My dad has recently moved to a nursing home. Once his savings are gone and he has to utilize Medicaid, how much money can I put aside that the nursing home and Medicaid can’t take? I heard it was recently raised to $2000, but I don’t want to hold onto that money and endanger his care.
My question is about your statement "For example, it cannot permit ANY distributions of the trust principal back to the grantor (person who sets up and funds the trust) for ANY reason, although it is possible to permit distributions of income." Her condo is also part of the trust. The heating system failed and needed to be replaced. In order to buy all the parts needed, I used MY credit card. The trust was used to pay that back (paid directly to the credit account, not to me.) Does this violate that statement you made? At the time of the purchase we did not have a checking account/bill payment system set up for the trust, but when payment was due we did have this, and that was used to pay the cost of the parts (again, I got nothing out of this payment.)
Setting up a trust more than five years in advance of applying for Medicaid is indeed a good idea. However, to be an excludible asset, it needs to be written (drafted) correctly. For example, it cannot permit ANY distributions of the trust principal back to the grantor (person who sets up and funds the trust) for ANY reason, although it is possible to permit distributions of income.
For more info on how to use trusts for Medicaid planning, I recommend my eBook "Trusts to Protect Your Assets from Medicaid", available here: http://medicaidsecrets.com/eBooks.html
This was not considered hiding the money - this was making sure that everything would be taken care of when the time came. It is another option for "spend down" funds. And IMHO, it's vital.
If what your wanting is knowing that family will be able to deal with death costs, then doing a Medicaid compliant irrevocable pre-need funeral & burial policy at a FH will solve that concern. Traditional ones run 7-15k & cremation maybe 1/2 that amount. FH are used to doing these. Not all costs are included necessarily, like floral, minister or police detail. Single location situation, where FH & cemetery & headstone provider are adjacent and under the same corporate umbrella will be the cheapest. Often religious cemeteries - Catholic, Jewish - have their own costs and not at all included in the FH pre-need policy. The Medicaid compliance means the policy is under Medicaid limits for new preneeds written. I’m remembering it was like 8k for Texas. $ amount will vary by state, as each state fund Medicaid uniquely, but it needs to be under the Medicaid maximum.
Medicaid allows for term life insurance policy. But the “face value” needs to be under whatever your state has set to not have Medicaid compliance factor in. Maybe 1k or $1500. If you make the beneficiary of the term life your kids, then they can use that $ to pay after death costs not covered in the funeral preened.
It’s important that the “face value” read to be under whatever your state has at the maximum allowable for Medicaid compliance. My mom had very very old 1k fully paid up term life; old enough so was paying a dividend that plowed back into policy as required by policy terms. Had no cash value ability. Dividend reported as income / asset for Medicaid annual renewal but amoritized over 12 mo so not an issue. When she died, it paid to beneficiary several times it’s face value. You can get these type of term policies done but probably need a better independent insurance agent to find one & place it for you. As long as term policy has no cash value ability and its face value is under Medicaid compliance limit, there’s nothing Medicaid can do to force a change to it. (If it’s over face value Medicaid limit, states can require changes or a surrender). You need to have beneficiary be someone who will use the $ to pay your after death costs and not just pocket $ for themselves. Beneficiary gets $ paid to them. If they decide to flat keep it and not use if for incidental burial costs or to pay atty to get probate going, or to use to upkeep your home till MERP/probate cleared, they don’t have to. Beneficiary needs to be someone other than your spouse that you absolutely trust.
For marriages with 1 in NH & 1 still Community Spouse, the CS can have higher non exempt assets & each state sets the ceiling for the CS amount with most having it at 119k but a few states have it lots lower.
Personally I think for a son/daughter dealing with Medicaid for widowed parent can totally be a DIY project if your dpoa & involved in their life. They basically have to spend down in categories allowed by Medicaid (their home, a car, care, prepaid funeral/burial, normal daily living expenses).
BUT for couples it’s way way more complex & I think the folks & dpoa are best meeting with elder law atty to look at options for what to do with assets A “May-Dec marriage” or “1 needing care like yesterday & the other looking great on ADLs even at 88” marriage pose different financial issues. The CS should never ever make themselves impoverished to get the other eligibile for medicaid. But how to do cleverly do that & be ok for medicaid needs insight from and atty & outside of the family.
For couples too when it’s your spouse that needs care, it’s especially difficult as you are likely overwhelmed from care plus your own life to really have time to find out what best to do with assets. Atty & advisors esp. worthwhile.
Have you filed an application with Medicaid on behalf of your father? Medicaid does not automatically "kick in".
Talk to the facility social worker and/or business office about this. They generally have lots of information. Just don't sign ANYTHING that makes YOU personally responsible for dad's bills.