Transfer and Return

Use "Return of Transferred Resources" Rules To Qualify for Louisiana Long Term Care Medicaid

This post will help people who have a family member or loved one in a nursing home (or their loved one is about to enter a nursing home) and the family member or loved one has more than $70,000 of countable resources.

Most people think that if you enter a nursing home owning more than $2,000 of assets (other than your home and car), then you will be forced to spend all of those assets on your care until you deplete them down to less than $2,000. Nursing homes are expensive so the money gets depleted rapidly, preventing seniors from being able to leave an inheritance to their children or other loved ones.

But there is a particular legal strategy that can enable you to protect at least half of your countable resources, even if you don't take advantage of the strategy until you (or your loved one) are already in the nursing home as a private pay patient.

Let's use an example to describe how the Return of Transferred Resources provisions of the Louisiana Medicaid Eligibility Manual ("Medicaid Manual") can help one family save $100,000. Let's say Mom (who is not married) is entering the nursing home with a bank account balance of $200,000.

Now we must look at a couple of provisions of the Medicaid Manual. The first provision says, "Do not continue to count the uncompensated value of a transferred resource if the original resource is returned."

Another important provision states, "If only a part of the asset or its equivalent is returned, the penalty period is modified, but not eliminated."

In our example, let's say Mom donated $200,000 to Daughter just prior to Mom entering the nursing home. Mom then applies for Medicaid and gets denied due to the transfer of countable resources. Medicaid will assess a penalty period equal to 40 months ($200,000 transferred divided by $5,000 LA monthly private pay rate). The penalty period begins the month Mom is determined eligible for Medicaid except for the transfer of resources.

Next, Daughter returns to Mom $100,000 of the original $200,000 transferred. As a result, Medicaid will modify the penalty period from 40 months to 20 months. Now, Mom has $100,000 in Mom's account. Daughter has $100,000 in Daughter's account. And Mom's modified 20 month penalty period is underway. Mom uses the $100,000 in Mom's account to pay for her care during the 20 month penalty period.

At the end of the 20 month penalty period, Mom has less than $2,000 of countable resources, the penalty period expires, Medicaid starts covering Mom's nursing home expenses, and Daughter still has $100,000 in Daughter's account.

A few things to keep in mind. We are basing this on the Louisiana Medicaid Eligibility rules. If you live in another state, find out what your state's rules are on the return of transferred resources. Second, DON'T TRY THIS AT HOME. Complications result through the Medicaid Application process, the many transactions that take place, and the providing of appropriate financial institution documentation to Medicaid and other third parties. Get good help. One false move and you could do more harm than good.

Also, the family members that play a role in this must be 100% cooperative and supportive. It does not good if they turn around and spend all of the money on themselves.

So, what should you do? Call our office and say you'd like to find out of t he "Transfer and Return" strategy can help your family protect assets. We'll look at your situation and determine whether this would be worthwhile to take advantage of.

This post is for informational purposes only and does not provide legal advice. Please do not act or refrain from acting based on anything you read on this site. Using this site or communicating with Rabalais Estate Planning, LLC, through this site does not form an attorney/client relationship.

Paul Rabalais

Louisiana Estate Planning Attorney

Phone: (225) 329-2450

In Some Rare Circumstances, Last Minute Medicaid Planning Is An Option

I was working with a family today. Dad was in the nursing home getting rehabilitation. Elderly Mom was still living at home, and she is too fragile to be able to take care of Dad if he comes home after rehab. Mom and Son said Dad weighed about 230 pounds, and Dad would need someone around the clock to care for him. Dad is likely to live in the nursing home until he dies.

Mom was disappointed because she expressed how hard Dad had worked over the years to save some assets to pass along to their children. They owned a paid-for home, and they had another roughly $230,000 of life savings. We discussed how, normally, people in a nursing home have to spend all of their savings until they have less than $2,000 remaining. She also told me that the nursing home in Lake Charles, Louisiana, would cost her husband $5,400 monthly. She could foresee their life savings that they had spent seven decades saving - wasting away.

We discussed a particular legal strategy that would enable them to save Mom about $175,000 of her $230,000. The only way this strategy works is that if the bulk of the non-home assets are liquid, and there is a child or children that will cooperate with the plan. The legal strategies are very complicated, but it involves:

  1. The parents transferring their Countable Resources to other parties;
  2. The parent applies for Long-Term Medicaid - and gets denied due to the transfer of resources. Medicaid will assess a penalty period that lasts a number of months;
  3. Assets are returned to the parents to reduce the value of the original transfer, thus reducing the penalty period;
  4. Parent spends the returned funds on their care.

All of this is very complicated and there is a significant amount of documentation that is necessary. One mistake can cost the family their entire life savings and perhaps even their home.

Taking advantage of legal strategies to protect your assets from losing to the nursing home is most effective when you plan ahead - at least five years before a nursing home situation. Since no one knows if - or when - they will go into a nursing home, it's difficult to determine when you should engage in Medicaid planning. But we know that the sooner you take the right action, the better.

But if you have a relative who is in the nursing home right now, or they are within days of going into the nursing home, and they have cash assets of $120,000 or more, you may want to give us a call so that we can help you determine if there are actions you can take within the rules of the Louisiana Long Term Care Medicaid Manual to protect what you've save for yourself and your loved ones.