How Private-Pay Nursing Home Residents Can Qualify for Medicaid Faster

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