Elder planning explored during webinar

By Brandon Martin

The Estate & Elder Law Center of Southside Virginia, in conjunction with the New College Institute’s LIFE series, hosted a free webinar to provide guidance on asset and Medicaid planning.

The webinar, hosted by Managing Attorney Robert Haley, was designed to provide seniors and caregivers the tips they need to avoid the prospect of debt associated with long-term care and nursing facilities.

Haley said there are two types of planning when it comes to assets–advanced and crisis. Advanced planning is completed five years or more prior to the need for long-term care while crisis planning is done when long-term care is imminent.

Those that find themselves in the crisis planning phase often seek out attorney’s like Haley who said the primary challenge is getting under the asset limit in order to qualify for Medicaid–$2,000.

Individuals in Virginia are allowed to keep $2,000 when they apply to Medicaid for long term care. If they are over this amount, they must spend down on care. Individuals are not allowed to give gifts of any amount for a period of 5 years (60 months) prior to applying to Medicaid.

“Basically, what you are doing is taking money that would count against you on an application and changing it to money that works for you instead,” Haley said.

All assets are not created equal, according to Haley who said that they break down into exempt and countable assets. Some examples of assets that are exempt from being counted towards the $2,000 limit are one car (to be used to transport the elder to and from appointments), prepaid funerals, term life insurance, personal possessions, certain government bonds, assets in special needs trust or in an irrevocable trust like estates.

Those that elders need to consider carefully are the countable assets such as a house, investments, 401(k) plans and all other retirement plan assets.

Haley gave an example of a daughter who doesn’t want to put her mother in a nursing home.

“People don’t want to go into a nursing home unless it’s the last resort,” he said.

One way to implement asset planning in this scenario is for the daughter to move in with the mother as a “caretaker child.”

Haley said this could work by setting up an hourly contract between the parent and child for caregiving services rendered.

“It gets the money out of the person’s name to lower the asset amount below the $2,000 limit and it compensates the child for time spent,” he said.

Under this option, income and payroll taxes would still have to be paid by the child.

He also suggested combining other strategies such as planning a funeral in advance and using assets to pay for it in advance. Taking advantage of the one vehicle rule could also be done by purchasing a new car, further spending the assets in a way that is beneficial to the elder. That’s not the only way to get rid of assets, according to Haley.

“If a child has been living in the home long enough then the house can be transferred to the caregiver under the Medicaid Caregiver Transfer Exception,” he said.

As mentioned earlier, Medicaid looks at all uncompensated transfers within a five year period which results in a “penalty period.” The longer the penalty period, the longer an individual has before they can enter a long-term care facility.

In Virginia, you can configure the amount of penalty months by dividing the amount of your asset transfer by a set $6,422.

Luckily, Haley said that the amount transferred can be used to pay towards a nursing home bill each month leaving the children with the balance left over following the monthly income deduction.

Couples that both require Medicaid for long term care in Virginia are allowed to keep $3,000 in assets. If there is one spouse that requires care, and one that does not, the spouse that does not receive care is referred to as the Community Spouse. The Community Spouse is allowed to keep 50 percent of their assets up to $123,600 in countable assets which is known as the Community Spouse Resource Allowance. The Community Spouse is allowed to keep 100 percent of their marital assets up to $24,720.

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