is sold to a third party, Medicaid is paid back its outlays before proceeds are distributed to other beneficiaries.

In addition to the lien placed on the exempt residence, Medicaid may also put a lien on other probate assets. At this time it does not put liens on other assets owned in trust or joint tenancy or those that transfer by beneficiary designation, but all of this may soon change under the DRA and other laws that may be enacted or by judicial interpretation.

A Medicaid applicant or community spousal facing income limits, non-exempt asset limits and Medicaid liens may initiate a Medicaid appeal process or seek a court order if the affected person can prove a true hardship.

A spouse may refuse to disclose assets without affecting a Medicaid applicant’s eligibility, but that loophole will close when the DRA is implemented in Illinois.

If you live in the Chicago or Lake County area, and need an experienced Elder Law attorney, please contact Matlin Law Group.