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Medicaid Long Term Care Eligibility Rules and Payback Requirements

Medicaid Long Term Care Eligibility Rules and Payback Requirements

Most Arkansans cannot afford the cost of nursing home care on their own.  They oftentimes need assistance from the government in the form of Medicaid Long-Term Care benefits.  This article is a continuation of a previous article (click here) where I discuss eligibility requirements for the Medicaid Long-Term Care program and payback requirements to the program after you die (known as estate recovery).   

The Five Year Look Back Period 

As discussed in my previous article, Medicaid has strict asset limits for program eligibility ($2,000 for an individual).  Assets over the eligibility limit generally need to be spent before someone can qualify to received Medicaid Long-Term Care.  Assets cannot generally be given away.  Any asset transfers that are made within five years from the date you enter a nursing home and apply for Medicaid Long-Term Care benefits are scrutinized.  If the asset was given away or transferred for less than fair market value, then the value of the asset will still be counted against you for eligibility purposes. This is known as the “five year look back period.”  For instance, if your home is worth $100,000 and you sell it to your daughter for $10,000 in 2019 and then have to go into a nursing home in 2020 and apply for Medicaid, you will be considered to have $90,000 worth of assets and will be disqualified from the program until you have paid out of pocket for $90,000 worth of your nursing home care. 

However, assets transferred prior to the five year look back period, even if they are gifted or transferred for less than fair market value, are not counted when determining Medicaid Long-Term Care eligibility.  In the example above if you gave your home to your daughter six-years ago and you enter a nursing home today, then the transferred property would not count against you when applying for Medicaid Long-Term Care.

Joint Bank Accounts

A cautionary note on jointly held bank accounts.  Sometimes individuals will place a family member, such as a son or daughter, as a joint owner on their checking or savings account.  This is done for varying reasons, including wanting the adult child to be able to pay your bills if you are unable to do so or to allow the child to have the funds in the account when you die.  However, you should be aware that funds held in a joint bank account are generally presumed to be fully available to an individual applying for Medicaid Long-Term Care assistance and are therefore counted as an asset.  If the funds are withdrawn by the co-account holder (such as the son or daughter) that is considered an asset transfer and, if done within the five-year look back period, would be counted as an asset of the person applying for Medicaid Long-Term Care.  This presumption can be rebutted, but only by showing the state that the assets in the account were originally owned by the other account holder. 

Estate Recovery 

A cautionary note on jointly held bank accounts.  Sometimes individuals will place a family member, such as a son or daughter, as a joint owner on their checking or savings account.  This is done for varying reasons, including wanting the adult child to be able to pay your bills if you are unable to do so or to allow the child to have the funds in the account when you die.  However, you should be aware that funds held in a joint bank account are generally presumed to be fully available to an individual applying for Medicaid Long-Term Care assistance and are therefore counted as an asset.  If the funds are withdrawn by the co-account holder (such as the son or daughter) that is considered an asset transfer and, if done within the five-year look back period, would be counted as an asset of the person applying for Medicaid Long-Term Care.  This presumption can be rebutted, but only by showing the state that the assets in the account were originally owned by the other account holder. 

Medicaid Long-Term Care should be considered more as a loan than as a government benefit.  That is because federal law requires that States attempt to recover the cost of the benefits from the estate of the person receiving the Medicaid Long-Term Care after they die. 

Estate recovery will not be made from the estate of a deceased individual when:

  • There is a surviving spouse, dependent children under age 21, or children that are blind or have a disability (as determined by the Social Security Administration);
  • In cases of a home, there is an adult child currently residing in the home and who was in the Medicaid Long-Term Care recipient’s home for at least two years immediately before the their admission to the nursing home, and who provided care which permitted the recipient to reside in the home rather than in an institution;
  • In cases of a home, there is a sibling currently lawfully residing in the home, and the sibling was residing in the home at least one year immediately before the date of the Medicaid Long-Term Care recipient’s admission to the nursing home;
  • Recovery will create an undue hardship for other surviving family members; or
  • Recovery is not cost effective.

Also, estate recovery will not be made from resources which were protected as a result of the individual having a Qualified Long Term Care Insurance Partnership Policy.

The State will generally only seek to recover the cost of the Medicaid Long-Term Care benefits from the recipient’s probate estate (that is any property that must go through probate court before it is passed on to heirs or beneficiaries).  Property, such as life insurance proceeds or 401(k) and IRA accounts, generally fall outside of probate court as long as there is a valid beneficiary listed on the plans.  Likewise, land that is held in a joint tenancy with right of survivorship also falls outside of probate court. 

Eligibility Versus Estate Recovery

  Be aware that even though an asset may be excluded for purposes of qualifying for Medicaid Long-Term Care (such as a primary residence) that does not prevent the State from seeking to recover the costs of Medicaid Long-Term Care benefits from that asset after you die.  For instance, if your only asset was your home at the time you needed nursing home assistance you can apply and qualify for Medicaid Long-Term Care (as long as it is worth less than $585,000 your home will not be counted as an asset).  However, when you die, the State of Arkansas can seek to be paid back for the costs of your Medicaid Long-Term Care from the sale of your home.   

Call Us Today

If you have questions regarding Medicaid long-term care or if you need assistance with an estate plan, feel free to click here or call our firm at (501) 960-6060 for a free consultation. 

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