Long-term Care, Part XVII (“Crisis” Transfers for Medicaid)

The Greatest Financial Risk for Seniors: Paying for

Long-term Care, Part XVII (“Crisis” Transfers for Medicaid)

One of the most enduring misunderstandings about Medicaid is the belief that once you are in a nursing home it is too late to protect any assets. This is NOT true. Last month’s article as well as this one both concern “crisis” planning – that is, asset-protection planning when a parent, spouse or other loved one is already in a nursing home and so cannot take advantage of the 5-year “look-back” period for gifting.

Last month’s article described how an immediate annuity can be used to help a SINGLE PERSON in a nursing home protect a significant part of his or her assets. This month’s article continues the discussion of immediate annuities by explaining how they can also be used to help a MARRIED COUPLE protect assets when one spouse is in a nursing home.

Here is the important take-away for this article: Under the current Medicaid rules in Pennsylvania, when one spouse is in a nursing home, with the help of an elder-law attorney it is typically possible to protect – for the benefit of the community spouse – 70% to 80% or more of the assets that would otherwise have to be paid to the nursing-home.

To understand how this is possible, you first have to understand how much of the couple’s assets the “community spouse” – that is, the spouse who is not applying for Medicaid – is allowed to keep. Under the Medicaid rules the community spouse can keep one-half of the couple’s “countable assets,” with a minimum of $25,284 and a maximum of $126,420 (2019 numbers).

Example: John and Mary Smith are a married couple. John is in the nursing home, while Mary is living at home as the “community spouse.” Their total financial assets are $300,000 (bank accounts, some mutual funds, John’s IRA of $100,000, and Mary’s IRA of $50,000), plus their house. The house is excluded under the federal Medicaid rules, and the retirement accounts of the “community spouse” are excluded under the Pennsylvania Medicaid rules.

So, subtracting Mary’s IRA, the couple’s total countable assets are then $250,000. Half of this is $125,000, which is less than the maximum of $126,420 and so this is how much of the $250,000 Mary gets to keep. Of the remaining $125,000, John can only keep $2,400 and so – without the help of an elder-law attorney – $122,600 of their life savings would have to be spent down before John could be eligible for Medicaid.[1]

Mary contacts an elder-law attorney for asset-protection planning. Assume that after purchasing pre-paid funerals for both of them, paying off some bills, and paying the attorney fee and annuity broker commission, there is $100,000 remaining. By having Mary use the $100,000 to purchase an immediate annuity, the entire $100,000 is converted from a countable asset in the bank into a non-countable stream of income to Mary. So with this purchase two things have been accomplished:

  • Mary and John now have their countable assets down to the Medicaid level of $127,400 (Mary’s $125,000 plus John’s $2,400); and
  • because the elder-law attorney made sure the annuity met all of the Medicaid requirements, they were able to do this without any “gifting” that would have created a delay in John’s Medicaid eligibility.

Assuming that John and Mary had not made any non-exempt gifts in past 60 months (in excess of $500 total in any one calendar month) and that Mary and her family are able to get the elder-law attorney the required documentation so that the Medicaid application can be filed within three months after the annuity purchase, John can be eligible for Medicaid to cover his nursing-home care beginning the day after the annuity purchase. And, assuming Mary chose a three-year annuity, the $100,000 that would otherwise have been spent down on John’s care will now be coming back to Mary as additional income in the form of a direct deposit into her bank account of approximately $2,800 each month for the next 36 months.

So that’s how elder-law attorneys are able to help families protect a significant part of their lifetime of savings when a spouse is already in a nursing home. And, as is true of all asset-protection strategies we use:

  • John’s care has not been compromised by this planning – the quality of care that he will receive will depend upon the particular nursing home, not on the source of payment; he will get the same quality of care whether he is paying privately or Medicaid is paying.
  • And if these asset-protection strategies seem unduly complicated, this is how Charles Sabatino, past president of the National Academy of Elder Law Attorneys, put it: “The fact that some planning options sound strained is a testament to the fact that, unlike most Western countries, there is no national policy to provide long-term care in the United States. Instead, families are left to find their way through an uncoordinated hodge-podge of programs not covered by Medicare nor most conventional insurance.”

The next article in this series will continue this discussion of the Medicaid gifting rules by looking at the opposite of exempt transfers – that is, instead of gifts that do not affect your Medicaid eligibility, there can also be transfers that you never intended as gifts but might well affect your Medicaid eligibility.


The content herein is for general informational purposes only and does not constitute legal advice. For specific questions you should consult a qualified elder law attorney

Note: Working with the long-term care system we have in this country, seniors and their families need to understand that despite the restrictions in the Medicaid law, it is almost never too late to protect part or your remaining assets, even when facing an immediate crisis and with no advance planning. Whether you are 75 years old and living in your own home, or have an 85-year-old spouse in a nursing home, there are steps you can be taking now to preserve part – and often a very significant part – of your life savings otherwise at risk of being spent on your nursing care. But “time works against you.” Every day of delay in a crisis can result in $250 or more of irretrievable loss, so it is important to contact a knowledgeable and experienced elder law attorney for advice sooner rather than later.

Kemp Scales is now retired, but elder-law attorney Schellart Los continues to serve clients throughout western Pennsylvania from offices in Erie and Titusville. She can be reached toll-free at (888) 827-2788 or by e-mail at schelly@losscaleselderlaw.com. The Law Offices of Schellart Joyce, LLC has an Internet presence at www.losscaleselderlaw.com.

  1. In Pennsylvania how much the nursing-home spouse can keep is based on his or her gross monthly income. For 2019, the cut-off is $2,313. This means that if the nursing-home spouse’s gross income is more than $2,313, the asset limit is $2,400; otherwise it’s $8,000.