By Adam D. Schmaelzle, Esq.
One of the many unfortunate realities of being a human being is the very realistic possibility that you or someone you care about may end up needing long-term care in a nursing home facility. Sometimes you expect it, and sometimes it happens without warning. Unfortunately, many people neglect this possibility until it is too late, and the consequences become a burden in itself.
One study shows that the average semi-private room for long-term care in a nursing home costs around $205.00 per day or $6,235 per month (See link). That’s an average of $74,820 per year, which would understandably drain the average individual’s life savings in a very short of time. Many people haven’t saved up that kind of nest egg, and instead turn to Medicaid (MassHealth) to cover those costs. But much like everything else, the multiplicity of regulations required to qualify make it difficult to receive that sort of benefit, especially if your goal was to pass on your savings or your assets to your loved ones. Medicaid was keen on this notion and decided to employ a three-year “look-back period” which would disqualify an individual from Medicaid benefits for a calculable amount of time, based on the value of an asset or monetary amount that was transferred. Essentially, this prevented people from giving away their homes and money to friends and family in an effort to meet the financial threshold to qualify for Medicaid and to prevent it from getting it’s hands on that persons savings. As a result, people started to transfer their assets into revocable trusts to other people. This allowed a person to shelter their assets, continue to live in their homes or receive some financial benefit from the trust while continuing to have some kind of say in the administration of the asset. Massachusetts caught on quickly and implemented a five-year look back period (as opposed to three years) on any asset transfers, including those transferred into a trust, and would disqualify a person from benefits for a time equal to the fair market value of that asset of gift.
It would work like this: Grandma qualifies for MassHealth long-term care on October 1, 2014. If grandma gave her $50,000 speedboat to her brother on September 1, 2014, and the average cost of living in a nursing home was $5,000 a month, Grandma would not qualify for Medicaid for 10 months, starting on October 1, 2014 (the day she qualified).
The goal of MassHealth is to make healthcare available for those who truly cannot afford it, and the Courts have continuously supported that goal. In 1996, the court decided in Cohen v. Division of Medical Assistance, 423 Mass. 399 (1996), that if a trustee can distribute the principle of a trust to a beneficiary, rather than just income, then MassHealth can employ their look-back period to that asset, and count it against MassHealth benefits. The issue came up again in Doherty v. Director of the Office of Medicaid, 74 Mass.App.Ct. 439 (2009), and the Court agreed that MassHealth should consider the income or payments in an irrevocable trust if they benefit that individual. Nevertheless, the possibility of ending up in a nursing home should be factored into every person’s retirement plan. Individuals should consider structuring their finances long before preparing an application for Medicaid benefits.
Here are some important considerations to think about before applying for a MassHealth long-term health care plan:
- Start planning before age 65.
- Always plan five years ahead to avoid the look-back period.
- Read the Seniors Guide to MassHealth coverage (Link below)
- Try not to consider the cost of providing mandatory banking information to MassHealth. Banks are now required to provide that service for free.
- Try not to make any gifts, contributions or transfers over $1,000.00 within a five-year period. It is MassHealth’s policy to review all transfers over $1,000.00.
- Remember that ANY sale for less than fair market value could be a disqualifier.
- Consider setting up “care-giver agreements” if you plan on receiving in-home care from a relative or friend.
Following the ruling in Doherty, a good attorney can carefully draft a trust that would protect a person’s assets, while complying with the restrictions set by Doherty and the State. To be on the safe side, a person should always look five years ahead and consult with an attorney.
If you have any questions, or feel as though I have made a mistake, please feel free to contact me at 774-314-9124.
Links:
1. Long-Term Health Care Statistics
2. MassHealth Senior Guide to MassHealth Coverage
