At Heritage Elder Law & Planning, PLC it is our goal to help clients pay for long term care. At this time in history people are living longer than ever before. Eventually many reach a point where they cannot care for themselves. Many times senor citizens suffer from chronic illnesses such as Alzheimer’s disease or dementia. The stress of knowing how to provide this care without running out of needed financial support for both the caretakers and those cared for can be overwhelming. Many believe they will exhaust their life savings or lose their homes. Many will be surprised and comforted to learn that they have very good options.
The primary financial support for Americans who need long term care and are 65 and older is Medicaid. However, this common state and federal program has become one of the most confusing and complicated areas of the law to understand. In Michigan, there has been no less than four dates in the last two years where the State implemented significant changes in the Medicaid law – changes that mean the public can no longer trust the rules they had known in the past. Most of these changes stem from the federal “Deficit Reduction Act” which was passed by Congress and signed into law by the President in February, 2006. These changes include:
1) September 1, 2005: certain types of annuities not acceptable;
2) April 1st, 2007: some retroactive Medicaid no longer allowed, most income producing real estate no longer exempt;
3) July 1st, 2007: look-back period changed from three years to five years, start of penalty period changed, limit on the amount of equity one can keep in a home;
4) October 1st, 2007: limit on how much can be transferred to a funeral policy, loans must be structured a certain way, acceptable annuities must name the State of Michigan as remainder beneficiary.
These changes are far reaching and threaten to undermine the confidence of the aging population that they can obtain Medicaid without complete impoverishment. Indeed, some may infer that Medicaid planning is against the intent of the government and that to plan to preserve assets or maximize income savings would be immoral or unethical.
These conclusions – while understandable – are incorrect. For example, the government has specifically provided various “safe harbors” in the law. These legal options are not generally known and would not be implemented by Medicaid caseworkers without a proper legal claim to them. As a result, without guidance many may be putting themselves in a worse position than they need to be under the law. For example:
A) Spouses –
Spouses in Michigan are permitted unlimited income. If necessary, a spouse living at home may shift income (i.e., social security, pension) from a spouse institutionalized in a nursing home to themselves, up to a certain amount. If more income is needed, a probate judge can enter an order permitting this;
Spouses can claim an exemption for a certain amount of their combined assets; however, because the federal and state government permit spousal trusts and other devices there is rarely a time when a spouse of a nursing home resident cannot keep everything the couple owns and then provide for it to pass on to the couple’s children;
B) Disabled Children –
The law permits transfers of property to disabled children with no penalty;
C) Caretaker children --
If a child lives in the home of their parents to provide care for two years prior to entering a long term care facility, the home can be transferred to that caretaker child. Significantly, there are also care contracts that, when properly drafted, can permit transfer of the parents’ assets to go to the children that provide care for their parents.
Moreover, the government has provided excellent support for our nation’s veterans. For those who have served at least ninety (90) days of active military service with at least one day of war-time service they may qualify for a pension that pays for assisted living or home care.
In working with these and many other relevant laws, it has been the conclusion of this writer that the government is still concerned with the support and benefit of those that are disabled and their families. The government is not our enemy – ignorance is our enemy. With proper education and guidance it is still possible to provide a high level of care for the disabled and aging population while preserving and fostering a family legacy.
