What Do You Need To Do, And When – When Long-Term Care Is Needed

This advice comes courtesy of a relative with a husband needing care.  She told me that if he cannot recover enough to come home from the rehab facility, she will sell the house for a smaller place to live.

This seems like a logical thought until one understand how Medicaid treats you when you must request it’s assistance in paying for care.  Medicaid is a needs based program that will pay for LTC when you are impoverished.  It allows a single person to keep only $2000 of assets, $45/month for spending money, $1500 of life insurance, and a prepaid irrevocable burial trust up to $15,000 for burial expenses (limits may vary by state).

The married spouse at home can keep the home, one vehicle, half of their joint savings up to a maximum retained of $119,220, and some income.  The state will recover from the at-home spouse’s assets after last death.

Here is the problem: If the house is sold before the other spouse is on Medicaid, then the house value (an initially protected asset) is exchanged for cash – which is not protected.  Thus selling that house before the other spouse is on Medicaid can result in all the proceeds being spent back down to Medicaid impoverishment.  If the at-home spouse waits until the other is on Medicaid, the house can be sold and the proceeds banked.

Another misconception is that the money being spent-down must be used for care.  Actually, you cannot give money away at that time, but you can exchange it for things you want or need.  This could include trading in the old car for a new one, or granite countertops, or the new roof you need.

Medicaid, which pays for LTC when you are impoverished, has many rules.  These are not readily understood or remembered when other, seemingly not connected financial transactions, are done years earlier.  Planning for LTC does not always mean buying insurance for such care.  For many people such insurance is either not appropriate, or unavailable due to health history. It is not guaranteed issue like health insurance is now through the exchanges.

Feel free to contact TheLongTermCareGuy.com if you have questions, or simply want to learn how this affects you.  Family meetings in my conference room are a regular occurrence.

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