SPEND-DOWN FOR MEDICAID?
By: Sanford R. Altman, Esq., retired
Jacobowitz & Gubits, LLP
My Father’s health is deteriorating. My mother is finding it more and more difficult to care for him and he may need to be admitted into a nursing home in the near future. They have too much in assets to qualify for Medicaid and I have heard that they can “spend down” the excess and then become eligible. Does spending down, simply mean that they must pay for the nursing home until that extra money is used up?
Not necessarily. There are many items for which they can spend additional monies which will both reduce their assets benefit the family rather than simply paying for the nursing home. These are generally referred to as “legitimate spend-downs”. These items are not considered gifts, will not bring a “penalty period” before he can get Medicaid and may be utilized any time up to and sometimes even after submitting the Medicaid application.
Legitimate spend-downs include but are not limited to the following:
- Burial Trust – This is essentially a pre-paid funeral including burial plot, casket, head stone and everything else that typically goes along with it. Burial Trusts may be obtained from virtually any funeral home and are universally recognized by Medicaid. They may be “revocable” which means you can cancel them but must be made “irrevocable” at the time of submitting the Medicaid application. Documents showing proof of the Irrevocable Burial Trust must be submitted with the application. Costs can range from $8,000.00 to $10,000.00 and higher if you want to be fancier. There is no legal limit as far as Medicaid is concerned but I would suggest not getting too carried away. Most funeral directors can also sell you a burial trust through their association called “Pre-Plan”. The advantage of this is that it can be used even if your parents move or would like to be buried in a different location. This is a very popular spend-down because it is something that will definitely be needed sooner or later by us all and it is a protected fund that cannot be touched by Medicaid. In contrast, most bank accounts, insurance policies and other provisions for burial are generally deemed to be available assets which must be applied towards nursing home care. Further, parents often see this as a way to make their own decisions about their funeral and also to relieve their family of the burden of doing so and paying for it later.
- Home Repairs – The beauty of this spend-down is that you are changing excess available funds into exempt “non countable” equity in the home. When money is spent on a new roof, remodeled kitchen or bathroom, or a paved driveway, the value of the home increases as well. While, as with the burial trust, there are no legal limits on how much you can spend, it is also advisable not to be “greedy”. As an extra added bonus and perhaps most importantly, such repairs can make the home much more livable for the spouse remaining in the community.
- Paying Bills– Bills such as medical bills, legal fees, credit cards etc. are all viewed as legitimate expenditures by Medicaid. If they are paid now making the applicant eligible for Medicaid sooner, it is more advantageous than paying more months of nursing home fees and still having to pay all of these bills.
- Repayment of loans from children – If you have been helping your parents by paying any of their expenditures over the years and have proof such as cancelled checks or credit card receipts, now is a good time for payback. It keeps the money in the family and is not considered a gift so there is no penalty period. In addition, if this were a case where your parents were living with you, you have a right to collect from them a reasonable rent even for past months. (On the other hand, payment for your past care of your parents is generally not acceptable).
- If she drives, buy your mother a new car, or, for that matter, a plasma tv or anything else that she may need or may make her life more pleasant.
- While these spend-downs will be effective in most cases for reducing excess assets under today’s law, some may well fall prey to the increasing tendency to tighten up on Medicaid eligibility. As always, it is important to keep abreast of changes in the law.